Inventories Key (106-136 Questions)

106. Which of the following is used to analyze the efficiency and effectiveness of inventory management? A. inventory turnover only B. number of days’ sales in inventory only C. both inventory turnover and number of days’ sales in inventory D. neither inventory turnover or number of days’ sales in inventory 107. Which of the following measures the relationship between cost of merchandise sold and the amount of inventory carried during the period? A. inventory turnover B. Fixed asset turnover C. retail method of inventory costing D. gross profit method of inventory costing 108. Which of the following measures the length of time it takes to acquire, sell and replace inventory? A. inventory turnover B. number of days’ sales in inventory C. retail method of inventory costing D. gross profit method of inventory costing 109. For the year ended December 31, 2014 Depot Max’s cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max’s inventory turnover for the year. A. 8.7 B. 7.8 C. 8.3 D. 44 110. For the year ended December 31, 2014 Depot Max’s cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Depot Max’s number of days sales in inventory is closest to A. 42 B. 46 C. 8 D. 44 111. The method of computing inventory that uses records of the selling prices of the merchandise is called A. retail method B. last-in, first-out C. first-in, first-out D. average cost 112. On the basis of the following data, what is the estimated cost of the merchandise inventory on May 31 using the retail method? May 1 May 1-31 May 1-31 Merchandise Inventory Purchases (net) Sales (net) Cost $125,000 235,000 Retail $166,667 313,333 230,000 A. $250,000 B. $360,000 C. $172,500 D. $187,500 113. If the estimated rate of gross profit is 30%, what is the estimated cost of the merchandise inventory on September 30, based on the following data? Sep. 1 Sep. 1-30 Sep. 1-30 Merchandise inventory Purchases (net) Sales (net) $ 125,000 300,000 150,000 A. $320,000 B. $192,500 C. $275,000 D. $105,000 114. All of the following are reasons to use an estimated method of costing inventory except: A. Perpetual inventory records are not maintained. B. Purchase records are not maintained. C. A disaster has destroyed the inventory records and the inventory. D. Interim financial statements are required but physical inventory is only taken at the end of the financial accounting period. 115. Garrison Company uses the retail method of inventory costing. They started the year with an inventory that had a retail cost of $45,000. During the year they purchased an inventory with a retail cost of $300,000. After performing a physical inventory, they calculated their inventory cost at retail to be $80,000. The mark up is 100% of cost. Determine the ending inventory at its estimated cost. A. $160,000 B. $80,000 C. $40,000 D. $45,000 116. A company will most likely use an estimated method of determining inventory when A. the company decides not to do a physical inventory. B. a natural disaster has destroyed most of their inventory. C. the company has not kept up with their inventory records. D. the company is preparing annual financial statements. 117. Stevens Company started the year with an inventory cost of $145,000. During the month of January they purchased inventory that cost of $53,000. January sales totaled $140,000. Estimated gross profit is 35%. The estimated ending inventory as of January 31 is A. $58,000 B. $91,000 C. $107,000 D. $69,300 118. Determine the total value of the merchandise using Net Realizable Value: Item Doll Horse A. $35 B. $80 C. $115 D. $25 Quantity 10 5 Selling Price $7 9 Commission $2 3 119. If a company values inventory at the lower of cost or market, which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole. Item Product C Product D Inventory Quantity 420 370 Unit Cost Price $6 12 Unit Market Price $5 14 A. $6,960 B. $7,700 C. $6,540 D. $7,280 120. Safeguarding inventory from damage or theft is a primary objective for the control of inventory. If you were running a clothing store, name three specific controls you would implement to guard inventory from theft. Answers may vary. Some of these include ink tags, alarm tags, bells that signal a customer is entering the area to try on clothing, or chains that hook through the sleeves of garment and are locked onto clothing racks. 