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Exam 6: Merchandise Inventory and Cost of Sales

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Question 61

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If obsolete or damaged goods can be sold,they will be included in inventory at their net realizable value if it is less than cost.

A) True
B) False

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Question 62

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Toys "R" Us had cost of goods sold of $6,900 million.Its ending inventory was $2,000 million.Therefore its days' sales in inventory was 90 days.

A) True
B) False

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Question 63

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An overstatement of beginning inventory will __________________ cost of goods sold,and _________________ net income.

The cost of an inventory item includes its invoice price plus any added or incidental costs necessary to put it in a place and condition for sale.

In a period of inflation,FIFO usually gives a lower taxable income and thus a tax advantage.

DVDs usually sell for $14 per unit,and have a profit margin of 25%.However,the expected selling price has fallen to $7 per unit.The Movie Company's current inventory includes 200 units purchased at $10 per unit.Calculate the value of the inventory at the lower of cost and net realizable value.

Harlingen Store uses the retail method and has the following information available concerning their most recent accounting period: (1)What is the cost ratio using the retail method? (2)What is the estimated cost of the ending inventory?

Goods in transit are automatically included in inventory.

In the process of adjusting inventory,how can the lower of cost and net realizable value be applied to the ending inventory?

All businesses should take an inventory count once each year to identify inventory errors or shortages.

The inventory cost flow assumption that assigns the highest cost to cost of goods sold in a period of rising prices is FIFO.

Which ratio measures the portion of net sales that is gross profit?

Days' sales in inventory:

Trekking Company's total cost of inventory was $305,000.The net realizable value is $297,000.Under LCNRV,the amount reported should be $305,000.

Incidental costs added to the value of inventory include import duties,transportation-in,storage,and insurance.

Damaged or obsolete goods:

Coronado Company sells two types of inventory,MP3 players and Blu Ray players.The MP3 players originally cost $2,250 and have a net realizable value $1,075 while the Blu Ray players had an original cost of $500 and have a net realizable value of $700.Calculate the year end adjustment to inventory when applying the lower of cost and net realizable value on an item by item basis.

A business that has inventory items that are ordinarily interchangeable is required to use the specific identification method of assigning costs to inventory.

The _____________________ method is used to estimate the value of inventory that has been destroyed,lost,or stolen.

During January,a company that uses a perpetual inventory system had beginning inventory,purchases,and sales as follows: Prepare a schedule to show the cost of goods sold and ending inventory using the moving weighted average method of costing rounding calculations to two decimals.