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Exam 8: Inventories: Cost Measurement and Flow Assumptions

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Question 31

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Phillips Corp.purchased raw materials with a catalog price of $60, 000.Credit terms of 3/15, n/60 apply.If Phillips uses the net price method, the purchase should be recorded at

A) $61, 800
B) $60, 000
C) $58, 200
D) $51, 000

E) None of the above
F) A) and C)

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Question 32

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Which one of the following sets of inventory cost flow assumptions is not susceptible to profit manipulation by management?

A) FIFO and specific identification
B) LIFO and average cost
C) FIFO and average cost
D) LIFO and specific identification

E) C) and D)
F) B) and D)

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Question 33

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Which of the following is not a disadvantage of using the FIFO cost flow assumption?

Alabama Company (a U.S.company) purchases inventory from a Japanese company for 5, 000, 000 yen when the exchange rate is $.012.Alabama makes payment when the exchange rate is .013.When making the journal entry for payment, Alabama Company will record a

The following information is available for Crystal Company: $\begin{array}{lll}\text { Jan. } 1 & \text { Beginning inventory } & 15 \text { units } @ \$ 12.00 \text { each } \\\text { Jan. } 9 & \text { Purchase } & 10 \text { units } @ \$ 16.00 \text { each } \\\text { Jan. } 14 & \text { Sale } & 6 \text { units } \\\text { Jan. } 20 & \text { Purchase } & 6 \text { units } @ \$ 18.00 \text { each } \\\text { Jan } 26 & \text { Sale } & 9 \text { mits }\end{array}$ Required: Answer the following questions for Crystal Company: a. If FIFO is in use, what is the ending invent ory in doilars? b. If periodic LIFO is in use, what is the cost of goods sold? c. If moving average is in use, what is the ending inventory in dollars (round calculations to nearest cent)? d. If weighted average is in use, what is the ending inventory in dollars (round unit cost to the nearest cent)

The cost of goods sold can be determined only after a physical count of inventory on hand under the

On October 17, Sedona Salon Supplies bought $42, 000 of goods with terms of 1/10, n/30.One-third of the bill was paid on October 24, and the rest of the bill was paid on October 31. Required: Journalize for October 24 as follows: a. gross method of ac counting for purchase discounts b. net method of accounting for purchase discounts

Titan Company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising prices.What was the result of the change on net income in the year of the change?

On December 31, 2009, the current cost of the Greene Company's ending inventory was $10, 000 when the cost index was 100.On January 1, 2010, Greene adopted the dollar value LIFO method of inventory costing.Information from the company's ending inventory records is as follows:. $\begin{array}{rll}&&\text { Ending Inventony }\\&\text {Cost}&\text {Reported at}\\\text { Year } &\text { Index } &\text { Dollar-Value LIFO }\\2010 & 110 & \$ 10,000 \\2011 & 125 & 15,500 \\2012 & 140 & 16,340\end{array}$ Required: Determine the current cost of Greene's ending inventory for the years 2010, 2011, and 2012.

A manufacturing firm would not normally have an account titled

Which one of the following statements is true?

Which one of the following statements is true?

Even though the LIFO cost flow assumption will reduce taxable income and the related cash outflow for income taxes, there are certain difficulties encountered with its implementation.Thus, dollar-value LIFO is often used. Required: Discuss three different ways that the dollar-value LIFO method overcomes some of the difficulties in the application of the LIFO approach.

For the year in which the change takes place (assuming rising prices) , adoption of a "just-in-time" inventory system will most likely result in a(n) :

On July 1, Deuce Hardware, Inc.had an inventory of 300 gas grills costing $100 each.Purchases and sales during July are as follows: $\begin{array}{lll}\text {Date}&\text {Purchases}&\text {Sales}\\\text { July 3 } & & 100 @ \$ 125 \text { each } \\\text { July } 10 & 150 @ \$ 110 \text { each } \\\text { July } 17 & &150 @ \$ 130 \text { each }\\\text { July } 17 & 50 @ \$ 120 \text { each } &\end{array}$ What is the cost of Deuce's inventory on July 31 using the FIFO method?

Which of the following is not an advantage of a perpetual inventory system?

IFRS and GAAP are similar for all of the following inventory accounting standards except IFRS

Johnson Industries performed consulting services on account for a German customer on December 1, 2010.This transaction was for 30, 000 euros.Johnson's accounting year ends December 31.The invoice amount was received by Johnson on January 15, 2011.The exchange rates during this period were as follows: $\begin{array}{ll}\text { December } 1 & \$ 1.10 / \text { euro } \\\text { December } 31 & 1.15 / \text { euro } \\\text { January } 15 & 1.12 / \text { euro }\end{array}$ Required: Prepare the necessary journal entries to record this consulting revenue and subsequent cash receipt.

The purchases discounts taken account may appear in the accounting records if which one of the following methods is used to account for purchase discounts?

Quicksilver adopted LIFO in January 1, 2010, when the inventory had a FIFO cost of $180, 000 ($10 per unit).At the end of 2010, inventory consisted of 18, 750 units at $12 per unit, and the ending inventory for 2011 consisted of 20, 000 units at $15 per unit. Required: a. Calculate the cost index to be used for 2010 and 2011 using the link-chain method. b. Compute the endinginvent ory for 2010 and 2011 using dollar-value LIFO.