Question 1

Items that are very similar, such as grains and fuels, would be costed using the ________ system of inventory valuation.

Accepted Answer

The answer of Items that are very similar, such as...

Question 2

Hard Candy has a beginning inventory of $1,600 with a retail value of $2,000. June purchases were $3,000, with a retail value of $5,000 and retail sales were $4,700. What is the June 30 estimated ending inventory at cost under the retail method? (Round any percentages to two decimal places, X.XX%, and your final answer to the nearest dollar.)

Accepted Answer

The retail method estimates ending inventory at cost by first finding the cost-to-retail percentage and then applying it to the ending inventory at retail. 1. Calculate the cost-to-retail percentage:   - Beginning inventory + Purchases at cost = $1,600 + $3,000 = $4,600   - Beginning inventory + Purchases at retail = $2,000 + $5,000 = $7,000   - Cost-to-retail percentage = ($4,600 / $7,000) * 100 = 65.71%2. Calculate ending inventory at retail:   - Beginning inventory + Purchases at retail - Sales = $2,000 + $5,000 - $4,700 = $2,3003. Apply the cost-to-retail percentage to the ending inventory at retail:   - Estimated ending inventory at cost = $2,300 * 65.71% = $1,511.33, rounded to the nearest dollar = $1,511.

Question 3

Under the specific invoice method, costs are matched with individual sale items.

Accepted Answer

Under the specific invoice method, costs are directly matched with the revenue from individual sale items, allowing for precise profit calculation on a per-item basis.

Question 4

A beginning inventory and purchases of desks follow:  The company sold 11 units from beginning inventory, 16 units from the first purchase, and 21 units from the second purchase.
Required: Determine the (a) cost of an ending inventory and (b) Cost of Goods Sold under the specific invoice method. Round to two decimal places if required.

Accepted Answer

The answer of A beginning inventory and purchases of desks...

Question 5

If a change is made in the inventory valuation method, no disclosure is necessary.

Accepted Answer

According to accounting principles, any change in the inventory valuation method must be disclosed in the financial statements to ensure transparency and consistency in financial reporting.

Question 6

Calculate the ending inventory under each of the following methods given the information below about purchases and sales during the year. Assume a periodic inventory system. Round to four decimal places.  Sales for April: 115 units
a) ________ FIFO
b) ________ LIFO
c) ________ Weighted-average

Accepted Answer

The answer of Calculate the ending inventory under each of...

Question 7

In assigning a cost to ending inventory, the cost flow has to follow the physical flow.

Accepted Answer

The cost flow assumption in accounting does not need to match the physical flow of goods. Companies can choose from several methods (e.g., FIFO, LIFO, average cost) to assign costs to ending inventory, independent of the actual physical movement of products.

Question 8

A company should use the specific invoice method to value items that are in large quantities and are low-cost goods.

Accepted Answer

The specific invoice method is more suitable for high-value, unique items rather than large quantities of low-cost goods. For large quantities of low-cost goods, methods like FIFO, LIFO, or weighted average cost are more appropriate.

Question 9

The ________ is the one who consigns the merchandise.

Accepted Answer

The answer of The ________ is the one who consigns...

Question 10

The _________ method assumes the goods purchased first are sold first.

Accepted Answer

The answer of The _________ method assumes the goods purchased...

Question 11

A beginning inventory and purchases of computer parts follow:  The company sold 20 units from beginning inventory, 5 units from the first purchase, and 18 units from the second purchase.
Required: Determine the (a) cost of an ending inventory and (b) Cost of Goods Sold under the specific invoice method. Round to two decimal places if required.

Accepted Answer

The answer of A beginning inventory and purchases of computer...

Question 12

The first-in-first-out method assumes the oldest goods are sold first.

Accepted Answer

The first-in-first-out (FIFO) method assumes that the oldest inventory items are sold first, meaning the cost of the oldest items is used to calculate the cost of goods sold.

Question 13

The weighted-average method assumes each item is assigned a different unit cost.

Accepted Answer

The weighted-average method averages the cost of goods available for sale and assigns the same cost to each unit of inventory, not different costs.

Question 14

Calculate the cost of goods sold under each of the following methods given the information below about purchases and sales during the year. Assume a periodic inventory system. Use four decimal places.  Sales for March: 95 units
a) ________ FIFO
b) ________ LIFO
c) ________ Weighted-average

Accepted Answer

The answer of Calculate the cost of goods sold under...

Question 15

Inlet Inc. has a normal gross profit of 25%. The current year's beginning inventory was $3,500, purchases were $14,000, and retail sales were $20,000. The estimated ending inventory under the gross profit method is:

Accepted Answer

The gross profit method estimates ending inventory by applying the gross profit percentage to sales to estimate the cost of goods sold, then subtracting this from the cost of goods available for sale. Here, the cost of goods available for sale is the beginning inventory ($3,500) plus purchases ($14,000), totaling $17,500. With a 25% gross profit, the cost of goods sold is 75% of sales, or 0.75 * $20,000 = $15,000. Subtracting the estimated cost of goods sold ($15,000) from the cost of goods available for sale ($17,500) gives an estimated ending inventory of $2,500.

