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Exam 6: Merchandise Inventory

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Question 1

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The Merchandise Inventory account is debited to write down the inventory as per the lower-of-cost-or-market rule.

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Question 2

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A company purchased 100 units for $50 each on January 31. It purchased 200 units for $30 each on February 28. It sold a total of 250 units for $60 each from March 1 through December 31. If the company uses the weighted-average inventory costing method, calculate the amount of ending inventory on December 31. (Assume that the company uses a perpetual inventory system. Round any intermediate calculations two decimal places, and your final answer to the nearest dollar.)

A) $11,000
B) $1,833.5
C) $9,167
D) $2,000

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Question 3

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A company discovers that its cost of goods sold is understated by an insignificant amount. It does not need to correct the error because of the materiality concept.

Samson, Inc. had the following balances and transactions during 2017: What is the amount of the company's Merchandise Inventory, as disclosed in the December 31, 2017 balance sheet as per the periodic FIFO inventory costing method?

Which of the following principles states that a business's financial statements must report enough information for outsiders to make knowledgeable decisions about the company?

Best Deals, Inc. has 10 units in ending merchandise inventory on December 31. The units were purchased in November for $160 each. The price lists from suppliers indicate the current replacement cost of the item to be $162 each. What would be the amount reported as Merchandise Inventory on the balance sheet?

If the merchandise inventory's market value is greater than its cost, then it must be adjusted for the difference.

The disclosure principle states that a company should disclose all major accounting methods and procedures in the ________.

Murphy, Inc. had the following balances and transactions during 2017. The company maintains its records of inventory on a perpetual basis using the last-in, first-out inventory costing method. Calculate the amount of ending Merchandise Inventory at December 31, 2017 using the lower-of-cost-or-market rule.

Under the periodic inventory system, which of the following amounts will always stay the same regardless of the inventory valuation method used?

When using the weighted-average inventory costing method, the dollar amounts for ending inventory and cost of goods sold are the same for both the perpetual and periodic inventory costing methods.

Using the FIFO method of inventory valuation will always produce the same results whether a company uses perpetual or periodic inventory costing methods.

Which of the following inventory costing methods results in the highest value of ending inventory during a period of rising inventory costs?

The ending merchandise inventory for the current accounting period is overstated by $3,500. What will be the effect of this error?

Blue Sky, Inc. sold 500 units of inventory at $25 per unit for cash. The company uses the perpetual inventory system. The cost of the units sold was $10 per unit. Provide the journal entries to record the sale.

Inventory turnover measures the number of times a company sells its average level of merchandise inventory during a period.

When using the specific identification inventory costing method, ending inventory amounts depend on which costs are assigned to the inventory sold.

The ending merchandise inventory for the current year is overstated by $25,000. What effect will this error have on the following year's net income?

A company purchased 400 units for $20 each on January 31. It purchased 520 units for $26 each on February 28. It sold a total of 560 units for $40 each from March 1 through December 31. What is the amount of ending inventory on December 31 if the company uses the first-in, first-out (FIFO) inventory costing method? (Assume that the company uses a perpetual inventory system.)

The periodic inventory records of Witte Veterinary Supply indicate the following for the month of April: As of April 30, Witte counts 8 units of merchandise inventory on hand. Compute ending merchandise inventory and cost of goods sold for Witte using the weighted-average inventory method. (Round the per unit cost to two decimal places.)