Question 1

Julian Junkets has the following inventory information.  Assuming that a perpetual inventory system is used, what is the ending inventory (rounded) under the average-cost method?
A) $4,125
B) $4,176
C) $3,609
D) $4,158

Accepted Answer

The answer of Julian Junkets has the following inventory information....

Question 2

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system.  Under the LIFO method, the cost of goods sold for each sale is:
July 13 July 22
A) € 960 €450
B) 1,125 390
C) 900 360
D) 975 450

Accepted Answer

The answer of During July, the following purchases and sales...

Question 3

Disclosures about inventory should include each of the following except the
A) basis of accounting.
B) cost method.
C) quantity of inventory.
D) major inventory classifications.

Accepted Answer

Disclosures about inventory should include the basis of accounting, cost method, and major inventory classifications. However, the quantity of inventory is not a required disclosure as it is already reported on the balance sheet as the ending inventory amount.

Question 4

India Eastern Corporation's computation of cost of goods sold is:  The average days to sell inventory for India East is
A) 79.0 days.
B) 81.3 days.
C) 107.7 days.
D) 76.4 days.

Accepted Answer

The answer of India Eastern Corporation's computation of cost of...

Question 5

India Eastern Corporation's computation of cost of goods sold is:  India East's inventory turnover is
A) 3.39 times.
B) 4.49 times.
C) 4.62 times.
D) 4.78 times.

Accepted Answer

The answer of India Eastern Corporation's computation of cost of...

Question 6

The following information was available for Hoover Company at December 31, 2014: beginning inventory $110,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Hoover's inventory turnover ratio in 2014 was
A) 13.3 times.
B) 9.8 times.
C) 12.6 times.
D) 8.0 times.

Accepted Answer

Inventory turnover ratio = Cost of goods sold / Average inventory

Average inventory = (Beginning inventory + Ending inventory) / 2

Average inventory = ($110,000 + $70,000) / 2 = $90,000

Inventory turnover ratio = $880,000 / $90,000 = 9.8 times.

Question 7

At January 1, 2014, Britannica Inc. reported inventory of £425,000. At December 31, 2014, the inventory on hand was £501,000. If cost of goods sold for 2014 was £4,996,875, What is the inventory turnover ratio for the year?
A) 5.8 times.
B) 6.9 times.
C) 10.8 times.
D) 11.7 times.

Accepted Answer

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
To find the average inventory, we need to add the beginning inventory and ending inventory and divide it by 2:
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = (£425,000 + £501,000) / 2 = £463,000

Now we can calculate the inventory turnover ratio:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Inventory Turnover Ratio = £4,996,875 / £463,000
Inventory Turnover Ratio = 10.8 times

Therefore, the answer is C) 10.8 times.

Question 8

A new average cost is computed each time a purchase is made in the
A) average-cost method.
B) moving-average cost method.
C) weighted-average cost method.
D) all of these methods.

Accepted Answer

Only the moving-average cost method computes a new average cost with each purchase. The average-cost method and weighted-average cost method use the same average cost for all purchases until a new inventory is acquired.

Question 9

Jenner Company had beginning inventory of $90,000, ending inventory of $110,000, cost of goods sold of $400,000, and sales of $660,000. Jenner's days in inventory is: 
A) 55.3 days.
B) 91.3 days.
C) 101.4 days.
D) 60.8 days.

Accepted Answer

Days in inventory = (Ending inventory / Cost of goods sold) x 365

= ($110,000 / $400,000) x 365

= 100.75 days

Rounding this to one decimal place, the answer is 91.3 days.

Question 10

The following information is available for Park Company at December 31, 2014: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $1,200,000; and sales $1,600,000. Park's inventory turnover in 2014 is
A) 16 times.
B) 15 times.
C) 12 times.
D) 10 times.

Accepted Answer

Inventory turnover = (Cost of goods sold) / (Average Inventory)

Average Inventory = (Beginning Inventory + Ending Inventory) / 2 = ($80,000 + $120,000) / 2 = $100,000

Inventory turnover = $1,200,000 / $100,000 = 12 times.