Question 16

LIFO reflects the oldest costs for inventory on the balance sheet.

Accepted Answer

LIFO (Last-In, First-Out) assumes that the most recently purchased inventory is sold first. Therefore, the oldest costs are reflected in the ending inventory on the balance sheet.

Question 17

A method that uses average gross profit rate and net sales to compute inventory is:

Accepted Answer

The gross profit method estimates inventory by using the average gross profit rate and net sales. It is often used for interim financial statements or when inventory is destroyed or stolen.

Question 18

LIFO provides an up-to-date ending inventory on the income statement because it uses the latest purchases to calculate ending inventory.

Accepted Answer

LIFO (Last In, First Out) method assumes the last items purchased are the first ones sold, so the ending inventory consists of older purchases, not providing an up-to-date value of ending inventory on the balance sheet.

Question 19

Which is NOT a good reason to use the specific invoice method?

Accepted Answer

The specific invoice method is not ideal for goods with a large sales volume because it requires tracking each item individually, which becomes impractical and overly complex for large quantities of items. It is better suited for a small amount of high-cost, unique goods where individual tracking is feasible and beneficial.

Question 20

The retail method:

Accepted Answer

The retail method calculates the value of ending inventory using a cost-to-retail ratio and is commonly used for interim financial reports, making both A and B correct.

Quiz 15: Accounting for Merchandise Inventory

Items that are very similar, such as grains and fuels, would be costed using the ________ system of inventory valuation.

Under the specific invoice method, costs are matched with individual sale items.

If a change is made in the inventory valuation method, no disclosure is necessary.

Calculate the ending inventory under each of the following methods given the information below about purchases and sales during the year. Assume a periodic inventory system. Round to four decimal places. Sales for April: 115 units a) FIFO b) LIFO c) Weighted-average

In assigning a cost to ending inventory, the cost flow has to follow the physical flow.

A company should use the specific invoice method to value items that are in large quantities and are low-cost goods.

The ________ is the one who consigns the merchandise.

The _________ method assumes the goods purchased first are sold first.

The first-in-first-out method assumes the oldest goods are sold first.

The weighted-average method assumes each item is assigned a different unit cost.

Calculate the cost of goods sold under each of the following methods given the information below about purchases and sales during the year. Assume a periodic inventory system. Use four decimal places. Sales for March: 95 units a) FIFO b) LIFO c) Weighted-average

Inlet Inc. has a normal gross profit of 25%. The current year's beginning inventory was $3,500, purchases were $14,000, and retail sales were $20,000. The estimated ending inventory under the gross profit method is:

LIFO reflects the oldest costs for inventory on the balance sheet.

A method that uses average gross profit rate and net sales to compute inventory is:

LIFO provides an up-to-date ending inventory on the income statement because it uses the latest purchases to calculate ending inventory.

Which is NOT a good reason to use the specific invoice method?

The retail method:

Quiz 15: Accounting for Merchandise Inventory

Items that are very similar, such as grains and fuels, would be costed using the ________ system of inventory valuation.

Under the specific invoice method, costs are matched with individual sale items.

If a change is made in the inventory valuation method, no disclosure is necessary.

Calculate the ending inventory under each of the following methods given the information below about purchases and sales during the year. Assume a periodic inventory system. Round to four decimal places. Sales for April: 115 units a) ________ FIFO b) ________ LIFO c) ________ Weighted-average

In assigning a cost to ending inventory, the cost flow has to follow the physical flow.

A company should use the specific invoice method to value items that are in large quantities and are low-cost goods.

The ________ is the one who consigns the merchandise.

The _________ method assumes the goods purchased first are sold first.

The first-in-first-out method assumes the oldest goods are sold first.

The weighted-average method assumes each item is assigned a different unit cost.

Calculate the cost of goods sold under each of the following methods given the information below about purchases and sales during the year. Assume a periodic inventory system. Use four decimal places. Sales for March: 95 units a) ________ FIFO b) ________ LIFO c) ________ Weighted-average

Inlet Inc. has a normal gross profit of 25%. The current year's beginning inventory was $3,500, purchases were $14,000, and retail sales were $20,000. The estimated ending inventory under the gross profit method is:

LIFO reflects the oldest costs for inventory on the balance sheet.

A method that uses average gross profit rate and net sales to compute inventory is:

LIFO provides an up-to-date ending inventory on the income statement because it uses the latest purchases to calculate ending inventory.

Which is NOT a good reason to use the specific invoice method?

The retail method:

Calculate the ending inventory under each of the following methods given the information below about purchases and sales during the year. Assume a periodic inventory system. Round to four decimal places. Sales for April: 115 units a) FIFO b) LIFO c) Weighted-average

Calculate the cost of goods sold under each of the following methods given the information below about purchases and sales during the year. Assume a periodic inventory system. Use four decimal places. Sales for March: 95 units a) FIFO b) LIFO c) Weighted-average