Q1. On the basis of the following data, what is the estimated cost of the merchandise inventory on October 31 by the retail method?
Cost Retail
Oct. 1 Merchandise Inv . . . . $225,000 $324,500
Oct. 1-31 Purchases (net) . . . . . 335,000 475,500
Oct. 1-31 Sales (net) . . . . . . . . . 600,000
Q2. If the estimated rate of gross profit is 30%, what is the estimated cost of the merchandise inventory on June 30, based on the following data?
June 1 Merchandise Inv . . . . $ 75,000
June 1-30 Purchases (net) . . . . . $150,000
June 1-30 Sales (net) . . . . . . . . $135,000
3. Too much inventory on hand:
A. reduces solvency
B. increases the cost to safeguard the asset
C. increases the losses due to price declines
D. all of the above
4. Inventory turnover:
A. is computed by dividing average inventory by cost of merchandise sold
B. measures the relationship between the volume of goods sold and amount of inventory carried
C. increases the risk of loss from damaged merchandise
D. is computed by dividing the beginning inventory plus the ending inventory by two
E. None
5. Under a perpetual inventory system, when a shortage is discovered:
A. Merchandise Inventory is debited
B. Cost of Merchandise Sold is credited
C. Inventory Shortages is credited
D. Merchandise Inventory is credited
E. None
6. The inventory data for an item for the month of May are as follows:
May 1 Inventory . . . . . . . . . . . . . . . . . . . . . . . 20 units at $50
5 Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 units
10 Purchased . . . . . . . . . . . . . . . . . . . . . . 30 units at $55
20 Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 units
29 Purchased . . . . . . . . . . . . . . . . . . . . . . 29 units at $60
What is the cost of the merchandise inventory of 25 units on May 31 by the last-in, first-out method if the periodic system is used:
A. $1,500
B. $1,275
C. $1,475
D. $1,250
E. None
7. The following lots of a particular commodity were available for sale during the year:
Beginning inventory . . . . . . . . . . . . . . . . . . . . 10 units at $60
First purchase . . . . . . . . . . . . . . . . . . . . . . . . . 25 units at $63
Second purchase . . . . . . . . . . . . . . . . . . . . . . . 30 units at $64
Third purchase . . . . . . . . . . . . . . . . . . . . . . . . 15 units at $71
The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of this inventory according to the first-in, first-out method?
A. $1,200
B. $1,230
C. $1,385
D. $1,400
E. None
8. The inventory data for an item for November are:
Nov. 1 Inv . . . . . . . . . . . . . . . . . . . 20 units at $20
4 Sold . . . . . . . . . . . . . . . . . . 10 units
10 Purchased . . . . . . . . . . . . . 30 units at $21
17 Sold . . . . . . . . . . . . . . . . . . 20 units
30 Purchased . . . . . . . . . . . . . 10 units at $22
Using the perpetual system, costing by the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?
A. $640
B. $610
C. $620
D. $630
E. None
9. During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is:
A. fifo
B. lifo
C. average cost
D. weighted averag
E. None
10. If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is:
A. periodic
B. lifo
C. fifo
D. average
E. None
11. If merchandise inventory is being valued at cost and the price level is consistently rising, which method of costing will yield the largest gross profit?
A. average cost
B. lifo
C. fifo
D. weighted average
E. None
12. If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest gross profit?
A. average cost
B. lifo
C. fifo
D. weighted average
E. None
13. Determine the Inventory turnover from following information:
Beginning Inventory(B.I)= $100, 000
Ending inventory(E.I)= $120, 000
Cost of goods sold(COGS)= $10, 000, 000
14. Use your finding from previous question: If the industry average for inventory turnover is 40, compare your inventory turnover to the industry average. Are you doing better than industry average? Why or Why not?