During august the first month of the fiscal year

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Accounting
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Chapter 7 / Exercise 4
Accounting
Reeve/Warren
Expert Verified
172. During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $700,000. Estimate the cost of the merchandise inventory as of August 31, based on an estimated gross profit rate of 45%. 173. On the basis of the following data, estimate the cost of the merchandise inventory at March 31 by the retail method: Cost Retail March 1 Merchandise Inventory $250,000 $350,000 March 1-31 Purchases (net) 850,000 1,650,000 March 1-31 Sales (net) 845,000 174. On the basis of the following data, determine the estimated cost of the inventory as of March 31 by the retail method, presenting details of the computation in good order.
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Accounting
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Chapter 7 / Exercise 4
Accounting
Reeve/Warren
Expert Verified
Chapter 7--Inventories Key 1. One of the two internal control procedures over inventory is to properly report inventory on the financial statements.
2. A purchase order establishes an initial record of the receipt of the inventory.
3. A perpetual inventory system is an effective means of control over inventory.
4. A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.
5. Safeguarding inventory and proper reporting of the inventory in the books are the reasons for controlling the inventory.
6. Inventory controls start when the merchandise is shelved in the store area.
7. A physical inventory should be taken at the end of every month.
8. The specific identification inventory method should be used when the inventory consists of identical, low cost units that are purchased and sold frequently.
9. The selection of an inventory costing method has no significant impact on the financial statements. FALSE 10. Of the three widely used inventory costing methods (FIFO, LIFO, and average cost), the LIFO method of costing inventory assumes costs are charged based on the most recent purchases first. TRUE 11. When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods sold. FALSE 12. FIFO is the inventory costing method that follows the physical flow of the goods. TRUE 13. Under the LIFO inventory costing method, the most recent costs are assigned to ending inventory. FALSE 14. The average cost inventory method is the rarely used with a perpetual inventory system. TRUE 15. If the perpetual inventory system is used, the account entitled Merchandise Inventory is debited for purchases of merchandise. TRUE 16. Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand. FALSE 17. Under the periodic inventory system, a physical inventory is taken to determine the cost of the inventory on hand and the cost of the merchandise sold. TRUE
18. The three inventory costing methods will normally each yield different amounts of net income.

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