ASSESS 5
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Accounting
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1. To place the proper valuation on inventory, a business must determine which costs should be included in inventory cost. Getting goods ready to sell should include what items?
When getting goods ready to sell you want to make sure to include these costs in the inventory cost. Seller’s invoice price less than purchase discount- the cost to obtain the goods that are to be sold. Include the cost of the insurance to cover the goods that are shipped, which will protect from losses and reduce liability. You also want to include shipping costs to ship the goods. You also want to include handling cost so that the presentation of the goods when it is delivered meets the consumer’s expectations
2. If inventory is being valued at cost and the price, level is steadily rising, which of the three methods of costing—FIFO, LIFO, or weighted average cost—will yield the lowest annual after tax net income? Which method will yield the highest after tax net income in a scenario where the price level is steadily declining?
When considering which method is the lowest after tax net income, it would be LIFO if the prices were steadily rising. It is the lowest annual after tax net income because when the prices are rising it shows the highest COGS out of the three methods and when the prices are declining it yields the highest after tax net
income because it shows the lowest COGS. Therefore, either way LIFO is a better match with sales revenue with the current COGS
3. Some circumstances justify departures from the historical cost approaches of FIFO, LIFO, and weighted average cost. Several additional inventory methods may be used when circumstances warrant. Identify and describe each of these alternative methods. Include an example of when each method may be applied.
The lower of cost or market method is a method that values the inventory at the lower of its cost historically and its current market cost. This method would be used typically when inventory has deteriorated or obsolete and the market prices have declined.
The gross margin method is a method that estimates the ending inventory by subtracting estimated cost of
goods that have sold versus cost of goods that are available for sale. The gross margin method might be useful to estimate each months ending inventory or to use it as part of a calculation to determine approximately the amount of inventory that has been lost due to theft, fire, or any other reason.
The retail inventory method, which is a method that is used to estimate the cost of ending inventory by applying a cost and retail price ratio at the end of inventory. The retail inventory method produces solid inventory control record, which is an advantage to the method. The method ties in the direct products to the sales and provides an ending count without adding much work. The method deals with the direct items rather than groups or lots of items.
4. Given the following information, calculate the inventory turnover for a company. Evaluate the trend results.
2014: Cost of goods sold— $1,043,000; Beginning inventory— $283,000; Ending inventory— $264,000.
2013: Cost of goods sold— $820,000; Beginning inventory— $311,000; Ending inventory— $283,000.
In 2014, the inventory turnover ratio was 3.81 and 2.76 in 2013. The increase from 2013 to 2014
is a signal that the company is becoming more efficient in managing and selling current inventory and increasing profitability.
5. Identify which methods could be used to determine whether there has been shrinkage or shortage
in the physical inventory.
The gross margin method and retail inventory method could be used to identify a shortage in physical inventory. With the gross margin method, they would have to estimate gross margin base on the net sales and using the same gross margin rate in previous accounting periods. Then they would have to determine the estimated cost of goods sold by subtracting the gross margin from the net sales. Finally, they would have to determine estimated ending inventory by subtracting estimated cost of goods sold from the cost of
goods that are available for sale. The retail inventory method can be used to allow the business to estimate inventory cost based on retail prices. The business would have to total the beginning inventory and the amount of goods that were purchased during this period both at cost and retail price. Then they would have to divide the cost of goods available for sale by the retail price of goods available. Once they do that, the business will find the
cost/retail price ratio. Then they are going to deduct the retail sales from the retail price of the goods so that they can determine ending inventory at retail. Finally, they will multiple the ratio from cost/retail or percentage by the ending inventory at retail prices to reduce it to the ending inventory at cost.
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Related Questions
The taxable income of Jenny for first week of
January 2021 was R3 220. She did not earn
overtime pay or any other remuneration. Her
weekly pension deduction was R280. Her other
deductions amounted to R800. Which one of
the following statements is true?
Select one:
O A. Her contribution to the pension fund was
8% of her normal pay.
