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Exam 10: Short-Term Operating Assets: Inventory

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Question 31

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1. What is the LIFO conformity rule? 2. Why is LIFO used by so many companies? 3. What is the disadvantage of LIFO?

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1. The LIFO conformity rule requires tha...

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Question 32

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What are the advantages of using dollar-value LIFO

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Question 33

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The inventory allocation method that assigns the most recent costs to ending inventory and the oldest costs to cost of goods sold is the ________.

At December 31, the Selig Company has ending inventory with a historical cost of $634,000. Assume the company uses the FIFO perpetual inventory system. The net realizable value is $612,000. The normal profit on this inventory is $50,000. Before any adjustments at the end of the period, the cost of goods sold account has a balance of $900,000. Following U.S. GAAP, which journal entry is required on December 31 to adjust the ending balance of inventory if the direct method is used?

Sikich Company has the following data available: $\begin{array} { l c c c } \text { Transaction } & \text { Units Purchased } & \text { Unit Cost } & \text { Units Sold } \\\text { Beginning Inventory } & 650 & \$ 18 & \\\text { Oct. 1 Purchase } & 325 & 31 & \\\text { Oct. 10 Sale } & & & 425 \\\text { Oct. 14 Purchase } & 450 & 33 & \\\text { Oct. 20 Sale } & & & 600 \\\text { Oct. 22 Purchase } & 400 & 37 & \\\text { Oct. 29 Sale } & & & 525\end{array}$ If Sikich Company uses a perpetual FIFO inventory system, the cost of goods sold for the month is ________.

Which inventory costing method most closely approximates current cost for each of the following line items on the financial statements?

The flow of a manufacturer's product costs through the inventory accounts is ________.

Freight-out costs are included as part of inventory costs.

When following U.S. GAAP, which of the following statements is not correct regarding inventory write-downs using the lower-of-cost-or-market rule?

Meyer Co. has the following information available: $\begin{array} { | l | r | } \hline \text { Cost of inventory } & \$ 56,000 \\\hline \text { Freight-in } & 6,000 \\\hline \text { Freight-out } & 2,500 \\\hline \text { Packaging costs } & 550 \\\hline \text { Handling costs } & 700 \\\hline\end{array}$ What amount of inventory should the company report on the balance sheet?

Assume inventory costs are increasing over time and inventory levels are stable. Which inventory method results in a higher net income and a higher ending inventory?

Inventory disclosures require information about any inventory financing arrangements.

The following information is available for the past year for a retail store: $\begin{array} { | l | r | } \hline \text { Sales } & \$ 121,000 \\\hline \text { Sales Returns } & \$ 1,000 \\\hline \text { Markups } & \$ 11,000 \\\hline \text { Markup cancellations } & \$ 1,000 \\\hline \text { Markdowns } & \$ 9,000 \\\hline \text { Purchases (at cost) } & \$ 40,000 \\\hline \text { Purchases (at retail) } & \$ 90,000 \\\hline \text { Beginning inventory (at cost) } & \$ 32,000 \\\hline \text { Beginning inventory (at retail) } & \$ 42,000 \\\hline\end{array}$ What is the cost-to-retail ratio to estimate the cost of ending inventory using the conventional retail method? (Round cost-to-retail ratios to four decimal places.)

The Henry Store has the following data for inventory: $\begin{array} { | l | r | r | } \hline & \text { Cost } & \text { Retail } \\\hline \text { Inventory, January 1 } & \$ 300,000 & \$ 450,000 \\\hline \text { Purchases for January } & 340,000 & 480,000 \\\hline \text { Sales for January } & & 440,000 \\\hline\end{array}$ The store uses the dollar-value LIFO retail method. The price index for the year is 1.08. The price index that pertains to the beginning inventory is 1.00. Round all ratios to four decimal places. What is the cost of the ending inventory at January 31? (Round any percentages to two decimal places, X.XX%, and your final answer to the nearest dollar.)

Donaldson Corporation uses a periodic inventory system. On January 1, inventory is $253,000. On April 5, Donaldson sells inventory with a selling price of $75,000 on account. The cost of the inventory sold is $50,000. The journal entry (entries) to record the sale is (are) ________.

Destiny Industries reports beginning inventory of $254,000, purchases of $559,000, and ending inventory of $198,000. What is the cost of goods sold?

Sampe Company has the following data available: $\begin{array} { | l | c | c | c | } \hline \text { Transaction } & \text { Units Purchased } & \text { Unit Cost } & \text { Units Sold } \\\hline \text { Beginning Inventory } & 400 & \$ 10 & \\\hline \text { March 1 Purchase } & 200 & \$ 13 & \\\hline \text { April 25 Sale } & & & 350 \\\hline \text {June 10 Purchase } & 300 & \$ 14 & \\\hline \text { July 20 Sale } & & & 250 \\\hline \text { October 30 Purchase } & 350 & \$ 18 & \\\hline \text { December 15 Sale } & & & 400 \\\hline\end{array}$ If Sampe Company uses a perpetual FIFO inventory system, the cost of goods sold for the year is ________.

Farm Tools Inc. (FTI) uses the LIFO retail inventory method for inventory costing. It has beginning inventory at a cost of $20,000 with a retail value of $50,000. During the year, FTI purchased inventory with a cost basis of $120,000 and a retail basis of $200,000. It had net markups of $6,000 and net markdowns of $12,000. FTI has net sales of $150,000. What is the cost of FTI's ending inventory using the LIFO retail inventory method? (Use two decimal places for percentages. Round final answer to nearest dollar.)

When costs are increasing, and inventory levels are stable, a company will report ________.

Michael Jones Company has adopted the dollar-value LIFO method in 2018. At December 31, 2018, the ending inventory at dollar-value LIFO is $103,000, with a price index of 1.00. At December 31, 2019, the ending inventory using FIFO is $125,000. The price index is 1.3 in 2019. Round all dollar amounts to the nearest dollar. What is the ending inventory using dollar-value LIFO at December 31, 2019?