Practice Question 50
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Correct! This represents cost of goods sold under LIFO:Sale on August 8: 200 × $5.20* = $1,040. *$1,560/300 = $5.20Sale on August 24: 350 units × $3.35** = $1,172.50. **$1,340/400 = $3.35Total cost of goods sold = $2,212.50. |
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A company just starting business made the following inventory transactions in August:
| Purchase on August 1
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300 units |
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$1,560 |
| Sale on August 8
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200 units |
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3,400 |
| Purchase on August 12
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400 units |
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1,340 |
| Sale on August 24
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350 units |
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5,950 |
Using the LIFO inventory method, how much is cost of goods sold for August using a perpetual inventory system?
Practice Question 49
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Correct! The units that remain in ending inventory are the units from the most recent purchases.(200 ×$6.30*) + (300 × $6.60**) = $3,240; *2,520/400 = $6.30; **1,980/300 = $6.60. |
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A company just starting business made the following purchases in August:
| August 1
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300 units |
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$1,560 |
| August 12
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400 units |
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2,340 |
| August 24
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400 units |
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2,520 |
| August 30
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300 units |
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1,980 |
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1,400 units |
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$8,400 |
A physical count of the inventory on August 31 reveals that there are 500 units on hand. Using the FIFO inventory method in a perpetual inventory system, how much is the value of the ending inventory on August 31?
Practice Question 48
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Correct! FIFO cost of goods sold under a periodic system will be the same as FIFO cost of goods sold under a perpetual system. |
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Which statement is true in a perpetual inventory system?
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FIFO cost of goods sold will be the same as in a periodic inventory system. |
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A new average is computed under the average cost method after each sale. |
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LIFO cost of goods sold will be the same as in a periodic inventory system. |
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Average costs are based entirely on unit-cost simple averages. |
Practice Question 43
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Correct! Since inventory turnover is a period ratio, average inventory for the period is used. |
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Inventory turnover is calculated by dividing cost of goods sold by
Practice Question 42
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Correct! Days sales in inventory is calculated as 365 days divided by inventory turnover.Inventory turnover = $960,000 / $30,000 = 32 timesDays sales in inventory = 365 / 32 = 11.4 days |
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Net sales are $2,000,000, cost of goods sold is $960,000, and average inventory is $30,000. How many days sales are in inventory?
Practice Question 40
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Correct! Cost of goods sold is the difference between sales revenue and gross profit:$1,800,000 – $600,000 = $1,200,000Inventory turnover ratio = Cost of goods sold divided by average inventory:$1,200,000 / [($160,000 + $240,000) / 2] = 6.0. |
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The following information came from the income statement of the Wilkens Company at December 31, 2017: sales revenue $1,800,000; beginning inventory $160,000; ending inventory $240,000; and gross profit $600,000. What is Wilkens’ inventory turnover ratio for 2017?
Practice Question 39
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Correct! Days in inventory equals 365 days ÷ inventory turnover (cost of goods sold ÷ average inventory). 365 ÷ ($285,000 ÷ [($80,000 + $110,000) ÷ 2]) = 121.7 days |
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Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales revenue of $475,000. What is Carlos’ days in inventory?
Practice Question 30
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Correct! LIFO will provide the highest net income during a period of falling prices. |
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In a period of falling prices, which of the following methods will give the largest net income?
Practice Question 28
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Correct! FIFO will result in the lowest cost of goods sold, highest net income, and highest income tax expense. |
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In a period of rising prices which inventory method will result in the greatest amount of income tax expense?
Practice Question 17
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FIFO assumes the cost of the earliest units purchased are the first to be allocated to cost of goods sold. |
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Which of the following is true of the FIFO inventory method?
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It assumes that the cost of the earliest units purchased are the first to be allocated to the ending inventory. |
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It assumes that the cost of the earliest units purchased are the last to be allocated to cost of goods sold. |
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It assumes that the cost of the earliest units purchased are the last to be allocated to the beginning inventory. |
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It assumes that the cost of the earliest units purchased are the first to be allocated to cost of goods sold. |