O B. Her net wage was R2 140.
O C. Her gross wage was R4 300.
D. Her gross wage for January 2021 was
higher than her basic wage.
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cost will be
Which of the following
included in the buyer's inventory
cost?
A. All the descriptions are tight.
B. Insurance cost for shipping the
purchased inventory to the buyer
C. Inventory purchase price paid by
the buyer to the seller
D. Freight cost for shipping the
purchased inventory to the buyer's
store.
E. Customs brokerage service fee
for the imported inventory
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When a customer returns goods, the merchandiser will:
Group of answer choices
Adecrease the Inventory account.
increase the Estimated Refund Liability account.
increase the customer's Accounts Receivable account.
decrease the Estimated Inventory Returns account.
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Solve this problem with question
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Help with this problem
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Closing inventory should be valued at the lower of cost and net realisable value. Costs includes all costs in purchasing inventory and bring it to its present location and condition. Costs include which of the following elements?
a) Purchase price + import duties + storage costs + carriage inb) Purchase price + import duties + carriage in + manufacturing costs c) Purchase price + storage costs + selling costsd) Abnormal costs + import duties + purchase price + carriage in
Eric Song has set up as a sole trader and introduced his savings worth £8,000 to his business, Song Sounds. What is the double entry to record the transaction?
a) Dr Capital Cr Cash
b) Dr Bank Cr Creditors
c) Dr Bank Cr Capital
d) Dr Capital. Cr Creditors
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Which of the following should not be taken into account when determining the cost of inventory?
a. storage costs of part- finished goodsb. trade discountsc. recoverable purchase taxesd. import duties on shipping of inventory
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True or false
If transportation costs are the responsibility of the buyer, they should be added to the cost of inventory purchases for the period.
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Right answer please provide
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s
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Please answer fast and correct in detail
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Which income statement account(s) would be affected by a policy choice at the same time as the inventory balance sheet account.
a.
Bad debts expense
b.
Cost of goods sold expense
c.
Depreciation or amortisation expense
d.
Sales revenue
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FAST PLZ
-
Which of the following element of cost is important in calculating the cost of closing inventory?
a.
Market price of Opening stock.
b.
Cost price of goods sold
c.
Market price of good sold
d.
Sales price of goods sold
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Match the accounting term with its correct definition. Question 1 options: 1. contains deductions from purchases for items returned to suppliers, as well as deductions allowed by suppliers for goods
that are not returned 2. means that the buyer takes delivery of goods being shipped to it by a supplier once the goods arrive at the buyer's receiving dock 3. gross profit divided by sales 4. the real -
time balances in merchandise inventory and cost of goods sold are not known until the physical inventory is counted at the end of the accounting period 5. the difference between sales revenue
and cost of goods sold 6. means that the buyer takes delivery of goods being shipped to it by a supplier once the goods leave the supplier's shipping dock 7. an offer from the supplier to the
purchaser, to reduce the payment amount if the payment is made within a certain period of time 8. the merchandise inventory account and cost of goods sold account are updated immediately
when transactions occur a.…
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1. Which one of the following types of costs is most likely to be included in determining the cost of inventory?a. Freight-inb. Interest cost for amounts borrowed to finance the purchase of inventoryc. Freight-outd. Marketing cost
2. Which of the following equation is correct and used in costing?a. Beginning Inventory + Purchases + Ending Inventory = Cost of Goods Soldb. Cost of Goods Sold - Ending Inventory - Purchases = Beginning Inventoryc. Cost of Goods Sold + Ending Inventory - Beginning Inventory = Purchasesd. Beginning Inventory + Cost of Goods Sold - Purchases = Ending Inventory
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Which one of the following statements is true regarding the cost of sales, if the perpetual inventory control system is in use?
Select one:
a.
If goods are sold for cash or on credit, the cost of sales will decrease on the debit side.
b.
Under the perpetual inventory control system, there is no cost of sales. Therefore, the cost of sales is not affected.
c.