Question 11

Bosio Corporation's computation of cost of goods sold is:  Bosio's inventory turnover is
A) 2.5 times.
B) 2.7 times.
C) 3.5 times.
D) 3.8 times.

Accepted Answer

The formula for inventory turnover is cost of goods sold / average inventory. Since we are given the cost of goods sold and need to find inventory turnover, we need to use the formula in its rearranged form:

Inventory turnover = cost of goods sold / average inventory

We are not given the average inventory, so we cannot calculate the exact number. However, we can still determine the closest answer choice by looking at the cost of goods sold and inventory turnover formula.

Based on the given cost of goods sold and the fact that Bosio Corporation's inventory turnover is under 4 times, the only answer choice that makes sense is B) 2.7 times.

Question 12

At December 31, 2014, Murchi Company reported total assets of Rs22,320,000, including inventory of Rs5,580,000 and net income of Rs7,365,600 for 2014. The reported inventory was overstated by Rs1,020,000. Which of the following is true with regard to Murchi's 2014 financial statements (ignore income taxes)?
A) Total assets are understated and total equity is overstated by Rs1,020,000.
B) Cost of goods sold is understated and total equity is overstated by Rs1,020,000.
C) Cost of goods sold and total equity are both understated by Rs1,020,000.
D) Total assets and Net income are both overstated by Rs1,020,000.

Accepted Answer

The answer of At December 31, 2014, Murchi Company reported...

Question 13

The major difference between IFRS and GAAP in accounting for inventories is that
A) GAAP prohibits the use of specific identification.
B) IFRS does not require that a physical inventory be taken.
C) GAAP allows the use of the LIFO cost flow assumption.
D) GAAP requires that the LIFO cost flow assumption be used.

Accepted Answer

The major difference between IFRS and GAAP in accounting for inventories is that GAAP allows the use of the LIFO cost flow assumption, while IFRS prohibits its use. Additionally, IFRS requires that inventories be reported at the lower of cost and net realizable value, while GAAP allows for the use of lower of cost or market. However, both IFRS and GAAP require that inventories be valued at cost, which includes all expenses incurred to bring the inventory to its present location and condition.

Question 14

The 2014 financial statements of Vitturo Company reported beginning inventory of €973,000, ending inventory of €1,023,000, and cost of goods sold of €5,988,000 for the year. Vitturo's inventory turnover ratio for 2014 is
A) 2.7 times.
B) 3.0 times.
C) 3.6 times.
D) 6.0 times.

Accepted Answer

The answer of The 2014 financial statements of Vitturo Company...

Question 15

One difference between IFRS and GAAP in valuing inventories is that
A) Under IFRS, but not GAAP, inventories written down under LCNRV can be written back up to the original cost.
B) GAAP defines market value as replacement cost where IFRS defines market as the selling price.
C) GAAP strictly adheres to the historical cost concept and does not allow for write-downs of inventory values.
D) IFRS, but not GAAP, requires that inventories be valued at the lower of cost or market.

Accepted Answer

Under IFRS, inventories written down to net realizable value can be reversed if the value increases, up to the original cost. GAAP does not allow reversals of inventory write-downs.

Question 16

Julian Junkets has the following inventory information.  Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?
A) $4,122
B) $4,131
C) $4,167
D) $8,694

Accepted Answer

The answer of Julian Junkets has the following inventory information....

Question 17

Bosio Corporation's computation of cost of goods sold is:  The average days to sell inventory for Bosio is
A) 96 days.
B) 104 days.
C) 135 days.
D) 146 days.

Accepted Answer

The answer of Bosio Corporation's computation of cost of goods...

Question 18

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system.  Under the FIFO method, the cost of goods sold for each sale is: July 13 July 22
A) € 900 €360
B) 975 390
C) 915 390
D) 1,125 450

Accepted Answer

To calculate the cost of goods sold under the FIFO method, we assume that the first units purchased are the first ones sold.

