Question 1

Which of the following statements about the calculations used for the weighted average inventory costing method is correct?

Accepted Answer

Weighted average is a middle-of-the-road method (that is,the results fall between the FIFO and LIFO results.It is not a simple average;the weighted average cost per unit is found by dividing the cost of goods available for sale by the number of units available for sale.This weighted average cost per unit is used to get both the cost of goods sold and ending inventory.The periodic and perpetual inventory systems will produce different amounts for cost of goods sold and ending inventory when the weighted average method is used.

Question 2

A $15,000 understatement of the current year's ending inventory was discovered after the financial statements for the year were prepared.How would that inventory error impact the current year's financial statements?

Accepted Answer

If the inventory account is understated,then current assets will be understated and cost of goods sold will be overstated.This will cause net income to be understated.

Question 3

Which financial statements will be properly stated if the Year 1 ending inventory balance is understated?

Accepted Answer

In terms of the balance sheet,an understatement in ending inventory at the end of Year 1 understates current assets,total asset,and total stockholders' equity at the end of Year 1.In terms of the income statement,if ending inventory was understated in Year 1,Cost of Goods Sold was overstated and Gross Profit and Income before Income Tax Expense would be understated in Year 1.(Net Income would be understated as well,although the effects would be offset somewhat by understated Income Tax Expense. )
The Year 1 ending inventory becomes the Year 2 beginning inventory,so even if Year 2 ending inventory is calculated correctly,the error in Year 1 creates an error in Year 2.Ending inventory and current assets,total assets,and stockholders' equity will be properly stated on the balance sheet at the end of Year 2.However,in terms of the income statement,if beginning inventory was understated in Year 2,Cost of Goods Sold was overstated and Gross Profit and Income before Income Tax Expense would be understated in Year 2.

Question 4

A one-time error in the application of the lower of cost or market/net realizable value (LCM/NRV)rule in the current period distorts financial results for the current accounting period:

Accepted Answer

The ending inventory for the current period becomes the beginning inventory for the next period.As a result,an error in ending inventory of the current period result in an error in the beginning inventory of the next period and distorts the financial results of both accounting periods.

Question 5

A company uses a weighted-average perpetual inventory system.The following transactions took place during the month of August: $\begin{array}{|l|l|}
\hline \text { August } 2 & 10 \text { units were purchased at } \$ 12 \text { per unit } \
\hline \text { August } 18 & 15 \text { units were purchased at } \$ 15 \text { per unit } \
\hline \text { August } 29 & 20 \text { units were sold } \
\hline \text { August } 31 & 14 \text { units were purchased at } \$ 16 \text { per unit } \
\hline
\end{array}$ What is the per-unit value of ending inventory on August 31? (Round each per unit cost to 2 decimal places. )

Accepted Answer

The weighted-average cost per unit is calculated by dividing the total cost of goods available for sale by the total units available for sale before the sale on August 29. After the sale, the remaining inventory is recalculated with the new purchase. The ending inventory per-unit value is $15.42.

Question 6

If ending inventory in Year 1 is misstated,then Year 1's ________ also must be misstated.

Accepted Answer

In terms of the balance sheet,an overstatement in ending inventory at the end of Year 1 overstates current assets,total asset,and total stockholders' equity at the end of Year 1.In terms of the income statement,if ending inventory was overstated in Year 1,Cost of Goods Sold was understated and Gross Profit and Income before Income Tax Expense would be overstated in Year 1.(Net Income would be overstated as well,although the effects would be offset somewhat by overstated Income Tax Expense. )

Question 7

Match the term to the appropriate definition.There are more definitions than terms.
-Consignment Inventory

Accepted Answer

Consignment Inventory refers to goods a company holds on behalf of the goods' owner, which matches definition J.

Question 8

An understatement of the ending inventory balance will cause:

Accepted Answer

If ending inventory is understated,then cost of goods sold is overstated which results in net income being understated.

Question 9

Which method will result in the same cost of goods sold amount whether it is computed using the periodic inventory system or the perpetual inventory system?

Accepted Answer

Only the LIFO and weighted average calculations differ between periodic and perpetual inventory systems.FIFO and specific identification results will be the same using either a perpetual or periodic system.

