Chapter 6, Reporting and Analyzing Inventory Video Solutions, Accounting Tools for Business Decision Making

Problem 1

When is a physical inventory usually taken?
(a) When the company has its greatest amount of inventory.
(b) When a limited number of goods are being sold or received.
(c) At the end of the company's fiscal year.
(d) Both (b) and (c).

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07:54

Problem 2

Which of the following should not be included in the physical inventory of a company?
(a) Goods held on consignment from another company.
(b) Goods shipped on consignment to another company.
(c) Goods in transit from another company shipped FOB shipping point.
(d) All of the above should be included.

Puneet Prajapati

Numerade Educator

Problem 3

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $\$ 180,000$ at December 31, 2017. This count did not take into consideration the following facts. Rogers Consignment Store currently has goods worth $\$ 35,000$ on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $\$ 50,000$. Railway purchased $\$ 13,000$ of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3 . Determine the correct amount of inventory that Railway should report.
(a) $\$ 230,000$.
(c) $\$ 228,000$.
(b) $\$ 215,000$.
(d) $\$ 193,000$.

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02:21

Problem 4

Kam Company has the following units and costs.
\begin{tabular}{lrrc}
& Units & & Unit Cost \\
\cline { 2 - 2 } Inventory, Jan. 1 & 8,000 & & $\$ 11$ \\
Purchase, June 19 & 13,000 & & 12 \\
Purchase, Nov. 8 & 5,000 & & 13
\end{tabular}
If 9,000 units are on hand at December 31 , what is the cost of the ending inventory under FIFO?
(a) $\$ 99,000$.
(c) $\$ 113,000$.
(b) $\$ 108,000$.
(d) $\$ 117,000$.

Narayan Hari

Numerade Educator

Problem 5

From the data in Question 4 , what is the cost of the ending inventory under LIFO?
(a) $\$ 113,000$.
(c) $\$ 99,000$.
(b) $\$ 108,000$.
(d) $\$ 100,000$.

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02:21

Problem 7

Davidson Electronics has the following:
\begin{tabular}{lrcc}
& Units & & Unit Cost \\
\cline { 2 - 2 } Inventory, Jan. 1 & 5,000 & & $\$ 8$ \\
Purchase, April 2 & 15,000 & & 10 \\
Purchase, Aug. 28 & 20,000 & & 12
\end{tabular}
If Davidson has 7,000 units on hand at December 31 , the cost of ending inventory under the average-cost method is:
(a) $\$ 84,000$.
(c) $\$ 56,000$.
(b) $\$ 70,000$.
(d) $\$ 75,250$.

Narayan Hari

Numerade Educator

Problem 8

On periods of rising prices, LIFO will produce:
(a) higher net income than FIFO.
(b) the same net income as FIFO.
(c) lower net income than FIFO.
(d) higher net income than average-cost.

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Problem 8

Cost of goods avanlable for sale consists of two elements: beginning inventory and:
(a) ending inventory.
(b) cost of goods purchased.
(c) cost of goods sold.
(d) All of the answer choices are correct.

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04:27

Problem 9

Considerations that affect the selection of an inventory costing method do not include:
(a) tax effects.
(b) balance sheet effects.
(c) income statement effects.
(d) perpetual versus periodic inventory system.

Puneet Prajapati

Numerade Educator

02:46

Problem 10

The lower-of-cost-or-market rule for inventory is an example of the application of:
(a) the conservatism convention.
(b) the historical cost principle.
(c) the materiality concept.
(d) the economic entity assumption.

Jennifer Stoner

Numerade Educator

Problem 11

Which of these would cause inventory turnover to increase the most?
(a) Increasing the amount of inventory on hand.
(b) Keeping the amount of inventory on hand constant but increasing sales.
(c) Keeping the amount of inventory on hand constant but decreasing sales.
(d) Decreasing the amount of inventory on hand and increasing sales.

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Problem 12

Carlos Company had beginning inventory of $\$ 80,000$, ending inventory of $\$ 110,000$, cost of goods sold of $\$ 285,000$, and sales of $\$ 475,000$. Carlos's days in inventory is:
(a) 73 days.
(c) 102.5 days.
(b) 121.7 days.
(d) 84.5 days.

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02:02

Problem 13

Norton Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $\$ 91$ each and a current replacement cost of $\$ 80$ each. The ending inventory under lower-of-cost-or-market is:
(a) $\$ 91,000$.
(c) $\$ 18,200$.
(b) $\$ 80,000$.
(d) $\$ 16,000$.

Amany Waheeb

Numerade Educator

Problem 14

The LIFO reserve is:
(a) the difference between the value of the inventory under LIFO and the value under FIFO.
(b) an amount used to adjust inventory to the lowerof-cost-or-market.
(c) the difference between the value of the inventory under LIFO and the value under average-cost.
(d) an amount used to adjust inventory to historical cost.

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Problem 15

In a perpetual inventory system:
(a) LIFO cost of goods sold will be the same as in a periodic inventory system.
(b) average costs are based entirely on unit-cost simple averages.
(c) a new average is computed under the averagecost method after each sale.
(d) FIFO cost of goods sold will be the same as in a periodic inventory system.

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Problem 16

16. Fran Company's ending inventory is understated by $\$ 4,000$. The effects of this error on the current year's cost of goods sold and net income, respectively, are:
(a) understated and overstated.
(b) overstated and understated.
(c) overstated and overstated.
(d) understated and understated

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Problem 17

Harold Company overstated its inventory by $15,000 at
December 31, 2016. It did not correct the error in 2016
or 2017. As a result, Harold’s stockholders’ equity was:
(a) overstated at December 31, 2016, and understated
at December 31, 2017.
(b) overstated at December 31, 2016, and properly
stated at December 31, 2017.
(c) understated at December 31, 2016, and understated
at December 31, 2017.
(d) overstated at December 31, 2016, and overstated
at December 31, 2017.

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