The 2021 inventory data for Island Corporation is presented below. Assume that Island uses periodic inventory tracking.   2021 Beginning Inventory (purchased in 2020)   100 units @ $28 per unit       Purchases:     Purchase 1 on 1/20/21   300 units @ $30 per unit Purchase 2 on 6/15/21   1,100 units @ $34 per unit        Sales:     Sale 1 on 4/8/21   520 units @ $60 per unit Sale 2 on 9/25/21   860 units @ $60 per unit   When Island examines the actual units in ending inventory, they see that 30 of the units are from 2021 beginning inventory, 40 units are from the 1/20/21 purchase, and 50 units are from the 6/15/21 purchase.    What is Inventory on the 12/31/21 Balance Sheet if Island uses FIFO? $3,400 $4,080 $45,120 $45,800       What is Cost of Goods Sold on the 2021 Income Statement if Island uses LIFO? $3,400 $4,080 $45,120 $45,800       What is Inventory on the 12/31/21 Balance Sheet if Island uses Specific Identification? $3,740 $4,080 $45,120 $45,460

Question

The 2021 inventory data for Island Corporation is presented below. Assume that Island uses periodic inventory tracking.

 

2021 Beginning Inventory (purchased in 2020)

 

100 units @ $28 per unit

 

 

 

Purchases:

 

 

Purchase 1 on 1/20/21

 

300 units @ $30 per unit

Purchase 2 on 6/15/21

 

1,100 units @ $34 per unit

  

 

 

Sales:

 

 

Sale 1 on 4/8/21

 

520 units @ $60 per unit

Sale 2 on 9/25/21

 

860 units @ $60 per unit

 

When Island examines the actual units in ending inventory, they see that 30 of the units are from 2021 beginning inventory, 40 units are from the 1/20/21 purchase, and 50 units are from the 6/15/21 purchase. 

 

  1. What is Inventory on the 12/31/21 Balance Sheet if Island uses FIFO?
    1. $3,400
    2. $4,080
    3. $45,120
    4. $45,800

 

 

 

  1. What is Cost of Goods Sold on the 2021 Income Statement if Island uses LIFO?
    1. $3,400
    2. $4,080
    3. $45,120
    4. $45,800

 

 

 

  1. What is Inventory on the 12/31/21 Balance Sheet if Island uses Specific Identification?
    1. $3,740
    2. $4,080
    3. $45,120
    4. $45,460

 

 

 

  1. What is Gross Profit on the 2021 Income Statement if Island uses Weighted Average Cost?
    1. $3,936
    2. $37,536
    3. $45,264
    4. $78,864

 

  1. On October 28, 2021, GE sells and ships $400,000 worth of merchandise to Best Buy. The goods are shipped FOB destination and arrive at Best Buy stores on November 4. Which of the following statements is TRUE?
    1. Best Buy includes the $400,000 as part of its October 31 Inventory balance.
    2. The goods are in transit on October 31 so neither company includes the $400,000 as part of its October 31 Inventory balance.
    3. GE includes the $400,000 as part of its October 31 Inventory balance.
    4. Both companies include the $200,000 as part of their October 31 Inventory balances.

 

 

  1. In a period of falling prices, which of the following statements is true?
    1. LIFO produces a lower cost for ending inventory than FIFO
    2. Average cost produces a higher net income than FIFO or LIFO
    3. LIFO produces a higher cost of goods sold than FIFO
    4. FIFO produces a lower amount of net income than LIFO

 

 

  1. Sleep Inc. uses a periodic inventory system. When a warehouse supervisor counts the inventory on December 31, 2020, he accidentally counts one pile of blankets twice, resulting in 2020 ending inventory being overstated by $200,000. The warehouse supervisor counts the December 31, 2021 inventory correctly. Which of the following statements is true related to Sleep’s 2020 and 2021 financial statements?
    1. 2020 Cost of Goods Sold will be understated by $200,000.
    2. 2021 Cost of Goods Sold will be overstated by $200,000.
    3. 2021 Beginning Inventory will be understated by $200,000.
    4. Both a and b are true.
    5. All of the above are true.

 

 

 

Use Newell Brands, Inc.'s most recent financial statements to answer the following three questions. 

  1. Which inventory cost flow assumption does Newell Brands use to value its inventories?
    1. LIFO
    2. FIFO
    3. Weighted Average Cost
    4. Specific Identification

 

 

  1. What is the most likely reason that Newell Brands chose this inventory cost flow assumption (given rising price trend)?
    1. To report higher Net Income on its Income Statement.
    2. To report higher Total Assets on its Balance Sheet.
    3. To pay less taxes.
    4. Both a and b are true.

 

 

  1. Which of the following statements about Newell Brands is TRUE?
    1. Fiscal year 2020 Gross Profit > Fiscal year 2019 Gross Profit.
    2. Fiscal year 2020 COGS < Fiscal year 2019 COGS.
    3. Fiscal year 2019 Gross Profit < Fiscal year 2018 Gross Profit.
    4. Fiscal year 2020 Operating Income < Fiscal year 2019 Operating Income.
    5. Both b and c are true.

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