LO5-1 Determine the amount of cost of goods sold and ending inventory using 4 cost flow methods.

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. When the company sold one of the items for $40, it expensed $30 to its cost of goods sold account. Based on this information which of the following cost flow methods is the company using?

Multiple Choice

• Weighted average

• FIFO

• LIFO

• NIFO

FIFO

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The company sold one of the items for $40. If the company uses the LIFO cost flow method, the balance in the inventory account after the sales transaction will be

Multiple Choice

• $30.

• $32.

• $31.

• $8.

$30.

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The company sold one of the items for $40. If the company uses the weighted average cost flow method, the amount of gross margin shown on the income statement will be

Multiple Choice

• $12.

• $8.

• $10.

• $9.

$9.

Which of the following cost flow methods would provide the lowest amount of net income in an inflationary environment?

Multiple Choice

• FIFO

• LIFO

• Weighted average

• NIFO

LIFO

The following information was drawn from the inventory records of Alpha Company as of December 31, Year 2.

Beginning inventory (purchased in Year 1)	200 units @ $5 each
Purchases made in Year 2	800 units @ $8 each
Units sold	900 units @ $12 each

Which of the following is the amount of the gross margin assuming Alpha uses a FIFO cost flow method?

Multiple Choice

• $800

• $4,200

• $6,600

• $500

$4,200

The following information was drawn from the inventory records of Alpha Company as of December, Year 2.

Beginning inventory (purchased in Year 1)	200 units @ $5 each
Purchases made in Year 2	800 units @ $8 each
Units sold	900 units @ $12 each

Which of the following is the amount of the gross margin shown on the Year 2 income statement assuming Alpha uses a LIFO cost flow method?

Multiple Choice

• $6,600

• $4,200

• $3,900

• $6,900

$3,900

The following information was drawn from the inventory records of Alpha Company as of December, Year 2.

Beginning inventory (purchased in Year 1)	200 units @ $5 each
Purchases made in Year 2	800 units @ $8 each
Units sold	900 units @ $12 each

Which of the following is the amount of the gross margin shown on the Year 2 income statement assuming Alpha uses a weighted average cost flow method?

Note: Round intermediate calculations to the nearest cent.

Multiple Choice

• $6,660

• $500

• $4,140

• $800

$4,140

The following information was drawn from the inventory records of Preston Company.

Beginning inventory (purchased in Year 1)	100 units @ $10 each
First purchase made in Year 2	400 units @ $12 each
Second purchase made in Year 2	500 units @ $14 each
Units sold	950 units @ $15 each

Based on this information, which of the following represents the amount of ending inventory appearing on the balance sheet assuming a LIFO cost flow?

Multiple Choice

• $300

• $600

• $700

• $500

$500

The cash flow associated with buying and selling inventory is not affected by the inventory cost flow method. This statement is

True or False

True