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Exam 5: Accounting for Inventories

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Question 71

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The Byrne Company had its entire inventory destroyed when a fire swept through the company's warehouse on April 30,2016.Fortunately,the accounting records were locked in a fireproof safe and were not damaged.The following information for the period up to the date of the fire was taken from the accounting records: Required: Assuming that the gross margin has averaged 35 percent of selling price,what is the estimated value of the inventory destroyed in the fire? Show all calculations in good form.

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Inventory lost is co...

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Question 72

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The Internal Revenue Service allows a company to use LIFO for income tax purposes only if it also uses LIFO for financial reporting.

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B) False

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Question 73

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West Corporation's 2015 ending inventory was overstated by $20,000;however,ending inventory for 2016 was correct.Which of the following statements is correct?

The following information is for Poole Company for 2016: Required: a)Assuming that Poole uses the LIFO cost flow method,determine how much product cost would be allocated to Cost of Goods Sold,and how much to Merchandise Inventory at the end of the year. b)Based on your results from part a,calculate inventory turnover and average number of days to sell inventory. c)Assuming that Poole uses the FIFO cost flow method,determine how much product cost would be allocated to Cost of Goods sold,and how much to Merchandise Inventory at the end of the year. d)Based on your results from part c,calculate inventory turnover and average number of days to sell inventory. e)Compare your results from parts b and d.Do LIFO and FIFO give the same results for inventory turnover? Which is higher,and why?

Which of the following circumstances is not a reason to compute an estimate of the amount of inventory?

Discuss the significance of the average number of days to sell inventory.

If some inventory items have declined in value from damage or obsolescence,what effect will the lower-of-cost-or-market rule have on the amount of inventory shown on the balance sheet?

Indicate whether each of the following statements related to inventory is true or false. _____ a)The higher a company's inventory turnover ratio,the higher its cost of financing inventory. _____ b)The selling price a company charges for its goods probably will not be affected by the inventory cost flow method it uses. _____ c)Other things being equal,if prices are rising,a company that uses the LIFO inventory method will have a higher amount of total assets than if it had used FIFO. _____ d)A company that plans to offer a higher level of customer service than its competitors probably will have a higher gross margin percentage than its competitors. _____ e)The lower of cost or market rule may reduce a company's net income,but it will never increase net income.

In relation to inventory,differentiate between the flow of cost and the physical flow of goods.

An overstatement of ending inventory results in which of the following in the present period?

Use the following information for questions The inventory records for Radford Co.reflected the following -Determine the weighted average cost per unit (rounded) for May.

Use the following information for questions -The average number of days to sell inventory for Company Y is approximately:

Jones Company sells exercise bikes.Its beginning inventory was 100 units at $200 per unit.During the year,Jones made two purchases of the bikes: first,a 300-unit purchase at $220 per unit,and then 200 units at $250 per unit.The ending inventory for the year was 250 units. Required: Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory,assuming that Jones uses a)FIFO b)LIFO c)Weighted average Round intermediate calculations to 2 decimal places.Round final answers to whole dollars.

On February 2,2016,a fire destroyed the entire inventory of Orange Co.The following information was found in accounting records: Purchases,$420,000;Sales $690,000;beginning inventory,$120,000;average gross margin percentage during the past five years,30%.Based on the above information,indicate whether each of the following statements is true or false. _____ a)The cost of goods available for sale is $540,000. _____ b)The cost of goods sold as a percent of sales is 70%. _____ c)The estimated cost of goods sold is $303,000. _____ d)Estimated inventory lost in the fire is $66,000. _____ e)Estimated gross margin for the period up to the date of the fire was $483,000.