Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?
Multiple Choice
LIFO.
FIFO.
Weighted-average.
Income will be the same under each assumption.
Which cost flow assumption must be used for financial reporting if it is also used for tax reporting?
Multiple Choice
LIFO.
FIFO.
Weighted-average.
Under a perpetual inventory system:
Multiple Choice
Cost of good sold is recorded with a period-end adjusting entry.
Purchase discounts are not recorded.
Inventory purchases are recorded only at the end of the period.
Inventory records for Dunbar Incorporated revealed the
following:
Date | Transaction | Number of Units |
Unit Cost |
|||||
Apr. | 1 | Beginning inventory | 430 | $ | 2.17 | |||
Apr. | 20 | Purchase | 330 | 2.70 | ||||
Dunbar sold 620 units of inventory during the month. Ending
inventory assuming LIFO would be: (Do not round your
intermediate calculations. Round your answer to the nearest dollar
amount.)
Multiple Choice
$304.
$933.
$378.
$891.
Inventory records for Dunbar Incorporated revealed the
following:
Inventory records for Dunbar Incorporated revealed the
following:
Multiple Choice
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The following information pertains to Julia &
Company:
Multiple Choice
|
Inventory records for Marvin Company revealed the
following:
Date | Transaction | Number of Units |
Unit Cost |
|||||
Mar. | 1 | Beginning inventory | 980 | $ | 7.19 | |||
Mar. | 10 | Purchase | 590 | 7.62 | ||||
Mar. | 16 | Purchase | 710 | 8.12 | ||||
Mar. | 23 | Purchase | 540 | 8.52 | ||||
Marvin sold 1,890 units of inventory during the month. Cost of
goods sold assuming FIFO would be: (Do not round your
intermediate calculations. Round your answer to the nearest dollar
amount.)
Multiple Choice
$14,590.
$16,103.
$15,221.
A company's sales equal $60,000 and cost of goods sold equals $20,000. Its beginning inventory was $1,600 and its ending inventory is $2,400. The company's inventory turnover ratio equals:
Multiple Choice
5 times.
10 times.
20 times.
30 times.
Anthony Corporation reported the following amounts for the
year:
Net sales | $ | 296,000 | |
Cost of goods sold | 138,000 | ||
Average inventory | 50,000 | ||
Anthony's average days in inventory is: (Round to the
nearest whole day.)
Multiple Choice
170 days.
114 days.
132 days.
151 days.
Anthony Corporation reported the following amounts for the
year:
Net sales | $ | 296,000 | |
Cost of goods sold | 138,000 | ||
Average inventory | 50,000 | ||
Anthony's gross profit ratio is:
Multiple Choice
53.4%.
51.9%.
50.3%
1)Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs | 2 | Reason |
LIFO | Incorrect | Here the later units are sold first and inventory represents the older purchased units which is cheaper. Hence the reported income will be lower. |
FIFO | Correct | Here the older units are sold first and inventory represents the recently purchased units which is costly. Hence the reported income will be higher. |
Weighted average | Incorrect | Here the inventory is valued at the average of older and newer purchased items. Hence the reported income will be comparatively lower than FIFO. |
2) Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs | Correct/ Incorrect | |
LIFO | Correct | Here the later units are sold first and inventory represents the older purchased units which is cheaper. Hence the reported income will be lower. It is preferable to use this method since the reported income under this method will be lower. |
FIFO | Incorrect | Here the older units are sold first and inventory represents the recently purchased units which is costly. Hence the reported income will be higher. |
Weighted average | Incorrect | Here the inventory is valued at the average of older and newer purchased items. Hence the reported income will be comparatively lower than FIFO. |
3) Under a perpetual inventory system | Cost of good sold is recorded with a period-end adjusting entry. |
Date | Particulars | Units | Cost | Total |
Apr-01 | Opening | 430 | 2.17 | |
Apr-20 | Purchases | 330 | 2.70 | |
Sales | -620 | |||
Apr-30 | Inventory (LIFO) | 140 | 2.17 | 304 |
4) | Cost of stock | 304 |
Date | Particulars | Units | Cost | Total |
Apr-01 | Opening | 550 | 2.34 | 1,287 |
Apr-20 | Purchases | 330 | 2.64 | 871 |
Sales | -650 | |||
Apr-30 | Inventory (LIFO) | 230 | 2.49 | 573 |
5) | Cost of stock | 573 | ||
Date | Particulars | Units | Cost | Total |
Mar-01 | Opening | 26 | 5.80 | |
Mar-03 | Purchases | 21 | 4.00 | |
Mar-09 | Sales | -30 | 8.40 | |
Mar-09 | COGS | 21 | 4.00 | 84 |
Mar-09 | COGS | 9 | 5.80 | 52 |
6) | COGS | 136 |
Date | Particulars | Units | Cost | Total |
Mar-01 | Opening | 980 | 7.19 | |
Mar-10 | Purchases | 590 | 7.62 | |
Mar-16 | Purchases | 710 | 8.12 | |
Mar-23 | Purchases | 540 | 8.52 | |
Sales | -1890 | |||
COGS | 540 | 8.52 | 4,601 | |
COGS | 710 | 8.12 | 5,765 | |
COGS | 590 | 7.62 | 4,496 | |
COGS | 50 | 7.19 | 360 | |
7) | COGS | 15,221 |
Opening stock | 1,600 | |
COGS | 20,000 | |
Sales | 60,000 | |
Closing stock | 2,400 | |
Average stock | 2,000 | |
Inventory T/o ration | 30.00 | Sales/ Stock |
8) | 30 | Times |
Net sales | 296,000 | |
COGS | 138,000 | |
Average stock | 50,000 | |
Inventory T/o ration | 132 | Stock / COGS*365 |
9) | 132 | Days |
Net sales | 296,000 | |
COGS | 138,000 | |
Average stock | 50,000 | |
Gross profit | 158,000 | Sales- COGS |
Gross Profit % | 53.4% | Gross profit/ Sales |
10) | 1 |
Which cost flow assumption generally results in the highest reported amount of net income in periods...
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