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Exam 5: Inventory and Cost of Goods Sold

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Question 41

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Which of the following would be included in the Cost of Goods Sold account on a merchandising company's income statement?

A) shipping costs from the manufacturer to the merchandiser
B) sales commissions
C) costs of advertising
D) sales taxes

E) None of the above
F) A) and C)

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Question 42

True/False

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An understatement in ending inventory results in an overstatement of gross profit.

A) True
B) False

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Question 43

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FIFO uses "old" inventory costs against revenue.

State some guidelines a company's management could use to determine the most desirable inventory costing method.

If year-end inventory is reduced from cost to a lower net realizable value,which of the following accurately depicts the results?

Calculate inventory turnover for the following independent situations.

A company may use more than one type of inventory method.For example it may use specific identification for one type of inventory and FIFO for another.

If a company makes an error when counting ending inventory in 2016,the effect of the error will cancel out at the end of 2017.

A sharp decrease in the gross profit percentage is a potential indicator of trouble.

What is the most important asset of a merchandising business?

A firm can change their inventory costing method if it provides more reliable and relevant information.

The following information is available for Don't Pay a Cent Corporation for the year ended December 31,2017: Calculate the following for Don't Pay a Cent Corporation: b.Net purchases for 2017.

On December 2,a customer returned merchandise,with a selling price of $1,200 purchased on account,to a department store.Ignoring cost of goods sold,which journal entry should the department store prepare? Assume no sales discount was offered for early payment.

A change in inventory costing method should be applied prospectively.

Which of the following would be included in the Inventory account on a merchandising company's balance sheet?

The following information is available for Digital Image Corporation for the year ended December 31,2016: Ending inventory: a.Compute gross margin as it would appear on the income statement valuing ending inventory at historical cost. b.Compute gross margin as it would appear on the income statement valuing ending inventory at lower-of-cost-or-net-realizable-value.

All of the following are deducted from the purchase price of inventory in determining cost of goods sold except:

The following data are for Upholstery Limited for January 2014: What is the company's estimated cost of goods sold for the month?

Sales commissions are not normally included in the cost of goods sold account.

Roughrider Ltd.(Roughrider)uses the lower of cost and net realizable value rule to value its football equipment inventory.Roughrider defines market as net realizable value.Roughrider's inventory on January 31,2017 had a cost of $1,200,000 and an NRV of $1,125,000. Required: a.By how much should Roughrider's inventory be written down? b.Prepare the journal entry that Roughrider should prepare to record the write-down. c.What amount should be reported for inventory on Roughrider's January 31,2017 balance sheet?