121. List three different security measures taken by stores to safeguard inventory. Answers may vary. - Inventory should be stored in a warehouse or restricted area. - Physical devices such as two-way mirrors, cameras, security guards. - Inventory store under lock and key. - Sensors at each of the exits which are set off by alarm tags. 122. Three identical units of Item Steele Plate are purchased during March, as shown below. Mar. 3 Mar. 10 Mar. 19 Total Item Steele Plate Purchase Purchase Purchase Units 1 1 1 3 Cost $830 840 880 $2,550 Assume that one unit is sold on March 23 for $1,125. Determine the gross profit for March and ending inventory on March 31 using (a) FIFO, (b) LIFO, and (c) average cost methods. Gross Profit Ending Inventory a. First-in, first-out (FIFO) $295 ($1,125 – $830) $1,720 ($840 + $880) b. Last-in, first-out (LIFO) $245 ($1,125 – $880) $1,670 ($830 + $840) c. Average cost $2,550 / 3 = $850 average cost $275 ($1,125 – $850) $1,700 ($850 ´ 2) 123. Three identical units of Item Magnesium XP are purchased during May, as shown below. Item Magnesium XP Purchase Purchase Purchase May 3 May 10 May 19 Total Units 1 1 1 3 Cost $130 136 142 $408 Assume that two units are sold on May 23 for $313. Determine the gross profit for May and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) average cost methods. a. First-in, first-out (FIFO) Gross Profit $47 ($313 – ($130+$136)) Ending Inventory $142 b. Last-in, first-out (LIFO) $35 ($313 – ($142+$136) $130 c. Average cost $408 / 3 = $136 average cost $41 ($313 – ( $136 x 2 units)) $136 124. Assume that three identical units of merchandise are purchased during October, as follows: October Total 5 12 28 Purchase Purchase Purchase Units 1 1 1 3 Cost $5 13 15 $33 Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold, Gross Profit, and Ending Inventory under the LIFO method. October 31 $28 15 $ 13 $18 Sales Cost of Merchandise Sold Gross Profit Ending Inventory ($5 + $13) 125. Assume that three identical units of merchandise are purchased during October, as follows: October 5 12 28 Units 1 1 1 3 Purchase Purchase Purchase Total Cost $5 13 15 $33 Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold, Gross Profit, and Ending Inventory under the Average Cost method. October 31 $28 11 $ 17 $22 Sales Cost of Merchandise Sold ($33/3) Gross Profit Ending Inventory ($33/3=$11x2) 126. Assume that three identical units of merchandise are purchased during October, as follows: October 5 12 28 Units 1 1 1 3 Purchase Purchase Purchase Total Cost $5 13 15 $33 Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold, Gross profit, and Ending Inventory under the FIFO method. Sales Cost of Merchandise Sold Gross Profit Ending Inventory ($13 + $15) October 31 $28 5 $23 $28 127. The three identical units of Product Basic H are purchased during July, as shown below. Date July 3 July 10 July 24 Product Basic H Purchase Purchase Purchase Total Units 1 1 1 3 Average cost per unit $36 Cost $35 $36 $37 $108 Assume one unit sells on July 28 for $45. Determine the gross profit, cost of merchandise sold, and ending inventory on July 31 using (a) first in first out, (b) last in last out, (c) average cost flow methods. a) First in first out Gross Profit $45 - $35= $10 Cost of Merchandise Sold $35 Ending Inventory ($108 - $35) = $73 b) Last in first out $45 - $37= $8 $37 ($108 - $37) = $71 c) Average $45 - $36= $9 $36 ($108 - $36) = $72 128. Beginning inventory, purchases, and sales for Product - Weld TM are as follows: Sep. 1 Sep. 5 Sep. 17 Sep. 30 Beginning Inventory Sale Purchase Sale 24 units 17 units 10 units 8 units @ $15 @ $20 Assuming a perpetual inventory system and the first-in, first-out method, determine (a) the cost of the merchandise sold for the September 30 sale and (b) the inventory on September 30. a) Cost of merchandise sold: 7 units @ 15 = $105 1 unit @ 20 = $20 8 units $125 b) Inventory, September 30 9 units @ $20 = $180 129. The following units of a particular item were available for sale during the year: Beginning inventory Sale First purchase Sale Second purchase Sale 150 units @ $755 120 units @ $925 400 units @ $785 200 units @ $925 300 units @ $805 290 units @ $925 The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to FIFO? $193,200 ($805 ´ 240 units) 130. The following units of a particular item were available for sale during the year: Beginning inventory Sale First purchase Sale Second purchase Sale 150 units @ $755 120 units @ $925 400 units @ $785 200 units @ $925 300 units @ $805 290 units @ $925 The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to LIFO? $187,700 [($755 ´ 30 units) + ($785 ´ 200 units) + ($805 ´ 10 units)] = $22,650 + $157,000 + $8,050 131. Beginning inventory, purchases, and sales for Product - Weld TM are as follows: Sep. 1 Sep. 5 Sep. 17 Sep. 30 Beginning Inventory Sale Purchase Sale 24 units 17 units 10 units 8 