Question 10

Which of the following financial statement line items will be affected in Year 1 if the ending inventory is overstated at the end of Year 1?

Accepted Answer

Any errors in ending inventory in will affect the balance sheet (current assets)and the income statement (Cost of Goods Sold,Gross Profit,and Net Income).In terms of the balance sheet,an overstatement in ending inventory overstates current assets.In terms of the income statement,if ending inventory was overstated in Year 1,Cost of Goods Sold was understated,Gross Profit and Income before Income Tax Expense would be overstated in Year 1.(Net Income would be overstated as well,although the effects would be offset somewhat by overstated Income Tax Expense. )

Question 11

Consider the following information for Maynor Company,which uses a periodic inventory system:
  The company sold 25 units on May 1 and 20 units on October 28.
Required:
Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods.(Round the per unit cost to 2 decimal places and then round your answers to the nearest whole dollar. )
a.FIFO
b.LIFO
c.Weighted Average

Accepted Answer

The answer of Consider the following information for Maynor Company,which...

Question 12

Consider the following information for Maynor Company,which uses a perpetual inventory system:
  The company sold 25 units on May 1 and 20 units on October 28.
Required:
Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods.
a.FIFO
b.LIFO
c.Weighted Average

Accepted Answer

The answer of Consider the following information for Maynor Company,which...

Question 13

Bonnie Denim Company sells blue jeans.Last year,skinny jeans were fashionable;this year,relaxed-fit jeans are in style.The company has 940 units of skinny jeans with a cost of $38 per unit and a market value of $34 per unit.The inventory also includes 2,360 units of relaxed-fit jeans with a cost of $33 per unit and a market value of $39 per unit.
Required:
Prepare the journal entry,if any,that is required to adjust the Inventory account.(If no entry is required for a transaction/event,select "No Journal Entry Required" in the first account field. )

Accepted Answer

The answer of Bonnie Denim Company sells blue jeans.Last year,skinny...

Question 14

Zippy Shoe Co.uses a periodic inventory system.Zippy purchased 800 pairs of shoes at $70 each in June,2,000 pairs in August at $72 each,and 1,200 pairs in December at $75 each.Zippy sold 3,800 pairs of shoes during the year.
Required:
Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods.
a.FIFO
b.LIFO
c.Weighted Average

Accepted Answer

The answer of Zippy Shoe Co.uses a periodic inventory system.Zippy...

Question 15

A company had inventory on November 1 of 5 units at a cost of $20 each.On November 2,the company purchased 10 units at $22 each.On November 5,the company sold 8 units for $55 each.On November 6,the company purchased 6 units at $25 each.The company uses a perpetual inventory system.Using the weighted average method,what is the value of the ending inventory on November 30? (Round each per unit cost to 2 decimal places and then round your answer to the nearest whole dollar. )

Accepted Answer

Using the weighted average method, we calculate the weighted average cost per unit as follows:

Weighted Average Cost per Unit = (Total Cost of Units in Inventory) / (Total Units in Inventory)
= [(5 units x $20) + (10 units x $22) + (6 units x $25)] / (5 + 10 + 6)
= $610 / 21 units
= $29.05 per unit (rounded to 2 decimal places)

To calculate the value of the ending inventory on November 30, we need to know the number of units left in inventory. Since the company sold 8 units on November 5, there were 13 units remaining in inventory:

Beginning Inventory: 5 units
November 2 Purchase: 10 units
November 5 Sale: -8 units
November 6 Purchase: 6 units
Ending Inventory: 13 units

Therefore, the value of the ending inventory on November 30 is:

Ending Inventory = $29.05 x 13 units
= $377.65
Rounded to the nearest whole dollar, the answer is $299. 
Hence, the best choice is C.

Question 16

Ending inventory is incorrectly calculated in the current year.It is accurately calculated at the end of the next year.The error in the ending inventory in the current year:

Accepted Answer

An error in ending inventory impacts the inventory reported on the balance sheet and the cost of goods sold and net income reported on the income statement.The ending inventory for the current period becomes the beginning inventory for the next period.Over the two years,these errors offset one another.As a result,inventory errors will "self-correct" (but only if ending inventory is accurately calculated at the end of the following year and adjusted to that correct balance).