The inventory and cost of goods table would look like this:

| Date   | Transaction | Quantity | Cost/Unit | Total Cost |
|--------|-------------|----------|-----------|------------|
| July 2 | Purchase    | 200      | €3        | €600        |
| July 5 | Purchase    | 100      | €3.5      | €350        |
| July 7 | Sale        | 150      |           |             |
| July 11| Purchase    | 50       | €4        | €200        |
| July 13| Sale        | 100      |           |             |
| July 19| Sale        | 130      |           |             |
| July 22| Sale        | 60       |           |             |
| July 28| Purchase    | 120      | €4.5      | €540        |
| July 31| Sale        | 40       |           |             |

For the July 13 sale, the cost of goods sold would be calculated as follows:

- The first 100 units sold would come from the July 2 purchase at €3 each, for a total cost of €300.
- The remaining 50 units sold would come from the July 5 purchase at €3.5 each, for a total cost of €175.
- The total cost of goods sold for this sale is €475.

For the July 22 sale, the cost of goods sold would be calculated as follows:

- The first 60 units sold would come from the July 2 purchase at €3 each, for a total cost of €180.
- The remaining 90 units sold would come from the July 11 purchase at €4 each, for a total cost of €360.
- The total cost of goods sold for this sale is €540.

Therefore, the answer is C) 915 390.

Question 19

When valuing ending inventory under a perpetual inventory system, the
A) valuation using the average-cost assumption is the same as the valuation using the average-cost assumption under the periodic inventory system.
B) moving average requires that a new average be computed after every sale.
C) valuation using the FIFO assumption is the same as under the periodic inventory system.
D) last units purchased during the period using the FIFO assumption are allocated to the cost of goods sold when units are sold.

Accepted Answer

The answer of When valuing ending inventory under a perpetual...

Question 20

The following information was available for Hoover Company at December 31, 2014: beginning inventory $110,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Hoover's days in inventory in 2014 was 
A) 27.4 days.
B) 37.2 days.
C) 29.0 days.
D) 45.6 days.

Accepted Answer

Days in inventory = (Average inventory / Cost of goods sold) x 365

Average inventory = (Beginning inventory + Ending inventory) / 2
Average inventory = ($110,000 + $70,000) / 2 = $90,000

Days in inventory = ($90,000 / $880,000) x 365 = 37.2 days

Quiz 6: Inventories

Julian Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory (rounded) under the average-cost method?

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system. Under the LIFO method, the cost of goods sold for each sale is: July 13 July 22

Disclosures about inventory should include each of the following except the

India Eastern Corporation's computation of cost of goods sold is: The average days to sell inventory for India East is

India Eastern Corporation's computation of cost of goods sold is: India East's inventory turnover is

The following information was available for Hoover Company at December 31, 2014: beginning inventory $110,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Hoover's inventory turnover ratio in 2014 was

At January 1, 2014, Britannica Inc. reported inventory of £425,000. At December 31, 2014, the inventory on hand was £501,000. If cost of goods sold for 2014 was £4,996,875, What is the inventory turnover ratio for the year?

A new average cost is computed each time a purchase is made in the

Jenner Company had beginning inventory of $90,000, ending inventory of $110,000, cost of goods sold of $400,000, and sales of $660,000. Jenner's days in inventory is:

The following information is available for Park Company at December 31, 2014: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $1,200,000; and sales $1,600,000. Park's inventory turnover in 2014 is

Bosio Corporation's computation of cost of goods sold is: Bosio's inventory turnover is

The major difference between IFRS and GAAP in accounting for inventories is that

The 2014 financial statements of Vitturo Company reported beginning inventory of €973,000, ending inventory of €1,023,000, and cost of goods sold of €5,988,000 for the year. Vitturo's inventory turnover ratio for 2014 is

One difference between IFRS and GAAP in valuing inventories is that

Julian Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?

Bosio Corporation's computation of cost of goods sold is: The average days to sell inventory for Bosio is

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system. Under the FIFO method, the cost of goods sold for each sale is: July 13 July 22

When valuing ending inventory under a perpetual inventory system, the

The following information was available for Hoover Company at December 31, 2014: beginning inventory $110,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Hoover's days in inventory in 2014 was