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Exam 8: Reporting and Interpreting Property, plant, and Equipment; Intangibles; and Natural Resources

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Question 51

Multiple Choice

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Joe Company sold merchandise with an invoice price of $1,000 to Gibbs,Inc.,with terms of 2/10,n/30.Which of the following is the correct entry for Joe Company to record the payment by Gibbs within the 10 days if the company uses the periodic inventory system and the gross method to record purchases?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

E) B) and C)
F) C) and D)

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Question 52

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The lower of cost and net realizable value is a valuation method departing from the cost principle.

A) True
B) False

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Question 53

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The cost of goods purchased for resale should include all amounts that are the responsibility of the purchaser for freight and handling charges in order to get the goods to the purchaser's intended location.

Which of the following is correct?

A large retail department store probably would use the specific identification inventory costing method for most of the items in its inventory.

Damaged,obsolete,and out-of-season inventory should be written down to their current estimated net realizable value if that is below cost.

A manufacturing company uses three different inventory accounts to track their product costs.

At the end of 20A,a $2,500 understatement was discovered in the amount of the 20A ending inventory as reflected in the perpetual inventory records.What were the 20A effects of the $2,500 inventory error (before correction) ?

Which of the following is true under the periodic inventory system?

A company that has decreased its inventory between years will cause a decrease in cash flow from operations.

If transportation costs are the responsibility of the buyer,they should be added to the cost of purchases for the period.

Solve for the missing amounts:

Landings Inc.provided the following footnote in their annual report: Inventories are stated at the lower of cost or net realizable value.The cost of inventories has been determined using last in first out (FIFO)method.Cost of goods sold under FIFO costing were $22.2 billion for 20B and ending inventory under FIFO was $1.3 billion.Inventory in 20A under FIFO costing was $1.2 billion. Compute the following for Landings:

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

A company purchased inventory as follows: On March 5,it sold 400 units for $17 each. The weighted- average unit cost to be used for the cost of goods sold on March 5,in a perpetual inventory system,is

When a periodic inventory system is used,a sales transaction requires two journal entries,while under the perpetual system,a sales transaction requires only one journal entry.

The following information is available from recent financial statements of Competitor A and Competitor B: Requirement: (a)Calculate the inventory turnover and days in inventory for both companies. (b)What conclusion concerning the management of inventory can be drawn from these data?

Under the periodic inventory system,cost of goods sold is computed as a residual amount by subtracting beginning inventory from total goods available for sale.

A physical inventory count is not required when a computerized perpetual inventory system is maintained by a business.

On December 31,20A,the end of the accounting period,Dunn Company has on hand 5,000 units of a resale item which cost $21 per unit when purchased on June 15,20A.The selling price is $35 per unit.On November 30,20A,the quoted purchase cost of this item was $22 per unit; whereas on December 30,20A,the cost had dropped to $20 per unit.In view of the large quantity of units on hand,no purchases are anticipated in the next six to nine months.At what inventory amount should the 5,000 units be reported?