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Exam 5: Reporting and Analyzing Inventories

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Question 51

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A corporation has provided the following information about one of its products: During the year, 470 units were sold. What is ending inventory using the weighted average periodic inventory method? (Round the weighted average cost per unit to two decimal points; round the ending inventory to the nearest whole dollar.)

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Number of units purchased = 235 + 435 + ...

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Question 52

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An error in the period-end inventory causes an offsetting error in the next period and therefore:

A) Managers can ignore the error.
B) It is sometimes said to be self-correcting.
C) It affects only income statement accounts.
D) If affects only balance sheet accounts.
E) Is immaterial for managerial decision making.

F) B) and E)
G) A) and B)

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Question 53

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A company made the following merchandise purchases and sales during the month of May: There was no beginning inventory. If the company uses the LIFO periodic inventory method, what would be the cost of the ending inventory?

How do the consistency concept and the full disclosure principle affect inventory valuation?

In applying the lower of cost or market method to inventory valuation, market is defined as the current replacement cost of the same inventory items in the usual manner.

Monitor Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for their first year of operation: Monitor's ending inventory using the LIFO method was $8,200. Monitor's accountant determined that had they used FIFO, the ending inventory would have been $8,500. a. Determine what the income before taxes would have been had Monitor used the FIFO method of inventory valuation instead of LIFO. b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?

Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income.

It can be expected that companies that sell perishable goods have higher inventory turnover than companies that sell nonperishable goods.

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the lowest gross profit and net income, providing a tax advantage.

Managers are still able to make important decisions when there are erroneous inventory balances because inventory errors are self-correcting and, as a result, are less serious.

A company had 260 units of inventory at a cost of $152 each on January 1. On June 5, the company purchased 460 units for $172 each. On November 10, the company purchased 160 units for $212 each. On December 15, the company sold 520 units. Given this information, use the weighted average periodic inventory method to find the ending inventory balance. (Do not round your intermediate calculations; round the final answer to nearest dollar amount.)

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

Net realizable value for damaged or obsolete goods is equal to the sales price plus the cost of making the sale.

If damaged goods can be sold at a reduced price, they are included in inventory at their ________________________.

A company made the following purchases during the year: On December 31, there were 28 units in ending inventory. These 28 units consisted of 1 from the January 10 purchase, 2 from the March 15 purchase, 5 from the April 25 purchase, 15 from the July 30 purchase, and 5 from the October 10 purchase. Using specific identification, calculate the cost of the ending inventory.

Regardless of what inventory method or system is used, cost of goods available for sale must be allocated between ___________________ and ___________________.

A company's warehouse was destroyed by a tornado on March 15. The following information was salvaged from the ruins: Inventory, beginning: $28,000 Purchases for the period: $17,000 Sales for the period: $55,000 Sales returns for the period: $700 The company's average gross profit ratio is 35%. What is the estimated cost of the lost inventory?

Given the following information, determine the cost of goods sold at November 30 using the weighted average perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per.

The lower of cost or market rule for inventory valuation must be applied to only individual items of inventory, not to major categories of inventory or to the entire inventory.

The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the: