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Exam 5: Inventories and Cost of Sales

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Question 71

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_______________________ is the estimated sales price of damaged goods minus the cost of making the sale.

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Net realiz...

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Question 72

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Goods on consignment are goods that are shipped by the owner, who is referred to as the _______________, to another party referred to as the ______________________.

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Consignor;...

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Question 73

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When units are purchased at different costs over time, it is simple to determine the cost per unit assigned to inventory.

When the __________ method is used with a periodic inventory system, cost of goods sold is assigned costs from the most recent purchases for the period.

A company had gross profit of $134,200 on net sales of $205,000. If ending inventory was $8,000 and average inventory was $7,080, what is the company's inventory turnover?

The conservatism principle requires that when more than one estimate of the amounts that are to be received or paid in the future exist and these estimates are about equally likely, then the less optimistic amount is used.

On September 30 a company needed to estimate its ending inventory to prepare its third quarter financial statements. The following information is available: Beginning inventory, July 1: $4,000 Net sales: $40,000 Net purchases: $41,000 The company's gross margin ratio is 15%. Using the gross profit method, the cost of goods sold would be:

A company uses the retail inventory method and has the following information available concerning its most recent accounting period: (a) What is the cost-to-retail ratio using the retail method? (b) What is the estimated cost of the ending inventory?

Errors in the period-end inventory balances only have an impact on the current period's records and financial statements.

A company had the following ending inventory costs: $\begin{array} { | l | r | r | r | } \hline \text { Product } & \text { Units Available } & \text { Cost } & \text { Market } \\\hline \text { A } & 10 & \$ 5 & \$ 6 \\\hline \text { B } & 50 & 8 & 7 \\\hline \text { C } & 35 & 10 & 11 \\\hline\end{array}$ Instructions: (a) Calculate the lower of cost or market (LCM) value for the inventory as a whole. (b) Calculate the lower of cost or market (LCM) value for each individual item.

The matching principle is used by some companies to avoid allocating incidental inventory costs to cost of goods sold.

When taking a physical count of inventory, the use of pre-numbered inventory tickets assists in the control process.

Describe the internal controls that must be applied when taking a physical count of inventory.

The four methods of inventory valuation are SIFO, FIFO, LIFO and average cost.

A company reported the following information regarding its inventory. Beginning inventory: cost is $70,000; retail is $130,000 Net purchases: cost is $65,000; retail is $120,000 Sales at retail: $145,000 The year-end inventory showed $105,000 worth of merchandise available at retail prices. What is the cost of the ending inventory?

An overstatement of ending inventory will cause an overstatement of assets and an understatement of equity on the balance sheet.

Given the following information, determine the cost of goods sold at December 31 using the LIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit December 15: 20 units were purchased at $10.15 per unit December 22: 18 units were sold at $35 per unit

Using the retail inventory method, if the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.

Apply the retail method to the following company information to calculate the cost of the ending inventory for the current period. $\begin{array} { | l | r | r | } \hline & \text { Cost } & \text { Retail } \\\hline \text { Beginning inventory } & \$ 20,224 & \$ 31,600 \\\hline \text { Net purchases } & 59,508 & 97,000 \\\hline \text { Sales } & & 89,000 \\\hline\end{array}$

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?