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Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

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Question 41

Multiple Choice

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Maxim Corp. has provided the following information about one of its products: During the year, Maxim sold 400 units. What is cost of goods sold using the average cost method?

A) $48,000.
B) $64,000.
C) $50,000.
D) $62,000.

E) A) and D)
F) A) and C)

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Question 42

True/False

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An overstatement of the 2015 ending inventory results in an overstatement of stockholders' equity as of the end of 2015.

A) True
B) False

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Question 43

Multiple Choice

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Which of the following statements is incorrect for a manufacturing entity?

When there is a $3,000,000 decrease in inventory and a $2,000,000 decrease in accounts payable, cash flow from operating activities increases by $1,000,000.

RJ Corporation has provided the following information about one of its inventory items: During the year, RJ sold 3,000 units. What was cost of goods sold using the FIFO cost flow assumption under a periodic inventory system?

Which of the following is correct?

Goods available for sale are allocated to both ending inventory and cost of goods sold.

Dows Company prepared income statements that reflected pretax income of $21,000 for 2015 and $30,000 for 2016. An audit has determined that there were two errors in the inventory amounts as follows: Amount Reported Correct Amount Ending inventory, 2015 $15,000 $14,000 Ending inventory, 2016 18,000 16,000 Required: Determine the correct pretax income amount for each year (show computations; assume the errors were not corrected):

Rio Company uses the FIFO inventory costing method and has a perpetual inventory system. All purchases and sales were cash transactions. The records reflected the following for January, 2016: Required: Determine the following: A.2016 cost of goods available for sale B.2016 cost of goods sold C.2016 ending inventory D.The journal entries for January 6 and 10.

How much were inventory purchases when cost of goods sold was $250,000, beginning inventory was $20,000, and ending inventory was $25,000?

Sideline Company reported net income for 2015 of $70,000 and in 2016 of $84,000 (both after income taxes at a 30% rate). It was discovered in 2016 that the ending inventory for 2015 was understated by $2,000 (before any income tax effect). Required: Calculate the correct net income (after income tax of 30%) for 2015 and 2016

Moore Company purchased an item for inventory that cost $20 per unit and was priced to sell at $30. It was determined that the disposal cost is $12 per unit. Using the lower of cost or net realizable value (LCM) rule, what amount should be reported on the balance sheet for inventory?

Which of the following is correct when, in the same year, beginning inventory is overstated by $1,300 and ending inventory is understated by $700?

Which of the following statements is correct when inventory unit costs are decreasing?

Carr Corporation has provided the following information for its most recent month of operation: sales $8,000; beginning inventory $1,000; ending inventory $2,000 and gross profit $5,000. How much were Carr's inventory purchases during the period?

What is the net adjustment to net income with respect to the determination of cash flows from operating activities when inventory increases $100,000 and accounts payable increases $20,000?

The LIFO inventory method will result in the lowest gross profit in comparison with the FIFO method when unit costs are decreasing.

Which of the following journal entries is not consistent with the use of a perpetual inventory system?

The use of raw materials in the manufacturing process is reported as an operating expense on the income statement.

The records of Jimmy Company show 2016 purchases of $90,000. An actual count revealed a 2016 ending inventory of $8,000. The 2016 beginning inventory was $5,000. What was cost of goods sold for 2016?