Question 1

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.
 $\begin{array} { l l l } 
\text { April } 1 \text { Beginning inventory } & 20 \text { units } \$ \$ 30 \
11 & \text { Purchases } & 70 \text { units } @ \$ 32 \
21 & \text { Purchases } & 50 \text { units } @ \$ 35
\end{array}$  Sales for April: 115 units
a)________ FIFO
b)________ LIFO
c)________ Weighted-average

Accepted Answer

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

Question 2

Under the average-cost method,costs are matched with individual sale items.

Accepted Answer

Under the average-cost method, costs are calculated by dividing the total cost of goods available for sale by the total number of units available for sale, resulting in a cost per unit. This cost per unit is then used to assign costs to the items sold or remaining in inventory, rather than matching costs with individual sale items.

Question 3

St.Paul Corporation has a normal gross profit of 45%.The current year's beginning inventory was $2,500,purchases were $9,000,and retail sales were $15,000.The estimated ending inventory under the gross profit method is:

Accepted Answer

To estimate the ending inventory using the gross profit method, first calculate the cost of goods sold (COGS) using the formula: COGS = Sales - (Sales * Gross Profit %). Here, COGS = $15,000 - ($15,000 * 0.45) = $8,250. Then, calculate the cost of goods available for sale: Beginning Inventory + Purchases = $2,500 + $9,000 = $11,500. Finally, estimate the ending inventory: Cost of Goods Available for Sale - COGS = $11,500 - $8,250 = $3,250.

Question 4

The specific identification method is a compromise between LIFO and FIFO.

Accepted Answer

The specific identification method tracks the cost of each individual item in inventory and is not a compromise between LIFO (Last In, First Out) and FIFO (First In, First Out) but rather a distinct method used primarily for unique or high-value items.

Question 5

If merchandise is purchased ________,the buyer becomes the owner when the merchandise is placed on the carrier.

Accepted Answer

The answer of If merchandise is purchased ________,the buyer becomes...

Question 6

A beginning inventory and purchases of computer parts follow:
 $\begin{array}{llcc}
  \text { Beginning inventory  } &6 @ \$ 12   \
 \text {  First purchase} &15 @ 11\
 \text { Second purchase } &10 @ 14\

\end{array}$
 Required: Determine the cost of an ending inventory of 6 computer parts remaining in the periodic inventory under each of the assumptions listed.
a)________ FIFO
b)________ LIFO
c)________ Weighted-average

Accepted Answer

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

Question 7

In assigning a cost to ending inventory,the cost flow must 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, regardless of the actual physical movement of the products.

Question 8

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

Accepted Answer

The specific invoice method is not ideal for goods with large sales volume, as it can be time-consuming and difficult to match costs with specific sales for every invoice. The other reasons listed are valid reasons to use the specific invoice method.

Question 9

If a change is made in the inventory valuation method,full disclosure should be indicated.

Accepted Answer

Full disclosure is necessary to ensure transparency and to avoid misleading financial information. Any change in inventory valuation method can impact the financial statements and hence, must be disclosed to the investors and other stakeholders.

Question 10

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

Accepted Answer

The answer of A method that uses average gross profit...

Question 11

Chewy Candy has a beginning inventory of $1,000 with a retail value of $1,800.June purchases were $3,000,with a retail value of $4,700 and retail sales were $4,200.What is the June 30 estimated ending inventory at cost under the retail method?

Accepted Answer

1. Find the cost-to-retail percentage: 
Beginning inventory cost / Beginning inventory retail = $1,000 / $1,800 = 0.556
Purchases cost / Purchases retail = $3,000 / $4,700 = 0.638
Weighted cost-to-retail percentage = (0.556 x $1,800 + 0.638 x $4,700) / ($1,800 + $4,700) = 0.614

2. Calculate the expected ending inventory at retail: 
Beginning inventory retail + Purchases retail - Sales retail = $1,800 + $4,700 - $4,200 = $2,300

3. Calculate the estimated ending inventory at cost: 
Expected ending inventory at retail x Cost-to-retail percentage = $2,300 x 0.614 = $1,409

4. Round to the nearest dollar: 
$1,409 is closest to $1,416, which is answer choice D.

Question 12

A company should use the specific invoice method to value items such as automobiles for retail sale.

Accepted Answer

The specific invoice method is the most appropriate method to value items such as automobiles for retail sale as it takes into account the specific cost of each item.

Question 13

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.
 $\begin{array} { l l } 
\text { May } 1 \text { Eeginning inventory } & 50 @ \$ 25 \
10 & \text { Purchases100 @ 28 } \
19 & \text {Purchases20@30 }
\end{array}$ May 1-31 Sales 130 units
a)________ FIFO
b)________ LIFO
c)________ Weighted-average

Accepted Answer

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

Question 14

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.
 $\begin{array} { l l l } 
\text { April } 1 \text { Beginning inventory } & 20 \text { units } \$ \$ 30 \
11 & \text { Purchases } & 70 \text { units } @\$ 32 \
21 & \text { Purchases } & 50 \text { units } @ \$ 35
\end{array}$ 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 15

The ________ holds the merchandise of another business to be sold.

Accepted Answer

The answer of The ________ holds the merchandise of another...

Question 16

Items that are very similar,such as canned goods in a grocery store would be costed using the ________ system of inventory valuation.

Accepted Answer

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

Question 17

FIFO provides an up-to-date ending inventory on the balance sheet because it uses the latest purchases to calculate ending inventory.

Accepted Answer

FIFO (first-in, first-out) assumes that the first items purchased are the first items sold, leaving the most recent purchases in ending inventory. Therefore, it provides an up-to-date ending inventory value on the balance sheet.

Question 18

Chewy Candy has a beginning inventory of $1,000.June purchases were $3,000,and retail sales were $5,000.The store has a normal gross profit of 50%.What is the June 30 estimated ending inventory at cost under the gross profit method?

Accepted Answer

The answer of Chewy Candy has a beginning inventory of...

Question 19

LIFO reflects most recent costs for inventory on the balance sheet.

Accepted Answer

LIFO (Last In, First Out) reflects the oldest costs for inventory on the balance sheet, as it assumes that the most recently acquired items are sold first.

Question 20

During a period of inflation,LIFO will produce the highest net income.

Accepted Answer

During a period of inflation, LIFO will result in a higher cost of goods sold, which will result in a lower net income compared to other inventory accounting methods such as FIFO or average cost. Therefore, the statement is false.

Quiz 15: Accounting for Merchandise Inventory