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Exam 6: Inventory Costing and Valuation

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Question 81

Multiple Choice

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Interim statements:

A) Are necessary to achieve full disclosure about a business's operations.
B) Are usually monthly or quarterly statements prepared in between the traditional, annual statements.
C) Are required by CRA.
D) Are required by CRA and are necessary to achieve full disclosure about a business's operations.
E) All of these answers are correct.

F) A) and E)
G) B) and E)

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Question 82

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If your inventory is destroyed by fire you can estimate the amount of inventorydestroyed if you know: beginning inventory, purchases, net sales, and gross profit ratio.

A) True
B) False

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Question 83

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A company made the following purchases during the year: On December 31, there were 32 units in ending inventory. These 32 unitsconsisted of 3 from the January 10 shipment, 4 from the March 15 shipment, 5 from the April 25 shipment, 15 from the July 30 shipment, and 5 from theOctober 10 shipment. Using specific identification, calculate the cost of theending inventory.

The choice of an inventory cost flow assumption can have a dramatic impact on amounts in financial statements.

Understatement of ending inventory causes:

The assignment of costs to cost of goods sold and inventory using (moving)weighted average usually gives different results depending on whether a perpetual or periodicsystem is used.

What are the effects of inventory methods on financial and tax reporting?

The gross profit ratio measures how much of each dollar of net sales is gross profit.