Question 1

Williams Company had the following balances and transactions during 2009.
 $$\begin{array} { | l | l | } 
\hline \text { Beginning inventory } & 10 \text { units at } \$ 70 \
\hline \text { June } 10 & \text { purchased } 20 \text { units at } \$ 80 \
\hline \text { December } 30 & \text { sold } 15 \text { units for } \$ 100 \
\hline \text { December } 31 & \text { replacement cost } \$ 60 \
\hline
\end{array}$$ What would the company's inventory amount be on the December 31, 2009 balance sheet if the perpetual First-in, First-out method is used?

Accepted Answer

Under the perpetual First-in, First-out (FIFO) method, the first goods purchased are the first ones to be sold. 
At the beginning of the year, the company had 10 units at $70 each, totaling $700. 
On June 10, the company purchased an additional 20 units at $80 each, totaling $1,600. 
On December 30, the company sold 15 units. According to the FIFO method, the first 10 units sold would be from the beginning inventory (10 units x $70 = $700), and the next 5 units would be from the June purchase (5 units x $80 = $400). So, the cost of goods sold would be $700 + $400 = $1,100. 
This leaves 15 units in the inventory (10 units from the June purchase). So, the value of the inventory at the end of the year would be 15 units x $80 = $1,200. 
Therefore, the company's inventory amount on the December 31, 2009 balance sheet would be $1,200. So, the correct answer is A) $1,200.

Question 2

Williams Company had the following balances and transactions during 2009.
$$\begin{array} { | l | l | } 
\hline \text { Beginning inventory } & 10 \text { units at } \$ 70 \
\hline \text { June } 10 & \text { purchased } 20 \text { units at } \$ 80 \
\hline \text { December } 30 & \text { sold } 15 \text { units for } \$ 100 \
\hline \text { December } 31 & \text { replacement cost } \$ 60 \
\hline
\end{array}$$ What would the company's inventory amount be on the December 31, 2009 balance sheet if the perpetual Last-in, First-out method is used?

Accepted Answer

Under the perpetual LIFO method, the last items purchased are the first ones sold. Therefore, for the 15 units sold on December 30, we would use the cost of the most recent purchases. The company purchased 20 units at $80 each. All 15 units sold would come from this batch, leaving 5 units at $80 each and the original 10 units at $70 each in inventory. The inventory valuation would be (5 units * $80) + (10 units * $70) = $400 + $700 = $1,100. However, the correct calculation considering the perpetual LIFO method and the error in the initial explanation should lead to the correct inventory valuation, which is not $1,100 as mistakenly concluded. The mistake in the explanation was in the final calculation and interpretation of the remaining inventory. Under LIFO, the last items purchased are indeed the first sold, but the calculation provided does not match the options given, indicating a mistake in the explanation process. The correct inventory valuation needs to account for the units remaining after the sales, considering the LIFO method, which would prioritize the removal of the most recently acquired inventory first.

Question 3

Williams Company had the following balances and transactions during 2009.
$$\begin{array} { | l | l | } 
\hline \text { Beginning inventory } & 10 \text { units at } \$ 70 \
\hline \text { June } 10 & \text { purchased } 20 \text { units at } \$ 80 \
\hline \text { December } 30 & \text { sold } 15 \text { units for } \$ 100 \
\hline \text { December } 31 & \text { replacement cost } \$ 60 \
\hline
\end{array}$$ What would the company's inventory amount be on the December 31, 2009 balance sheet if the specific unit method is used and the units sold were from the June 10 purchase?

Accepted Answer

Using the specific unit method and assuming the units sold were from the June 10 purchase, the remaining inventory would include the 10 units from the beginning inventory at $70 each and 5 units from the June 10 purchase at $80 each. Thus, the inventory value would be (10 units * $70) + (5 units * $80) = $700 + $400 = $1,100. However, with the replacement cost at $60 per unit at the end of the year, the value of the remaining 15 units would be adjusted to 15 units * $60 = $900.

Question 4

The accountant for a company determines that the 100 units of inventory on hand at the end of the year should be recorded at their cost of $10 each using Last-in, First-out. Current replacement cost is $8.00. What amount would be reported as inventory on the balance sheet?

Accepted Answer

The answer of The accountant for a company determines that...

Question 5

error in ending inventory carries over into the next period.

Accepted Answer

An error in ending inventory affects the calculation of cost of goods sold and, consequently, net income for the period. This error carries over into the next period because the ending inventory of one period becomes the beginning inventory of the next.

Question 6

overstatement of ending inventory in the current period results in the understatement of equity in the following year.

Accepted Answer

Overstatement of ending inventory in the current period results in an overstatement of equity in the following year, as it would cause an overstatement of net income due to lower cost of goods sold.

Question 7

inventory for the current accounting period is understated by $2,700. What effect will this error have on cost of goods sold?

Accepted Answer

If ending inventory is understated, it means that the cost of goods sold (COGS) will be overstated because COGS is calculated as beginning inventory plus purchases minus ending inventory. An understated ending inventory increases COGS, reducing net income.

Question 8

company makes two errors in the physical count of inventory. Beginning inventory was understated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

Accepted Answer

The net effect on net income for the current year is an understatement of $15,000. This is because the cost of goods sold (COGS) is understated by $28,000 due to the beginning inventory being understated, and then COGS is overstated by $43,000 due to the ending inventory being understated. The net effect is an understatement of COGS by $15,000 ($43,000 - $28,000), which leads to an understatement of net income by the same amount.

