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Exam 6: Inventory and Cost of Goods Sold

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Question 81

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During periods of rising costs,LIFO generally results in a higher cost of goods sold.

A) True
B) False

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Question 82

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Sales revenue minus cost of goods sold is referred to as operating income.Sales revenue minus cost of goods sold equals gross profit.

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B) False

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Question 83

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At the time inventory is sold,cost of goods sold is recorded under the perpetual inventory system.

Cost of goods sold is an asset reported in the balance sheet and inventory is an expense reported in the income statement.Cost of goods sold is an expense reported in the income statement and inventory is an asset reported in the balance sheet.

The primary distinction between operating activities and nonoperating activities in a multiple-step income statement is whether the activity is:

During periods of rising costs,FIFO generally results in a higher ending inventory balance.

The inventory cost flow assumption that is least likely to match the physical flow of inventory for most companies is:

The use of the lower of cost and net realizable value to report inventory is an example of conservatism in financial reporting.

During periods of rising costs,FIFO generally results in a higher cost of goods sold.During periods of rising costs,FIFO generally results in a lower cost of goods sold.

Which of the following would increase the gross profit ratio?

Inventory records for Dunbar Incorporated revealed the following: Dunbar sold 700 units of inventory during the month.Ending inventory assuming weighted-average cost would be (round weighted-average unit cost to four decimals and final answer to the nearest whole dollar) : $\begin{array} {| l | l | c r } \hline \text { Date } & \text { Transaction } & \text { Number of Units } & \text { Unit Cost } \\\hline \text { Apr. 1 } & \text { Beginning inventory } & 500 & \$ 2.40 \\\text { Apr. 20 } & \text { Purchase } & 400 & 2.50 \\\hline\end{array}$

After evaluating the lower of cost and net realizable value of inventory,the accountant prepares a year-end adjustment.That adjustment would:

The lower of cost and net realizable value rule causes losses in the value of inventory to be recognized in the period when:

Merchandise sold FOB shipping point indicates that:

A multiple-step income statement reports multiple levels of profitability,such as gross profit,operating income,income before income taxes,and net income.

The disclosure that shows the difference in the cost of inventory between LIFO and FIFO is referred to as the:

A perpetual inventory system measures cost of goods sold by:

The following information relates to inventory for Shoeless Joe Inc.At what amount would Shoeless report ending inventory using FIFO cost flow assumptions? $\begin{array} { | l | l | c | r | } \hline \text { Date } & & \text { Quantity } & \text { Price } \\\hline \text { March 1 } & \text { Beginning Inventory } & 20 & \$ 2 \\\hline \text { March 7 } & \text { Purchase } & 15 & 3 \\\hline \text { March 11 } & \text { Sale } & 25 & 7 \\\hline \text { March 12 } & \text { Purchase } & 20 & 4 \\\hline\end{array}$

Inventory records for Marvin Company revealed the following: Marvin sold 2,300 units of inventory during the month.Cost of goods sold assuming LIFO would be: $\begin{array} { | l | l | c | r | } \hline \text { Date } & \text { Transaction } & \text { Number of Units } & \text { Unit Cost } \\\hline \text { Mar. 1 } & \text { Beginning inventory } & 1,000 & \$ 7.20 \\\hline \text { Mar. 10 } & \text { Purchase } & 600 & 7.25 \\\hline \text { Mar. 16 } & \text { Furchase } & 800 & 7.30 \\\hline \text { Mar. 23 } & \text { Purchase } & 600 & 7.35 \\\hline\end{array}$

Inventory records for Dunbar Incorporated revealed the following: Dunbar sold 700 units of inventory during the month.Ending inventory assuming FIFO would be: $\begin{array} { | l | l | c r | } \hline & & \text { Number of } \\\text { Date } & \text { Transaction } & \text { Units } & \text { Unit Cost } \\\hline \text { Apr. } 1 & \text { Beginning inventory } & 500 & \$ 2.40 \\\hline \text { Apr. } 20 & \text { Purchase } & 400 & 2.50 \\\hline\end{array}$