Question 1

A company reports its 20B cost of goods sold at $20.0 billion.Its ending inventory for 20B is $1.8 billion and for 20A,ending inventory was $1.5 billion.How much inventory did the company purchase during 20B?

Accepted Answer

To find the inventory purchased, use the formula: Purchases = COGS + Ending Inventory - Beginning Inventory. So, Purchases = $20.0B + $1.8B - $1.5B = $20.3B.

Question 2

On December 31,20A,the end of the accounting period,Dunn Company has on hand 5,000 units of a resale item which cost $21 per unit when purchased on June 15,20A.The selling price is $35 per unit.On November 30,20A,the quoted purchase cost of this item was $22 per unit; whereas on December 30,20A,the cost had dropped to $20 per unit.In view of the large quantity of units on hand,no purchases are anticipated in the next six to nine months.At what inventory amount should the 5,000 units be reported?

Accepted Answer

The inventory should be reported at the lower of cost or market. The original cost was $21 per unit, but the market cost on December 30 was $20 per unit. Therefore, the inventory should be reported at $20 per unit, totaling $100,000 (5,000 units x $20).

Question 3

David Company uses the gross method to record its credit purchases,and it uses the periodic inventory system.On July 21,20D,the company purchased goods that had an invoice price of $3,000 with terms of 3/10,n/30.If payment in full is made on July 30,the journal entries to record the purchase and payment should be which of the following?

Accepted Answer

The answer of David Company uses the gross method to...

Question 4

The lower of cost and net realizable value rule for inventory is an example of the application of:

Accepted Answer

The lower of cost and net realizable value rule for inventory is an example of the application of the conservatism principle. This principle requires that when there are alternative methods of accounting, companies should choose the method that results in lower reported assets, lower income, and lower profits. In the case of inventory, the lower of cost and net realizable value rule ensures that inventory is not overstated on the balance sheet and that any losses due to declines in the value of inventory are recognized in a timely manner.

Question 5

Welsh Company purchased an item for inventory that cost $10 per unit and was marked to sell at $14.It was determined that the replacement cost is $9 per unit.No purchases in the near future are anticipated.Using the lower of cost and net realizable value rule,what is the per unit valuation for inventory?

Accepted Answer

According to the lower of cost and net realizable value rule, inventory should be valued at the lower of its cost or net realizable value. In this case, the replacement cost of the item is $9 per unit, which is lower than the original cost of $10 per unit. Therefore, the per unit valuation for inventory should be $9.00.

Question 6

Which of the following is true under the perpetual inventory system?

Accepted Answer

Under the perpetual inventory system, two entries are required to record a sale: one to record the revenue from the sale and another to record the cost of goods sold (COGS), thereby reducing the inventory account. This system continuously updates inventory records, including COGS, making it possible to determine COGS without a physical inventory count.

Question 7

How is the cost of goods sold calculated under the periodic method?

Accepted Answer

Under the periodic method, the cost of goods sold is calculated by subtracting the ending inventory from the cost of goods available for sale, which includes beginning inventory plus purchases.

Question 8

In 20B,Landings Inc.provided the following items in their footnotes.Its cost of goods available for sale was $6.2 billion under FIFO costing and its ending inventory value under FIFO costing was $2.1 billion.Its opening inventory was $2.5 billion.What was itspurchases?

Accepted Answer

The purchases can be calculated using the formula: Cost of Goods Available for Sale = Opening Inventory + Purchases. Rearranging gives Purchases = Cost of Goods Available for Sale - Opening Inventory. So, Purchases = $6.2 billion - $2.5 billion = $3.7 billion.

Question 9

A company reports its cost of goods sold as $20.0 billion in 20B.It has $1.8 billion in inventory and reports trade payable sat $1.6 billion in 20B.In 20A,ending inventory was reported at $1.2 billion and trade payables was $1.1 billion.How much cash was paid to suppliers for 20B?

Accepted Answer

To calculate the cash paid to suppliers in 20B, we need to use the formula:
Cash Paid to Suppliers = Cost of Goods Sold + Beginning Inventory - Ending Inventory - Increase in Trade Payables

Cost of goods sold = $20.0 billion
Beginning inventory = $1.2 billion (from 20A)
Ending inventory = $1.8 billion (from 20B)
Increase in trade payables = $1.6 billion - $1.1 billion = $0.5 billion

Plugging in the values, we get:
Cash Paid to Suppliers = $20.0 billion + $1.2 billion - $1.8 billion - $0.5 billion = $19.9 billion

Therefore, the best choice is C, $20.1 billion.

