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Exam 6: Reporting and Analyzing Inventory

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Question 111

Multiple Choice

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Atom Company just began business and made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is

A) $1,105.
B) $1,100.
C) $1,170.
D) $1,180.

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Question 112

Multiple Choice

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An overstatement of the beginning inventory results in

A) no effect on the period's net income.
B) an overstatement of net income.
C) an understatement of net income.
D) a need to adjust purchases.

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Question 113

Multiple Choice

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Tidwell Company's goods in transit at December 31 include sales made (1) FOB destination (2) FOB shipping point And purchases made (3) FOB destination (4) FOB shipping point. Which items should be included in Tidwell's inventory at December 31?

Use the following information regarding Black Company and Red Company to answer the question "Which of the following is Red Company's "cost of goods sold" for 2014 (to the closest dollar) ?"

Delightful Discs has the following inventory data: A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Ending inventory under LIFO is

The managers of Hong Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?

At December 31, 2014, the following information (in thousands) was available for Kitselman Inc.: ending inventory $22,600; beginning inventory $21,400; cost of goods sold $198,000; and sales revenue $430,000. Calculate the inventory turnover and days in inventory for Kitselman.

Which of the following statements is correct with respect to inventories?

The only acceptable cost flow assumptions under IFRS are

Inventory costing methods place primary reliance on assumptions about the flow of

Manufactured inventory that has begun the production process but is not yet completed is

All of the following statements are true regarding the LIFO reserve except:

Another problem is that the costs of maintaining a specific identification system may outweigh the benefits of using such a method. As mentioned in part a, financial statement and tax effects of using FIFO and LIFO are more beneficial to companies than simply being able to match the actual cost of a unit to its selling price. -Your office is on the 68^th floor of your building. The CEO's office is on the 77^th floor. The two of you are waiting for an elevator one morning. The CEO states "Our prices are rising and I want the lowest net income for tax purposes and the highest ending inventory for external reporting purposes. Which inventory method should we use? Requirement You have three minutes to respond to the CEO. What is your response?

Carter Company reported these income statement data for a 2-year period. Carter Company uses a periodic inventory system. The inventories at January 1, 2013, and December 31, 2014, are correct. However, the ending inventory at December 31, 2013, is overstated by $4,000. Instructions (a) Prepare correct income statement data for the 2 years. (b) What is the cumulative effect of the inventory error on total gross profit for the 2 years?

Under GAAP, companies can choose which inventory system?

Selection of an inventory costing method by management does not usually depend on

The following information was available for Camara Company at December 31, 2014: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $560,000; and sales $800,000. Camara's inventory turnover in 2014 was

Under a periodic inventory system, the merchandise on hand at the end of the period is determined by a physical count of the inventory.

The LIFO reserve is

Clear Clarinets has the following inventory data: Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a FIFO basis.