BAT Chapter 6 Review

Which of the following should not be included in a company's physical inventory?

• Goods held on consignment from another company

• Goods shipped on consignment to another company

• Goods in transit that were purchased from a supplier and shipped FOB shipping point

• Goods in transit that were sold to a customer and shipped FOB destination

What is the most important factor in determining if specific identification can be used?

• Management decides to use it.

• The inventory consists of high-priced goods

• The company has a low volume of sales

• The inventory items aren't interchangeable

In periods of rising prices, the average cost formula will produce:

• higher profit that FIFO

• the same inventory as FIFO

• lower profit that FIFO

• higher inventory than FIFO

In Fran Company, ending inventory is overstated by $4000 The effects of this error on the current year's COGS and profit, respectively, are:

• understated; overstated

• overstated; understated

• overstated; overstated

• understated; understated

Michelle Company made an error that understated ending inventory by $5000 on December 31, 2018. It did not correct the error in 2018 or 2019. As a result, owner's equity was:

• overstated at December 31, 2018, and understated at December 31, 2019

• overstated at December 31, 2018, and properly stated at December 31, 2019

• understated at December 31, 2018, and properly stated at December 31, 2019

• understated at December 31, 2018, and overstated at December 31, 2019

Rickety Company purchased 1000 units of inventory at a cost of $91 each. There are 200 units left in ending inventory. The NRV of these units is $80 each. The ending inventory under the LCNRV rule is:

• $2,200

• $16,000

• $18,200

• $80,000

If a company's COGS is $240,000, its beginning inventory is $50,000, and its ending inventory is $30,000, what are its inventory turnover and days sales in inventory?

• 3 times and 122 days

• 6 times and 61 days

• 4.8 times and 76 days

• 8 times and 46 days

The factor that determines whether or not goods should be included in a physical count of inventory is:

• physical possession

• legal title

• management's judgmenet

• whether or not the purchase price has been paid

Per its January 31, 2020 physical inventory count, Pugwash Company has $24,500 in inventory on hand at year end. In addition, the company has $1200 in merchandise in transit purchased from a supplier shipped FOB destination. Included in its physical inventory is $900 of goods held on consignment from a local manufacturer. How much inventory should be reported on the company's January 31, 2020 balance sheet?

• $24,500

• $25,700

• $24,800

• $23,600

A company just starting in business purchased three merchandise inventory items at the following prices: first purchase, $100; second purchase $120; third purchase, $125. If the company sold two units for a total of $400 and used FIFO, the gross profit for the period would be:

• $220

• $180

• $245

• $155