units @ $10 @ $15 Assuming a perpetual inventory system and the last-in, first-out method, determine (a) the cost of the merchandise sold for the September 30 sale and (b) the inventory on September 30. a) Cost of merchandise sold: 8 units @ $15 = $120 b) Inventory September 7 units @ $10 = $ 70 2 units @ $15 = $ 30 9 units $100 132. Using a LIFO perpetual cost flow, calculate the value of the ending inventory and the cost of goods sold for the month of November of Beamer Company using the data below. Nov 1 Purchased Nov 4 Sold Nov 11 Purchased Nov 12 Sold Nov 22 Purchased Nov 23 Sold 600 units $80 each 200 units 350 units $82 each 275 units 175 units $84 each 155 units Calculate the following: 1. Inventory valuation at the end of November 2. Calculate the Cost of Goods Sold for November 1. Inventory valuation 400 @ 80 = 32,000 75 @ 82 = 6,150 20 @ 84 = 1,680 November Inventory Valuation = $39,830 2. COGS calculation 200 @ 80 = 16,000 275 @ 82 = 22,550 155 @ 84 = 13,020 November Total COGS = $51,570 133. Complete the following table using the perpetual FIFO method of inventory flow. Inventory Valuation Perpetual FIFO Date Purchased Units UUnits n Sold it C o s t 2-Jul 600 1 2 Bal. 5-Jul 200 1 3 Bal. 7-Jul Bal. 10-Jul 300 325 1 4 Bal. 12-Jul Bal. 18-Jul 300 150 250 1 3 Bal. 22-Jul 50 205 Bal. 25-Jul Bal. 28-Jul Bal. 31-Jul 120 180 330 1 5 70 5 U Inventory Units n Balance it C o s t UInventory n Dollar i Balance t C o s t s Ending Balance F I F O I N V E N T O R Y V A L U A T I O N : Answers shown in RED. Inventory Valuation Perpetual FIFO Date 2-Jul Bal. 5-Jul Purchased Units 600 Unit Cost 12 200 13 Bal. 7-Jul Units Sold 300 Bal. 10-Jul 325 Unit Cost 12 14 Inventory Units Balance 600 Unit Costs 12 Inventory Dollar Balance 7,200.00 600 200 12 13 300 200 12 13 300 200 325 12 13 14 7,200.00 2,600.00 9,800.00 3,600.00 2,600.00 6,200.00 3,600.00 2,600.00 4,550.00 10,750.00 50 325 13 14 650.00 4,550.00 5,200.00 13 14 13 650.00 4,550.00 3,250.00 8,450.00 1,680.00 3,250.00 4,930.00 910.00 Bal. 12-Jul 300 150 12 13 Bal. 18-Jul 250 13 50 325 250 Bal. 22-Jul Bal. 25-Jul Bal. 28-Jul 330 50 205 13 14 120 250 14 13 120 180 14 13 70 13 70 330 13 15 325 15 15 Bal. 31-Jul 70 5 FIFO INVENTORY VALUATION: End Bal. 13 15 910.00 910.00 4,950.00 5,860.00 4,875.00 4,875.00 134. Beginning inventory, purchases and sales data for tennis rackets are as follows: Apr 3 11 14 21 25 Inventory Purchase Sale Purchase Sale 12 units 13 units 18 units 9 units 10 units @ @ $45 $47 @ $60 Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using FIFO. Date Cost of Purchase Merchandise Inventory s Sold Qty Unit Cost Total Cost Qty Unit Cost Total Cost Qty Unit Cost Total Cost Cost of Purchase Merchandise Inventory s Sold Qty Unit Cost Total Cost Qty Unit Cost Total Cost 12 6 45.00 47.00 540.00 282.00 Qty 12 12 13 7 Unit Cost 45.00 45.00 47.00 47.00 Total Cost 540.00 540.00 611.00 329.00 7 9 6 47.00 60.00 60.00 329.00 540.00 360.00 Balances Date Apr 3 Apr 11 13 47.00 611.00 Apr 14 Apr 21 9 60 540.00 Apr 25 7 3 47.00 60.00 Balances 329.00 180.00 1,331.00 360.00 135. Beginning inventory, purchases and sales data for tennis rackets are as follows: Apr 3 11 14 21 25 Inventory Purchase Sale Purchase Sale 12 units 13 units 18 units 9 units 10 units @ @ $45 $47 @ $60 Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using LIFO. Date Balances Cost of Purchase Merchandise Inventory s Sold Qty Unit Cost Total Cost Qty Unit Cost Total Cost Qty Unit Cost Total Cost Date Apr 3 Apr 11 Cost of Purchase Merchandise Inventory s Sold Qty Unit Cost Total Cost 13 47.00 Apr 14 Apr 21 9 60 Qty Unit Cost Total Cost 13 5 47.00 45.00 611.00 225.00 611.00 540.00 Apr 25 9 1 60.00 45.00 Balances 540.00 45.00 1,421.00 Qty 12 12 13 7 Unit Cost 45.00 45.00 47.00 45.00 Total Cost 540.00 540.00 611.00 315.00 7 9 6 45.00 60.00 45.00 315.00 540.00 270.00 270.00 136. Beginning inventory, purchases and sales data for widgets are as follows: Apr 3 11 14 21 25 Inventory Purchase Sale Purchase Sale 15 units 12 units 18 units 7 units 10 units @ @ $30 $27 @ $25 Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using LIFO. Date Cost of Purchase Merchandise Inventory s Sold Qty Unit Cost Total Cost Qty Unit Cost Total Cost Qty Unit Cost Total Cost Cost of Purchase Merchandise Inventory s Sold Qty Unit Cost Total Cost Qty Unit Cost Total Cost 12 6 27.00 30.00 324.00 180.00 Qty 15 15 12 9 Unit Cost 30.00 30.00 27.00 30.00 Total Cost 450.00 450.00 324.00 270.00 9 7 6 30.00 25.00 30.00 270.00 175.00 180.00 Balances Date Apr 3 Apr 11 12 27.00 324.00 7 25 175.00 Apr 14 Apr 21 Apr 25 Balances 7 3 25.00 30.00 175.00 90.00 769.00 180.00