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Exam 7: Inventory

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Question 21

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Which of the following statements is false?

A) The inventory account is updated after every sale and after every merchandise purchase under the perpetual inventory system.
B) The inventory account is updated only at the end of the accounting period under the periodic inventory system.
C) A cost of goods sold account is updated after each sale of merchandise under the periodic inventory system.
D) A purchases account is used only under the periodic inventory system.

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Question 22

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Augustus, Inc. buys designer clothing to sell in its retail stores. Since much of the merchandise comes from New York and Europe, Augustus must pay freight charges to get the merchandise shipped in. Which of the following statements must be true?

A) Transportation-in, paid by Augustus, is added to the inventory account under the periodic system.
B) Transportation-in, paid by Augustus, is subtracted from purchases under the periodic system.
C) Freight charges are only paid by a buyer in a periodic system.
D) Transportation-in is included in the total cost of purchases used to determine cost of goods sold in a periodic system.

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Question 23

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Ronn Industries Ronn Industries reported net income of $95,000 for 2012. Early in 2013, Ronn discovered that its 2012 ending inventory was overstated by $5,000. - Refer to the information provided for Ronn Industries. Determine the financial statement effects of the inventory error for 2013.

Max's Tire Center Company Selected data from the financial statements of Max's Tire Center are provided below. - Refer to the selected data provided for Max's Tire Center. What is Max's days-in-inventory ratio in 2012?

Patt Wholesale, Inc. On September 1, 2012, Patt Wholesale purchased 70 widgets for $35,000 cash and also paid $1,500 transportation costs related to this purchase. On the same date, Patt purchased 100 jiggies for $10,000 on credit; however, the seller paid the $1,200 freight. The credit terms for the jiggies were 2/10, n/30. On September 3rd, Patt determined that 5 of the widgets were defective, so they were returned to the seller. Patt paid for the jiggies on September 9th. On September 10th, Patt purchased 90 wackets for $8,000 on credit with terms 1/10, n/30. The seller paid the freight. Patt paid for the wackets on September 21st. Refer to the information presented for Patt Wholesale, Inc. Prepare all of Patt's journal entries for September. Patt uses a periodic inventory system.

Sadler Enterprises The following information is from Filmore's 2012 accounting records. -Refer to the information provided for Filmore Enterprises. Using the gross profit method, estimate Filmore's ending inventory at year end.

Sadler Enterprises The following information is from Filmore's 2012 accounting records. - Refer to the information provided for Sadler Enterprises. Using the gross profit method, estimate Sadler's cost of goods sold at year-end.

Davees Inc. reported the following information for 2012 and 2011: Determine the following amounts for Davees for 2012: A) Net cost of inventory purchases B) Cost of goods available for sale C) Cost of goods sold D) Inventory dy tumover ratio E) Average days to sell inventory

The following information is available for Wellington Industries for its fiscal year ending January 31, 2012: Compute the following financial ratios for Wellington: A) Inventory turnover ratio B) Average days to sell inventory

If a company does not update the inventory and cost of goods sold accounts during the period, it means company is using:

Under the ____________________ inventory system, the inventory account is updated after each purchase or sale.

Stephan, Inc. Stephan, Inc. has an inventory turnover rate of 8 times. - Refer to the information provided for Stephan, Inc. If its cost of goods sold is $150,000, then the company:

The difference between the inventory reported on the balance sheet by LIFO basis and what inventory would be if reported on a FIFO basis is called a(n) ____________________.

Entee Corporation Entee Corporation uses a periodic inventory system. The following information is available for the month of November. - Refer to the information provided for Entee Corporation. If Entee uses the LIFO inventory costing method, the cost of goods sold for November would be:

If a company understates its inventory, what are the effects on cost of goods sold and net income for the current year?

When inventories are written down due to the application of the lower-of-cost-or-market (LCM) rule, which of the following is usually increased?

The cost of goods sold for Annah, Inc. totaled $1,305,000. Sales returns and purchase returns were $3,000 and $4,000, respectively. Purchases totaled $1,300,000. Purchase discounts totaled $7,000, while sales discounts totaled $5,000. Beginning inventory was $90,000. Determine the amount of ending inventory to be reported on Annah's balance sheet.

Kellson, Inc. Selected data from the financial statements for Kellson, Inc. are presented below. Determine the dollar amount of net purchases, then use this figure for the net purchases within the cost of goods sold model to show the computation for cost of goods sold. Net purchases = $145,000* *$10,000 (Beginning inventory) + ? (Cost of goods purchased) - 16,000 (Ending inventory) = 139,000 (Cost of goods sold)

The lower-of-cost-or-market rule applies to the write-down of inventory values when market value exceeds cost. Why does this rule not allow for write-ups in inventory value?

Pendary Place Cafe reported the following financial results for 2011 and 2012: Provide the answer for each missing letter above.