Question 9

A company makes two errors in the physical count of inventory. Beginning inventory was understated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

Accepted Answer

The answer of A company makes two errors in the...

Question 10

A company makes two errors in the physical count of inventory. Beginning inventory was overstated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

Accepted Answer

The overstatement of beginning inventory will result in an understatement of cost of goods sold and an overstatement of net income. The understatement of ending inventory will result in an overstatement of cost of goods sold and an understatement of net income. The net effect of the two errors is an understatement of net income by $71,000 ($28,000 + $43,000).

Question 11

A company makes two errors in the physical count of inventory. Beginning inventory was overstated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

Accepted Answer

The answer of A company makes two errors in the...

Question 12

A company makes two errors in the physical count of inventory. Beginning inventory was overstated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

Accepted Answer

The answer of A company makes two errors in the...

Question 13

A company makes two errors in the physical count of inventory. Beginning inventory was overstated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

Accepted Answer

The answer of A company makes two errors in the...

Question 14

An audit of Forever Young Cosmetics reveals that beginning inventory was understated by $3,000. Which of the following will result from the correction of this error?

Accepted Answer

The answer of An audit of Forever Young Cosmetics reveals...

Question 15

An audit of Forever Young Cosmetics reveals that beginning inventory was overstated by $3,000. Which of the following will result from the correction of this error?

Accepted Answer

Correcting an overstatement of beginning inventory will decrease the cost of goods sold (because beginning inventory is added to purchases to determine goods available for sale, and an overstatement would have previously inflated COGS). This, in turn, increases gross profit since gross profit is sales minus cost of goods sold.

Question 16

An audit of Forever Young Cosmetics reveals that ending inventory was understated by $3,000. Which of the following will result from the correction of this error?

Accepted Answer

When ending inventory is understated, it means that the cost of goods sold (COGS) is overstated because the inventory not accounted for would have otherwise reduced COGS. Correcting this error will reduce COGS by $3,000, which in turn increases gross profit by the same amount.

Question 17

An audit of Forever Young Cosmetics reveals that ending inventory was overstated by $3,000. Which of the following will result from the correction of this error?

Accepted Answer

When ending inventory is overstated, cost of goods sold is understated, leading to an overstatement of net income. Correcting the error will increase cost of goods sold and reduce net income by $3,000.

Question 18

Ending inventory for the current accounting period is understated by $2,700. What effect will this error have on cost of goods sold and net income?

Accepted Answer

If ending inventory is understated, the cost of goods sold will be overstated because the cost of goods available for sale is allocated between cost of goods sold and ending inventory. An overstatement in cost of goods sold leads to an understatement in net income, as higher expenses reduce profit.

Question 19

A company makes two errors in the physical count of inventory. Beginning inventory was understated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

Accepted Answer

Understating beginning inventory decreases the cost of goods sold (COGS), while understating ending inventory increases COGS. The net effect depends on the magnitude of errors. Here, the larger understatement in ending inventory ($43,000) compared to the beginning inventory ($28,000) results in a net increase in COGS. Higher COGS leads to lower net income. Therefore, both COGS and net income are understated.

Question 20

Ending inventory for the current accounting period is overstated by $2,700. What effect will this error have on cost of goods sold and net income?

Accepted Answer

If ending inventory is overstated, the cost of goods sold (COGS) will be understated because the calculation of COGS is based on the ending inventory. An understated COGS leads to an overstated net income because COGS is deducted from revenue to calculate net income.

Quiz 6: Merchandising Inventory

The accountant for a company determines that the 100 units of inventory on hand at the end of the year should be recorded at their cost of $10 each using Last-in, First-out. Current replacement cost is $8.00. What amount would be reported as inventory on the balance sheet?

error in ending inventory carries over into the next period.

overstatement of ending inventory in the current period results in the understatement of equity in the following year.

inventory for the current accounting period is understated by $2,700. What effect will this error have on cost of goods sold?

company makes two errors in the physical count of inventory. Beginning inventory was understated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

A company makes two errors in the physical count of inventory. Beginning inventory was understated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

A company makes two errors in the physical count of inventory. Beginning inventory was overstated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

A company makes two errors in the physical count of inventory. Beginning inventory was overstated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

A company makes two errors in the physical count of inventory. Beginning inventory was overstated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

A company makes two errors in the physical count of inventory. Beginning inventory was overstated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

An audit of Forever Young Cosmetics reveals that beginning inventory was understated by $3,000. Which of the following will result from the correction of this error?

An audit of Forever Young Cosmetics reveals that beginning inventory was overstated by $3,000. Which of the following will result from the correction of this error?

An audit of Forever Young Cosmetics reveals that ending inventory was understated by $3,000. Which of the following will result from the correction of this error?

An audit of Forever Young Cosmetics reveals that ending inventory was overstated by $3,000. Which of the following will result from the correction of this error?

Ending inventory for the current accounting period is understated by $2,700. What effect will this error have on cost of goods sold and net income?

A company makes two errors in the physical count of inventory. Beginning inventory was understated by $28,000 and ending inventory is understated by $43,000. Which of the following will be the net effect of the two errors?

Ending inventory for the current accounting period is overstated by $2,700. What effect will this error have on cost of goods sold and net income?