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Exam 6: Merchandise Inventory

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Question 81

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A company purchased 130 units for $20 each on January 31.It purchased 200 units for $35 each on February 28.It sold 200 units for $80 each from March 1 through December 31.If the company uses the weighted-average inventory costing method,calculate the amount of Cost of Goods Sold on the income statement for the year ending December 31.(Assume the company uses the perpetual inventory system.Round any intermediate calculations two decimal places,and your final answer to the nearest dollar. )

A) $9,600
B) $5,818
C) $2,600
D) $7,000

E) A) and D)
F) B) and D)

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Question 82

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Which of the following statements is TRUE of a good merchandise inventory control system?

A) It eliminates the need for authorization of merchandise purchases.
B) It ensures that a physical count of inventory is not required.
C) It often prevents the company from a stockout.
D) It eliminates the need to examine inventory purchases for damage.

E) A) and B)
F) B) and C)

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Question 83

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The periodic inventory records of Northstar Sales indicate the following for the month of April: As of April 30,Northstar counts 8 units of merchandise inventory on hand. Compute ending merchandise inventory and cost of goods sold for Northstar using the LIFO inventory method.

Given the same purchase and sales data,and assuming the cost of inventory is rising,the costing methods for inventory will result in different amounts for cost of goods sold.

Which of the following is NOT an inventory costing method?

Michigan Motors is considering which inventory costing method it should use.The business wants to show the highest Merchandise Inventory balance during a period of declining costs.Which inventory method should Michigan Motors select? Discuss your selection.

The lower-of-cost-or-market rule demonstrates accounting conservatism in action.

Using the FIFO method of inventory valuation will always produce the same results for cost of goods sold and ending inventory whether a company uses perpetual or periodic inventory costing methods.

State the effects of inventory errors on cost of goods sold and net income for periods 1 and 2.The response should be overstated or understated. Period 1 Ending Merchandise Inventory is overstated

Which of the following inventory valuation methods minimizes income tax expense during a period of rising inventory costs?

Which of the following inventory costing methods yields the lowest cost of goods sold during a period of rising inventory costs?

Ending inventory is calculated by multiplying the number of units on hand by the unit cost.

Accounting is simpler in a periodic inventory system because the company keeps a daily running record of inventory on hand.

Under the periodic inventory system,which of the following amounts will always stay the same regardless of the inventory valuation method used?

Provide a definition for each of the following accounting principles.

The periodic inventory records of Hawk Dental Supply indicate the following for the month of April: As of April 30,Hawk counts 8 units of merchandise inventory on hand. Compute ending merchandise inventory and cost of goods sold for Hawk using the FIFO inventory method.

The Organizer Store uses the weighted-average inventory costing method in a perpetual inventory system.The unit cost of the beginning inventory for inventory item X500 was $10 per unit.There was one unit in beginning inventory.The first purchase of the period has a unit cost of $12 per unit.Multiple units were purchased.The weighted average cost per unit is $11.

The amounts obtained for cost of goods sold and ending merchandise inventory are not the same for FIFO perpetual and FIFO periodic.

Weighted average cost per unit is determined by dividing the cost of goods available for sale by the number of units available.

When using the FIFO inventory costing method,ending merchandise inventory will be the highest,as compared to LIFO and weighted-average inventory costing methods,when costs are decreasing.