Ch 5 Video Lecture HW

Merchandise inventory includes all of the following except:

Goods sold

During a period of regularly rising purchase costs, this method yields the highest reported cost of goods sold amount on the income statement

LIFO

An advantage of the _____ costing method is that the cost of goods sold approximates its current cost

LIFO

Under the conformity rule, companies who use the _____ method for tax reporting, are required by the IRS to also use it in their financial statements

LIFO

An item was shipped from a supplier under FOB shipping point. The invoice in the amount of $2,000 included payment terms of 2/10, n/30. When the invoice was paid, a purchase discount in the amount of $40 was taken. Other details relating to the purchase of this item included the following: shipping charges of $300, storage fees of $50, and insurance premium of $100. The cost of this inventory item is ____.

$2,410

Market value is

replacement cost of inventory

An inventory error can cause misstatement in all of the following except:

sales

Colman Company reports ending inventory on year 1 of $25,000 instead of the correct amount of $20,000. The effects of this error include:

Year 1 ending inventory is overstated and year 1 cost of goods sold is understated

A company overstated its ending inventory at the end of Year 1. If the error was not detected, cost of goods sold would be ____ for Year 1.

Understated

A company overstated its ending inventory at the end of Year 1. If the error was not detected, cost of goods sold would be ____ for Year 2.

Overstated

A company overstated its ending inventory at the end of Year 1. If the error was not detected, total assets would be ____ for Year 1.

Overstated

Inventory turnover is computed by dividing cost of goods sold by ______.

(beginning inventory + ending inventory) / 2

Days’ sales in inventory is computed as ending inventory divided by ______ * 365.

cost of goods sold