Question 10

In 20A,C Co.had an inventory turnover ratio of 6.11 while P Co.had a ratio of 10.67.Which of the following might most accurately explain the difference in their ratios?

Accepted Answer

C Co. takes a longer number of days to sell their inventory, which results in a lower inventory turnover ratio compared to P Co.

Question 11

In 20B,Landings Inc.provided the following information in their financial statements: Cost of goods sold under FIFO costing is $22.2 billion and their inventory value under FIFO is $1.3 billion at the end of 20B and $1.2 billion at the end of 20A.What would their inventory turnover ratio be under the FIFO cost flow method?

Accepted Answer

Inventory turnover ratio is calculated by dividing the cost of goods sold by the average value of inventory. The average value of inventory can be calculated by adding the beginning and ending inventory values and dividing by 2.

Using the FIFO cost flow method:

Average inventory value = (1.2 + 1.3) / 2 = $1.25 billion

Inventory turnover ratio = Cost of goods sold / Average inventory value 
= 22.2 / 1.25 
= 17.76

Rounding to one decimal place, the inventory turnover ratio would be 17.8, which corresponds to choice C.

Question 12

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

Accepted Answer

The answer of The lower of cost and net realizable...

Question 13

A company purchased inventory as follows: On March 5,it sold 400 units for $17 each.
The weighted- average unit cost to be used for the cost of goods sold on March 5,in a perpetual inventory system,is

Accepted Answer

The answer of A company purchased inventory as follows: On...

Question 14

A company recorded net purchases of $20.3 billion for 20B.In 20A,ending tradepayables was $1.2 billion and in 20B,it was $1.6 billion.How much cash was paid to suppliers in 20B?

Accepted Answer

To find the cash paid to suppliers, adjust the net purchases by the change in trade payables: $20.3 billion (net purchases) + $1.2 billion (beginning trade payables) - $1.6 billion (ending trade payables) = $19.9 billion.

Question 15

Which of the following is true under the periodic inventory system?

Accepted Answer

Under the periodic inventory system, a separate account for purchases is used to record inventory purchases, and the cost of goods sold is determined at the end of the period, not continuously.

Question 16

Which of the following may be used to calculate ending inventory (EI)under the periodic inventory system?

Accepted Answer

Under the periodic inventory system, ending inventory is calculated using the following formula: beginning inventory (BI) + purchases (P) - cost of goods sold (CGS) = ending inventory (EI). Therefore, option B is the correct formula to use for calculating ending inventory. Option A is incorrect because it adds the cost of goods sold to the beginning inventory and the purchases. Option C subtracts purchases from beginning inventory, which is incorrect. Option D is also incorrect because it mentions gross margin (GM), which is not used in the calculation of ending inventory under the periodic inventory system.

Question 17

In 20B,Landings,Inc.provided the following items in their footnotes.Their cost of goods available for sale was $4.5 billion under FIFO costing and their ending inventory value under FIFO costing was $2.1 billion.Their purchases were $4.1 billion.What was their opening inventory?

Accepted Answer

The opening inventory can be calculated by subtracting purchases from the cost of goods available for sale: $4.5 billion - $4.1 billion = $0.4 billion.

Question 18

If ABC's income statement showed cost of goods sold at $78,000,purchases of $80,000,freight-in at $300,purchases returns of $500 and end-of-the period inventory at $11,900,its beginning-of-the-period-inventory must have been:

Accepted Answer

Beginning Inventory + Purchases + Freight-in - Purchases Returns = Cost of Goods Available for Sale
Let's use the formula to find out the beginning inventory:
Beginning Inventory + $80,000 + $300 - $500 = $78,000 + $11,900
Beginning Inventory + $79,800 = $89,900
Beginning Inventory = $89,900 - $79,800
Beginning Inventory = $10,100
Therefore, the beginning-of-the-period inventory was $10,100.

Question 19

The cost of goods sold account is which of the following?

Accepted Answer

The cost of goods sold account is an expense account that records the cost of the goods or services sold by a company during a specific period. It is used to calculate the gross profit of a business by subtracting it from the revenue earned from the sale of these goods or services.

Question 20

On March 15,20A,Jack Company purchased $5,000 of merchandise on credit subject to terms 2/10,n/20.Jack records its purchases using the gross amount.The periodic inventory system is used.If Jack pays for these goods on March 30,the entry made to record the payment should include which of the following?

Accepted Answer

Since Jack Company is paying after the discount period, they must pay the full amount of $5,000. Therefore, the entry should debit Trade payables for $5,000.

Quiz 8: Reporting and Interpreting Property, plant, and Equipment; Intangibles; and Natural Resources