Question 1

A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000. The amounts reflected in the current end of the period balance sheet are

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Question 2

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is

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The answer of An error in the physical count of...

Question 3

When valuing ending inventory under a perpetual inventory system, the

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Question 4

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:

Accepted Answer

Days in Inventory = (Ending Inventory / Cost of Goods Sold) x 365 days

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

= 100.75 days

Therefore, Jenner's days in inventory is 91.3 days (rounded to one decimal place).

Question 5

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?

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

Question 6

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:

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Question 7

If beginning inventory is understated by $10,000, the effect of this error in the current period is

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Question 8

Paulson, Inc. has 5 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $825. At the statement date, each computer has a current replacement cost of $350. What value should Paulson, Inc., have for the computers at the end of the year?

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Question 9

The following information was available for Hoover Company at December 31, 2010: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $660,000; and sales $900,000. Hoover's inventory turnover ratio in 2010 was

Accepted Answer

Inventory turnover ratio = Cost of Goods Sold / Average Inventory

To find the average inventory, we can use the formula:

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

Plugging in the given values, we get:

Average Inventory = ($90,000 + $70,000) / 2 = $80,000

Now we can calculate the inventory turnover ratio:

Inventory turnover ratio = $660,000 / $80,000 = 8.25 times (rounded to one decimal place)

Therefore, the closest answer is B) 8.3 times.

Question 10

Understating beginning inventory will understate

Accepted Answer

Beginning inventory is used to calculate the cost of goods sold. Understating beginning inventory will result in a lower cost of goods sold, which will in turn result in a higher net income. Therefore, understating beginning inventory will understate the cost of goods sold and overstate net income. It will not affect assets or owner's equity.

Question 11

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

Accepted Answer

The statement applies only to the moving-average cost method, as it recalculates the average cost every time a new purchase is made, using the most recent inventory transactions to update the average cost. The other methods may also use average costs, but they are not necessarily recalculated with each new purchase.

Question 12

Inventory turnover is calculated by dividing cost of goods sold by

Accepted Answer

Inventory turnover is calculated by dividing cost of goods sold by average inventory, which gives the number of times inventory is sold and replaced during a given period. Using beginning or ending inventory alone does not accurately reflect the turnover rate, as inventory levels may fluctuate significantly during the period. Dividing by 365 days would give the average daily cost of goods sold, but does not provide a measure of inventory turnover.

Question 13

Widner Company understated its inventory by $10,000 at December 31, 2010. It did not correct the error in 2010 or 2011. As a result, Widner's owner's equity was:

Accepted Answer

The understatement of inventory in 2010 would cause owner's equity to be understated at December 31, 2010, because inventory is an asset and affects the calculation of net income. However, by December 31, 2011, the error would have self-corrected in the financial statements, as the beginning inventory for 2011 would be understated, leading to an understatement of cost of goods sold and an overstatement of net income, thus properly stating owner's equity.

Question 14

Paulson, Inc. has 5 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $825. At the statement date, each computer has a current replacement cost of $350. How much loss should Paulson, Inc., record for the year?

Accepted Answer

To calculate the loss, we need to compare the original cost of the computers with their current replacement cost.

Original cost of each computer = $600 
Current replacement cost of each computer = $350

Loss per computer = $600 - $350 = $250

Total loss for 5 computers = $250 x 5 = $1,250

Therefore, the answer is B.

Question 15

Disclosures about inventory should include each of the following except the

Accepted Answer

All the options listed in A, B, and D are essential to include in disclosures about inventory. However, the quantity of inventory alone may not be sufficient to provide meaningful information to the users of financial statements. Instead, the disclosure should focus on the basis of accounting, costing method, and major inventory classifications, which can help users understand the entity's inventory policies and their impact on financial performance.

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?

Accepted Answer

To calculate the ending inventory on a FIFO basis, we assume that the first items purchased are sold first. Therefore, the cost of the ending inventory is based on the cost of the most recently purchased items. Using the FIFO method, we take 3 units from the March 12 purchase at $912, and 2 units from the April 26 purchase at $924, for a total ending inventory cost of $2,754.

Question 17

Overstating ending inventory will overstate all of the following except

Accepted Answer

Overstating ending inventory will decrease cost of goods sold, which in turn will increase gross profit and net income. It will also increase assets and owner's equity due to the higher valuation of inventory on the balance sheet.

Question 18

The following information is available for Park Company at December 31, 2010: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $900,000; and sales $1,200,000. Park's inventory turnover in 2010 is

Accepted Answer

Inventory turnover = Cost of goods sold / Average inventory
Average inventory = (Beginning inventory + Ending inventory) / 2
Average inventory = ($80,000 + $120,000) / 2 = $100,000

Inventory turnover = $900,000 / $100,000 = 9 times

Question 19

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:

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

Question 20

The following information was available for Hoover Company at December 31, 2010: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $660,000; and sales $900,000. Hoover's days in inventory in 2010 was
A 38.8 days.
B) 44.0 days.
C) 50.0 days.
D) 60.8 days.

Accepted Answer

The answer of The following information was available for Hoover...

Quiz 6: Inventories