Question

1. The following information relates to inventory for Shoeless Joe Inc.

Date		Quantity	Price
March 1	Beginning Inventory	20	$2
March 7	Purchase	15	3
March 11	Sale	25	7
March 12	Purchase	20	4

At what amount would Shoeless report ending inventory using FIFO cost flow assumptions?

2. Ace Bonding Company purchased inventory on account. The inventory costs $2,000 and is expected to sell for $3,000. How should Ace record the purchase using a perpetual inventory system?

A.	Inventory	2,000
	Accounts Payable		2,000
B.	Cost of Goods Sold	2,000
	Deferred Revenue	1,000
	Sales Revenue		3,000
C.	Cost of Goods Sold	2,000
	Accounts Payable		2,000
D.	Cost of Goods Sold	2,000
	Gain	1,000
	Accounts Payable		3,000

3. Consider the following inventory data:

Beginning inventory	$150,000
Ending inventory	100,000
Purchases	310,000

What is the average days in inventory for the year?

152.0 days.

101.4 days.

126.7 days.

111.7 days.

4. Given the information below, what is the gross profit?

Sales revenue	$320,000
Accounts receivable	50,000
Ending inventory	100,000
Cost of goods sold	250,000
Sales Returns	20,000

		$50,000.
		$250,000.
		$70,000.
		$220,000.

5. The primary reason for the popularity of LIFO is that it gives:

		Simplified recordkeeping.
		Better matching of physical flow and cost flow.
		A lower income tax obligation when inventory costs are rising.
		A simpler method to apply

6. Ravens Inc. has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit?

		$72,000.
		$76,000.
		$74,000.
		$80,000.

7. Inventory records for Marvin Company revealed the following:

Date	Transaction	Number of Units	Unit Cost
Mar. 1	Beginning inventory	1,000	$7.20
Mar. 10	Purchase	600	7.25
Mar. 16	Purchase	800	7.30
Mar. 23	Purchase	600	7.35

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming FIFO would be:

		$5,140.
		$5,060.
		$5,050.
		$5,080.

Answer 1

1	Ending inventory = ($3 ×10) + ($4 ×20) = $110.
2	A.	Inventory	2000
		Accounts Payable		2000
3	126.7 days.
	Average days in inventory = 365/2.88 = 126.7
	Cost of goods sold = $150,000 + $310,000 - $100,000 = $360,000
	Inventory turnover ratio = $360,000 [($150,000 + $100,000)/2)] = 2.88.
4	Gross Profit	$50,000
	Sales revenue	$3,20,000
	Less: Sales Retuns	$20,000
	Net sale	$3,00,000
	Less: COGS	$2,50,000
	Gross Profit	$50,000
5	A lower income tax obligation when inventory costs are rising.
6	Gross Profit	$80,000
	Net sale	$2,00,000
	Less: COGS	$1,20,000
	Gross Profit	$80,000
7	Ending inventory = ($7.35 ×600) + ($7.30 ×100) = $5,140