Which of the following is true about the issues of the gross profit method of estimating inventory? O A. This method provides an estimate amount for the ending inventory. O B. Since this method provides estimated amount for the ending inventory, it is not acceptable for financial reporting purposes. OC. This method uses past ratios to make the computation. O D. All of the answers are correct. Question 2 of 5 A Moving to another question will save this response.

Which of the following is true about the issues of the gross profit method of estimating inventory? O A. This method provides an estimate amount for the ending inventory. O B. Since this method provides estimated amount for the ending inventory, it is not acceptable for financial reporting purposes. OC. This method uses past ratios to make the computation. O D. All of the answers are correct. Question 2 of 5 A Moving to another question will save this response.

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Description: Which of the following is true about the issues of the gross profit method of estimating inventory?O A. This method provides an estimate amount for the ending inventory.O B. Since this method provides estimated amount for the ending inventory, it is

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 36BE: Effects of Inventory Costing Methods Refer to the information for Tyler Company above. Required: 1....

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Lower of Cost or Market Merediths Appliance Store has the following data for the items in its inventory at the end of the accounting period: Required: 1. Compute the carrying value of Merediths ending inventory using the lower of cost or market rule applied on an item-by-item basis. 2. Prepare the journal entry required to value the inventory at lower of cost or market. 3. CONCEPTUAL CONNECTION What is the conceptual justification for valuing inventory at the lower of cost or market?
LO2 Under the perpetual system of accounting for inventory, the current merchandise inventory and the cost of goods sold are not determined until the end of the accounting period when a physical inventory is taken.
Which of these statements is false? A. If cost of goods sold is incorrect, ending inventory is usually incorrect too. B. C. D.
If a group of inventory items costing $3,200 had been double counted during the year-end inventory count, what impact would the error have on the following inventory calculations? Indicate the effect (and amount) as either (a) none, (b) understated $______, or (c) overstated $______. Table 10.2
Effects of Inventory Costing Methods Refer to the information for Tyler Company above. Required: 1. Which inventory costing method produces the highest amount for net income? 2. Which inventory costing method produces the lowest amount for taxes? 3. Which inventory costing method produces the highest amount for ending inventory? 4. How would your answers to Requirements 1-3 change if inventory prices declined during the period?
Lower of Cost or Market The accountant for Murphy Company prepared the following analysis of its inventory at year end: Required: 1. Compute the carrying value of the ending inventory using the lower of cost or market method applied on an item-by-item basis. 2. Prepare the journal entry required to value the inventory at lower of cost or market.
Lower of Cost or Market Garcia Company uses FIFO, and its inventory at the end of the year was recorded in the accounting records at $17,800. Due to technological changes in the market, Garcia would be able to replace its inventory for $16,500. Required: 1. Using the lower of cost or market method, what amount should Garcia report for inventory on its balance sheet at the end of the year? 2. Prepare the journal entry required to value the inventory at the lower of cost or market.
Errors A company that uses the periodic inventory system makes the following errors: 1. It omits a purchase on credit from the purchases account and the ending inventory. 2. It omits a purchase on credit from the purchases account, but the ending inventory is correct. 3. It overstates the ending inventory, but purchases arc correct. Required: Indicate the effect of the preceding errors on the income statement and the balance sheet of the current and succeeding years.
The following are independent errors made by a company that uses the periodic inventory system: a. Goods in transit, purchased on credit and shipped FOB destination, 10,000, were included in purchases but not in the physical count of ending inventory. b. Purchase of a machine for 2,000 was expensed. The machine has a 4-year life, no residual value, and straight-line depreciation is used. c. Wages payable of 2,000 were not accrued. d. Payment of next years rent, 4,000, was recorded as rent expense. e. Allowance for doubtful accounts of 5,000 was not recorded. The company normally uses the aging method. f. Equipment with a book value of 70,000 and a fair value of 100,000 was sold at the beginning of the year. A 2-year, non-interest-bearing note for 129,960 was received and recorded at its face value, and a gain of 59,960 was recognized. No interest revenue was recorded and 14% is a fair rate of interest. Required: 1. Next Level Indicate the effect of each of the preceding errors on the companys assets, liabilities, shareholders equity, and net income in the year in which the error occurs. State whether the error causes an overstatement (+), an understatement (), or no effect (NE). 2. Prepare the correcting journal entry or entries required at the beginning of the year for each of the preceding errors, assuming the company discovers the error in the year after it was made. Ignore income taxes.
Using the following data, how should the inventory be valued under lower of cost or market? Original cost 1,350 Estimated selling price 1,475 Selling expenses 180
Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system? A. balance sheet B. income statement C. neither statement D. both statements
When would using the FIFO inventory costing method produce higher inventory account balances than the LIFO method would? A. inflationary times B. deflationary times C. always D. never