Chapter 6 self questions

Question 1

Which of the following should not be included in the physical inventory of a company?

Answer 1

Goods held on consignment from another company

Question 2

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31, 2015. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report

Answer 2

$215,000

Question 3

Cost of goods available for sale consists of two elements: beginning inventory and:

Answer 3

cost of goods purchased.

Question 4

If Poppins has 9,000 units on hand at December 31, the cost of the ending inventory under LIFO is:
Inventory
*Jan. 1 
Units:  8,000 
Unit Cost: $11
* June 19 
Units:13,000 
Unit Cost: $12 
 *Nov. 8 
Units: 5,000 
Unit Cost:$13

Answer 4

[(8000 x $11) + (1000 x $12)]

Question 5

If Poppins has 9,000 units on hand at December 31, the cost of the ending inventory under FIFO is:
Inventory
*Jan. 1 
Units:  8,000 
Unit Cost: $11
* June 19 
Units:13,000 
Unit Cost: $12 
 *Nov. 8 
Units: 5,000 
Unit Cost:$13

Answer 5

[(5000 x $13) + (4000 x $12)]

Question 6

In periods of rising prices, LIFO will produce:

Answer 6

lower net income than FIFO

Question 7

Factors that affect the selection of an inventory costing method do not include:

Answer 7

perpetual vs. periodic inventory system

Question 8

Norton Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a current replacement cost of $80 each. The ending inventory under lower-of-cost-or-market is:

Answer 8

$16,000

200 x $80

Question 9

Falk Company’s ending inventory is understated $4,000. The effects of this error on the current year’s cost of goods sold and net income, respectively, are:

Answer 9

overstated, understated.

Question 10

Pauline Company overstated its inventory by $15,000 at December 31, 2014. It did not correct the error in 2014 or 2015. As a result, Pauline’s stockholders’ equity was:

Answer 10

overstated at December 31, 2014, and properly stated at December 31, 2015

Question 11

Santana Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales of $475,000. Santana’s days in inventory is:

Answer 11

121.7 days

$285,000 - [($80,000 + $110,000) - 2] = 3; 365/3

Question 12

Which of these would cause the inventory turnover to increase the most?

Answer 12

Decreasing the amount of inventory on hand and increasing sales.

Question 13

In a perpetual inventory system:

Answer 13

FIFO cost of goods sold will be the same as in a periodic inventory system

Question 14

King Company has sales of $150,000 and cost of goods available for sale of $135,000. If the gross profit rate is 30%, the estimated cost of the ending inventory under the gross profit method is:

Answer 14

$30,000
[$150,000 - (30% x $150,000)] = $105,000;
$135,000 - $105,000

Question 15

Hansel Electronics has the following: 
Inventory
*Jan. 1 
 Units: 5,000 
Unit cost: $ 8 
*April 2 
Units:15,000 
Unit cost: $10 
*Aug. 28 
Units: 20,000 
Unit cost: $12 

If Hansel has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is:

Answer 15

$75,250

[(5000 x $8) + (15,000 x $10) + (20,000 x $12) - 40,000] = $10.75; $10.75 x 7,000