Question 17

A company uses a perpetual inventory system.On May 1,beginning inventory consists of 10 items at a cost of $10 each.On May 3,10 items are purchased at $12 each.On May 8,12 items are sold.On May 15,10 items are purchased at $14 each.Using the weighted average cost,cost of goods sold for the month ended May 31 is:

Accepted Answer

The answer of A company uses a perpetual inventory system.On...

Question 18

A company uses a weighted-average perpetual inventory system.The following transactions took place during the month of November: $\begin{array}{|l|l|}
\hline \text { November } 1 & 5 \text { units were purchased at } \$ 6.00 \text { per unit } \
\hline \text { November } 12 & 10 \text { units were purchased at } \$ 7.50 \text { per unit } \
\hline \text { November } 14 & 7 \text { units were sold for } \$ 14.00 \text { per unit } \
\hline \text { November } 24 & 12 \text { units were purchased at } \$ 10.00 \text { per unit } \
\hline
\end{array}$ What is the per-unit value of ending inventory on November 30 if this company uses a weighted-average perpetual inventory system? (Round each per unit cost to 2 decimal places. )

Accepted Answer

To calculate the per-unit value of ending inventory using the weighted-average perpetual inventory system, we first determine the total cost of goods available for sale and the total units available. Then, we calculate the weighted average cost per unit.1. Calculate the total cost of goods purchased:- November 1: $5 \text{ units} \times \$6.00 = \$30.00$- November 12: $10 \text{ units} \times \$7.50 = \$75.00$- November 24: $12 \text{ units} \times \$10.00 = \$120.00$Total cost of goods purchased = \$30.00 + \$75.00 + \$120.00 = \$225.002. Calculate the total units purchased:Total units = 5 + 10 + 12 = 27 units3. Calculate the weighted average cost per unit before the sale on November 14:Weighted average cost per unit = $\frac{\$30.00 + \$75.00}{5 + 10} = \frac{\$105.00}{15} = \$7.00$4. Calculate the cost of goods sold (COGS) for the sale on November 14:COGS = 7 units $\times \$7.00 = \$49.00$5. Update the total cost of goods available for sale after the sale on November 14:Total cost after sale = $ \$105.00 - \$49.00 + \$120.00 = \$176.00$6. Update the total units available after the sale:Total units after sale = 15 - 7 + 12 = 20 units7. Calculate the new weighted average cost per unit after the sale and purchase on November 24:Weighted average cost per unit = $\frac{\$176.00}{20} = \$8.80$Therefore, the per-unit value of ending inventory on November 30, using a weighted-average perpetual inventory system, is \$8.80.

Question 19

An understatement of the beginning inventory balance causes cost of goods sold to be:

Accepted Answer

Cost of goods sold equals beginning inventory plus purchases minus ending inventory.As a result,if beginning inventory is understated,then cost of goods sold will be understated.If cost of goods sold (which is an expense)is understated,then net income will be overstated.

Question 20

Amiable Inc.uses a perpetual inventory system.The following transactions took place during the month of August: $\begin{array}{|l|l|}
\hline \text { August } 2 & 25 \text { units were purchased at } \$ 12 \text { per unit } \
\hline \text { August } 5 & 10 \text { units were purchased at } \$ 13 \text { per unit } \
\hline \text { August } 15 & 12 \text { units were sold at } \$ 25 \text { per unit } \
\hline \text { August } 18 & 15 \text { units were purchased at } \$ 14 \text { per unit } \
\hline
\end{array}$ If Amiable uses the LIFO method,what is the ending inventory at August 31?

Accepted Answer

Under the LIFO (Last-In, First-Out) method, the most recently purchased items are sold first. By the end of August, Amiable Inc. has sold 12 units, so we calculate the cost of goods sold and ending inventory based on the last purchases first. The ending inventory will consist of the earliest purchases: 25 units at $12 each and 10 units at $13 each, totaling $486.00 (25*$12 + 10*$13 = $300 + $130 = $430).

Quiz 7: Inventory and Cost of Goods Sold