Chapter 6

Which of the following should not be included in the physical inventory of a company? a. Goods held on consignment from another company. b. Goods shipped on consignment to another company. c. Goods in transit from another company shipped \(\mathrm{FOB}\) shipping point. d. None of the above.

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth \(\$ 180,000\) at December 31,2012 . This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth \(\$ 35,000\) on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is \(50,000. Rail- way purchased \)13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report. a. \(230,000. c. \)228,000. b. \(215,000. d. \)193,000.

Cost of goods available for sale consist of two elements: ( \((\mathrm{SO} 2)\) beginning inventory and a. ending inventory. b. cost of goods purchased. c. cost of goods sold. d. All of the above.

In periods of rising prices, LIFO will produce: a. higher net income than FIFO. b. the same net income as FIFO. c. lower net income than FIFO. d. higher net income than average costing.

Factors that affect the selection of an inventory costing method do not include: a. tax effects. b. balance sheet effects. c. income statement effects. d. perpetual vs. periodic inventory system.

Rickety Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of \(\$ 91\) each and a current replacement cost of \(\$ 80\) each. The ending inventory under lower-of-cost-or-market is: a. \(\$ 91,000\). c. \(\$ 18,200\). b. \(\$ 80,000\). d. \(\$ 16,000\).

Atlantis Company's ending inventory is understated \(\$ 4,000\). The effects of this error on the current year's cost of goods sold and net income, respectively, are: a. understated, overstated. b. overstated, understated.

Harold Company overstated its inventory by \(\$ 15,000\) at \((504)\) December 31,2011 . It did not correct the error in 2011 or 2012. As a result, Harold's owner's equity was: a. overstated at December 31,2011 , and understated at December 31, \(2012 .\) b. overstated at December 31,2011 , and properly stated at December 31, \(2012 .\) c. understated at December 31,2011 , and understated at December 31, \(2012 .\) d. overstated at December 31,2011 , and overstated at December 31, \(2012 .\)

Which of these would cause the inventory turnover ratio (SO 6) to increase the most? a. Increasing the amount of inventory on hand. b. Keeping the amount of inventory on hand constant but increasing sales. c. Keeping the amount of inventory on hand constant but decreasing sales. d. Decreasing the amount of inventory on hand and increasing sales.

Carlos Company had beginning inventory of \(\$ 80,000\), end- (SO 5) ing inventory of \(\$ 110,000\), cost of goods sold of \(\$ 285,000\), and sales of \(\$ 475,000\). Carlos's days in inventory is: a. 73 days. c. \(102.5\) days. b. \(121.7\) days. d. \(84.5\) days.

Songbird Company has sales of \(\$ 150,000\) and cost of (SO 8) goods available for sale of \(\$ 135,000\). If the gross profit rate is \(30 \%\), the estimated cost of the ending inventory under the gross profit method is: a. \(\$ 15,000\). c. \(\$ 45,000\). b. \(\$ 30,000\). d. \(\$ 75,000\).

In a perpetual inventory system, (SO 7) a. LIFO cost of goods sold will be the same as in a periodic inventory system. b. average costs are based entirely on unit cost averages. c. a new average is computed under the average-cost method after each sale. d. FIFO cost of goods sold will be the same as in a periodic inventory system. Go to the book's companion website, www.wiley.com/college/weygandt, The Navigator