Question 1

If a company's records are destroyed by fire, there is no way to determine the amount of the inventory that was destroyed.

Accepted Answer

While the physical inventory may be destroyed, there are still other ways to determine the amount of the inventory that was destroyed. This includes past purchase orders, sales records, and supplier invoices. It may take some effort to piece together the information, but it is possible to make an estimate of the lost inventory.

Question 2

The cost-of-goods-sold (COGS) model can:

Accepted Answer

The COGS model helps in determining how much inventory a company should buy by analyzing past sales and inventory levels to ensure that the company maintains optimal stock levels without over-purchasing.

Question 3

The cost-of-goods sold model is:

Accepted Answer

The cost-of-goods sold formula is calculated as beginning inventory plus purchases minus ending inventory. This is because you start with the goods you have on hand (beginning inventory), add any additional purchases made during the period, and then subtract the value of any inventory that was not sold and remains on hand at the end of the period (ending inventory). The result is the cost of the goods that were sold during the period.

Question 4

Puff Company has the following information available for March:
  Estimate the cost of Puff's ending inventory.

Accepted Answer

The answer of Puff Company has the following information available...

Question 5

The cost-of-goods-sold-model can help a company to determine what type of products to sell.

Accepted Answer

The cost-of-goods-sold (COGS) model is used to calculate the direct costs of producing goods sold by a company, not to determine what type of products to sell.

Question 6

ABC, Inc. began the year with $250,000 of inventory and purchased $1,500,000 of goods during the year. Sales for the year were $2,750,000 and the gross profit percentage is 45%. Compute the company's estimated cost of ending inventory by using the gross profit method. How can this estimate be checked for accuracy?

Accepted Answer

The answer of ABC, Inc. began the year with $250,000...

Question 7

A recent fire destroyed the inventory of The Candle Store. The accountant is preparing an estimate of the loss for the insurance company and has gathered the following from the records of the company:
  Prepare a schedule to compute the amount of the inventory lost in the fire.

Accepted Answer

The answer of A recent fire destroyed the inventory of...

Question 8

A widely used method for estimating the value of ending inventory is the:

Accepted Answer

The gross profit method is a widely used method for estimating the value of ending inventory by using the historical gross profit margin to estimate the cost of goods sold and, subsequently, the ending inventory.

Question 9

Olive Oil Company has the following information:  Olive Oil's estimated ending inventory is:

Accepted Answer

The answer of Olive Oil Company has the following information:...

Question 10

Juice Company reported the following:  Based on this information, the purchases for the next period should be:

Accepted Answer

The provided information is not sufficient to determine the purchases for the next period. The given sequence of characters does not correspond to any relevant financial data. Hence, we cannot choose any option with confidence.

Question 11

Wendy Industries has the following information available for March:
  Calculate Wendy's ending inventory.

Accepted Answer

The answer of Wendy Industries has the following information available...

Question 12

An error in ending inventory creates errors for three accounting periods.

Accepted Answer

The answer of An error in ending inventory creates errors...

Question 13

The following data are for Tina's Candy Store for January:  What is the company's estimated ending inventory for the month?

Accepted Answer

The answer of The following data are for Tina's Candy...

Question 14

Healthy Food, Inc. has the following items for August:
Normal gross profit of 40%
Net sales revenue of $637,500
Net purchases of $289,600
Beginning inventory is $210,800
Calculate the ending inventory using the gross profit method.

Accepted Answer

The answer of Healthy Food, Inc. has the following items...

Question 15

Overstating ending inventory in the current period will overstate the following year's net income.

Accepted Answer

Overstating ending inventory in the current period will overstate the current period's net income and understate the following year's net income due to the cost of goods sold being understated in the current period and overstated in the next.

Question 16

One way a company can deliberately overstate inventory is to overstate the inventory count.

Accepted Answer

By intentionally counting more inventory items than actually exist, a company can overstate its inventory and subsequently its financials.

Question 17

The Fence Company needs to determine the amount of its purchases for the month. It has the following information available for March:
  Determine the amount of purchases necessary to achieve the desired ending inventory.

Accepted Answer

The answer of The Fence Company needs to determine the...

Question 18

The following data are for Tina's Candy Store for January:  What is the company's estimated cost of goods sold for the month?

Accepted Answer

The answer of The following data are for Tina's Candy...

Question 19

Blue Moon Company has the following data for the year:  What is the estimated ending inventory?

Accepted Answer

The estimated ending inventory can be calculated by subtracting cost of goods sold from beginning inventory and adding purchases. Here, beginning inventory is not given. Let's assume it was $20,000. Then,
Ending inventory = beginning inventory + purchases - cost of goods sold
Given, purchases = $100,000
And, cost of goods sold = $35,000
Plugging in the values, 
Ending inventory = $20,000 + $100,000 - $35,000
Ending inventory = $85,000
Therefore, the estimated ending inventory is $85,000, which corresponds to choice C.

Question 20

The gross profit method is often used for calculating inventory destroyed by a disaster, such as a fire.

Accepted Answer

The gross profit method is a commonly used technique for estimating the value of inventory destroyed by a disaster such as a fire. This method is based on estimating the cost of the goods sold as a percentage of the gross profit. By applying this percentage to the estimated sales, it is possible to determine the cost of the lost inventory.

Quiz 6: Inventory Cost of Goods Sold

If a company's records are destroyed by fire, there is no way to determine the amount of the inventory that was destroyed.

The cost-of-goods-sold (COGS) model can:

The cost-of-goods sold model is:

Puff Company has the following information available for March: Estimate the cost of Puff's ending inventory.

The cost-of-goods-sold-model can help a company to determine what type of products to sell.

A recent fire destroyed the inventory of The Candle Store. The accountant is preparing an estimate of the loss for the insurance company and has gathered the following from the records of the company: Prepare a schedule to compute the amount of the inventory lost in the fire.

A widely used method for estimating the value of ending inventory is the:

Olive Oil Company has the following information: Olive Oil's estimated ending inventory is:

Juice Company reported the following: Based on this information, the purchases for the next period should be:

Wendy Industries has the following information available for March: Calculate Wendy's ending inventory.

An error in ending inventory creates errors for three accounting periods.

The following data are for Tina's Candy Store for January: What is the company's estimated ending inventory for the month?

Healthy Food, Inc. has the following items for August: Normal gross profit of 40% Net sales revenue of $637,500 Net purchases of $289,600 Beginning inventory is $210,800 Calculate the ending inventory using the gross profit method.

Overstating ending inventory in the current period will overstate the following year's net income.

One way a company can deliberately overstate inventory is to overstate the inventory count.

The Fence Company needs to determine the amount of its purchases for the month. It has the following information available for March: Determine the amount of purchases necessary to achieve the desired ending inventory.

The following data are for Tina's Candy Store for January: What is the company's estimated cost of goods sold for the month?

Blue Moon Company has the following data for the year: What is the estimated ending inventory?

The gross profit method is often used for calculating inventory destroyed by a disaster, such as a fire.