If goods are sold for cash or on credit, the cost of sales will increase on the debit side.
d.
If goods are sold for cash or on credit, the cost of sales will increase on the credit side.
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Which of the following should not be taken into account when determining the cost of inventory?
A. Storage cost of part finished goodsB. Trade discount C. Import duty on shipping of inventory inward D. Freight cost on purchase
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Explain how the inventory valuation method (LIFO or FIFO) chosen by a company affects the cost of goods sold and net income if prices are rising. What if the prices are declining?
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Which of the following costs will not affect cost of goods sold?
Multiple Choice
Inventory inspection costs.
Inventory preparation costs.
Inventory-related selling costs.
O Freight charges incurred to bring inventory to the warehouse.
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The original cost of an item of inventory is above its replacement
cost. The item s replacement cost is below its net realizable value
but is higher than its net realizable value minus a normal profit.
Under the lower of cost or market method, the inventory item
should be valued at:
a. Net realizable value.
b. Original cost.
c. Replacement cost.
d. Net realizable value less normal profit margin.
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To determine the cost of ending inventory using the LIFO method:
A.
the average cost of the inventory is used.
B.
the beginning inventory and earliest purchase costs are used.
C.
the specific unit cost of the inventory is used.
D.
the latest purchase costs are used.
thanks
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What is the treatment of the following items in connection with the retail inventory method?g. Sales returnh. Employee discounti. Normal and abnormal shortage, shrinkage, spoilage and breakage
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Related Questions
- The taxable income of Jenny for first week of January 2021 was R3 220. She did not earn overtime pay or any other remuneration. Her weekly pension deduction was R280. Her other deductions amounted to R800. Which one of the following statements is true? Select one: O A. Her contribution to the pension fund was 8% of her normal pay. O B. Her net wage was R2 140. O C. Her gross wage was R4 300. D. Her gross wage for January 2021 was higher than her basic wage.arrow_forwardcost will be Which of the following included in the buyer's inventory cost? A. All the descriptions are tight. B. Insurance cost for shipping the purchased inventory to the buyer C. Inventory purchase price paid by the buyer to the seller D. Freight cost for shipping the purchased inventory to the buyer's store. E. Customs brokerage service fee for the imported inventoryarrow_forwardWhen a customer returns goods, the merchandiser will: Group of answer choices Adecrease the Inventory account. increase the Estimated Refund Liability account. increase the customer's Accounts Receivable account. decrease the Estimated Inventory Returns account.arrow_forward
- Solve this problem with questionarrow_forwardHelp with this problemarrow_forwardClosing inventory should be valued at the lower of cost and net realisable value. Costs includes all costs in purchasing inventory and bring it to its present location and condition. Costs include which of the following elements? a) Purchase price + import duties + storage costs + carriage inb) Purchase price + import duties + carriage in + manufacturing costs c) Purchase price + storage costs + selling costsd) Abnormal costs + import duties + purchase price + carriage in Eric Song has set up as a sole trader and introduced his savings worth £8,000 to his business, Song Sounds. What is the double entry to record the transaction? a) Dr Capital Cr Cash b) Dr Bank Cr Creditors c) Dr Bank Cr Capital d) Dr Capital. Cr Creditorsarrow_forward
- Which of the following should not be taken into account when determining the cost of inventory? a. storage costs of part- finished goodsb. trade discountsc. recoverable purchase taxesd. import duties on shipping of inventoryarrow_forwardTrue or false If transportation costs are the responsibility of the buyer, they should be added to the cost of inventory purchases for the period.arrow_forwardRight answer please providearrow_forward
- sarrow_forwardPlease answer fast and correct in detailarrow_forwardWhich income statement account(s) would be affected by a policy choice at the same time as the inventory balance sheet account. a. Bad debts expense b. Cost of goods sold expense c. Depreciation or amortisation expense d. Sales revenuearrow_forward
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- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
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ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning