gross profit method assumes
Q: 1. On which of the following instances is cost estimation not permitted? A. Estimating the cost of…
A: Hi student Since there are multiple questions, we will answer only first question.
Q: When there are no inventory at the beginning or at the end of the period, the total purchases will…
A: The total purchase amount is the price agreed upon by the buyer and seller for an item, including…
Q: Which Inventory Valuation method gives the highest profit when inventory costs are rising? a.…
A: The inventory can be valued using various methods as FIFO, LIFO and average method. Using FIFO, the…
Q: If ending inventory is understaffed for year 1, then in year 2…. A. Costa of goods sold and gross…
A: Inventory is the term used in accounting which refers to the goods as well as materials that the…
Q: Which of the following statements about the use of the FIFO assumption is NOT true? a. The…
A: Solution: "The FIFO assumption produces inventory asset values that are based on older purchase…
Q: Proponents of the LIFO Inventory cost flow assumption argue that this costing method is superior to…
A: LIFO is one of the inventory methods used to account for inventory. Here the inventory of the…
Q: If ending inventory is understated in the current fiscal year, what effect will this have on net…
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: Which of the following statements is true for a company using the periodic inventory method? A.…
A: Inventory valuation is referred to as that method which helps in assigning a monetary value to the…
Q: M7-17 Calculating Effect of Inventory Errors For each of the following scenarios, determine the…
A: The inventory needs to be recorded correctly as incorrect accounting of inventory would impact the…
Q: Astro company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising…
A: The question is based on the concept of Cost accounting
Q: An understatement of ending inventory by $2 million in one period results ina. an overstatement of…
A: Inventory is the detailed list of items that are present on hand. It constitute of all the finished…
Q: a) Compare the periodic versus the perpetual system as a control device. b) What sort of…
A: The periodic and perpetual inventory Systems are two systems used to track the quantity of goods…
Q: If ending inventory is understated by $25,000, what effect will this have on cost of goods sold and…
A: Formula: Cost of goods sold = Beginning inventory + Purchases - Ending Inventory.
Q: If ending Inventory is overstated at the end of the year, profit will be: O Ovestated b) Understated…
A: Inventory valuation includes different methods that are used by companies to find out the value of…
Q: 10.In periods of rising prices (inflation), the use of which of the following inventory cost flow…
A: Under first in first out method, the goods which are brought into the inventory first are sold first…
Q: The installment method of recognizing profit for accounting purposes is acceptable if a. An…
A: Installment sales is a method of revenue recognition allowed under US GAAP (Generally accepted…
Q: All sales and purchases for the year at Ross Corporation are credit transactions. Ross uses a…
A:
Q: True False 1. During a period of rising costs, the LIFO cost flow assumption results in lower cost…
A: LIFO means last in first out where as FIFO means first in first out. Inventory and cost of goods…
Q: If the dollar amount in ending accounts payable is greater than the dollar amount in beginning…
A: Solution- Accounts payable are amounts due to vendors or suppliers for goods or services received…
Q: Sales Returns Which of the following statements is true relating to the allowance for sales returns?…
A: Sales return & allownace :— It is the amount of goods returned by customer due to receive of…
Q: If beginning inventory is understated by $980O, the effect of this error in the current period is…
A: The COGS is determined based on beginning inventory, inventory purchase, and closing inventory. COGS…
Q: Part One: Explanation 1. If merchandise inventory is being valued at cost and the price level is…
A: FIFO, LIFO and weighted average are different cost flow assumptions with regard to the cost of…
Q: An overstatement of ending merchandise inventory in the current period results in an understatement…
A: COST OF GOODS SOLDCost of Goods Sold States that the Amount of Cost Included in the Number of Units…
Q: Ann M. Martin Company makes the following errors during the current year. 1. Overstatement of…
A: Assets, liabilities and stockholders' equity are included in the balance sheet of the company.
Q: If purchases were recorded correctly but ending physical inventory is understated, which one of the…
A: Working capital, conjointly referred to as web assets (NWC), is that the distinction between a…
Q: Which of the following is true regarding LIFO and FIFO? A) In a period of decreasing costs, LIFO…
A: First in first out is also written as FIFO and last in first out is also written as LIFO. These are…
Q: Do you agree with the following statements? Express your opinion on each statement.
A: 1: This statement is correct This can be explained with the help of example: Suppose closing stock…
Q: The management of Milque Corp. is considering the effects of various inventory-costing methods on…
A: Particulars Inventory price FIFO LIFO Net income Increasing Increases Decreases Ending inventory…
Q: Overstating ending inventory in the current year causes net income in the current year to be…
A: 1. True 2. False The weighted-average cost includes both beginning inventory and purchases and is…
Q: Compare the financial effects (ignore income tax) of using the FIFO and average inventory cost…
A: FIFO FIFO Means First in, First Out. It is one of the Important Method of Valuation of Inventory.…
Q: Which of the following statements on inventory valuation errors is false? a. Over a two-year…
A: Ending inventory as regarding as credit item and will effect net income and balance sheet values.…
Q: Do you agree with the following statements? Express your opinion on each statement. An inventory…
A: 1) This statement is correct This can be explain with the help of example: Suppose closing stock is…
Q: Astro Company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising…
A: 1. If a company uses the FIFO method and the prices are rising over a period then it means the Cost…
Q: During periods of declining prices, when comparing LIFO and FIFO inventory methods: A. LIFO…
A: FIFO is first in first out inventory valuation method which says that inventory which is purchased…
Q: In a period of falling prices, which inventory method would result in the lowest tax burden? a.…
A: FIFO is first in first out which means inventory bought first is sold first.LIFO is last in first…
Q: The gross profit method is more reliable than retail inventory method so it is allowed for annual…
A: False. The statement is incorrect.Neither the gross profit method nor the retail inventory method…
Q: If beginning inventory is understated, then: a. goods available for sale will be overstated. b.…
A: The cost of goods sold represents the direct costs of producing goods or purchasing them for resale…
Q: 1. In a period of rising prices, the inventory reported in Huang Company's balance sheet is close to…
A: Note: As per our guidelines, only the first question shall be answered. 1. The FIFO technique is…
Q: Which of the following may be an indication of inventory theft? COGS is significantly different…
A: Inventory can be defined as the stock of goods or products that is manufactured and stored by the…
Q: A list of errors is shown below: Show the effects of the errors on the indicated balance sheet and…
A: solution The answer is presented in the table below
Q: If prices are rising and a company is using LIFO, large purchases of inventory near the end of the…
A: If prices are rising and a company is using LIFO, large purchases of inventory near the end of the…
Q: Which inventory method will result in lower net income in a period of rising prices? Which inventory…
A: First-in-First-Out (FIFO): In this method, items purchased initially are sold first. So, the value…
Q: A company using a periodic inventory system neglected to record a purchase of merchandise on account…
A: Understated, No effect
Q: What are the effects (UNDERSTATED, OVERSTATED, NO EFFECT AT ALL) of these inventory errors on (a)…
A: Inventory refers to the stock that the company held for resale purposes or the goods that are not…
Q: Unrealized profit on ending inventory A.will always be paired with a realized profit on beginning…
A: Inventory is the asset reported under the head current asset on the balance sheet of the company. It…
Q: Which of the following is false? Question 33 options: a) Inventory turnover ratio is…
A: solution: "Higher days' sales in inventory means that inventory is less likely to become obsolete…
Q: A company follows the LIFO inventory method and is experiencing rising costs. What impact will this…
A: When a company follows the LIFO inventory method and experiences rising costs, the ending inventory…
Q: If a company understates its inventory, what are the effects on cost of goods sold and net income…
A: The cost of goods sold is calculated as difference between cost of goods available for sale and…
Q: When there are no inventory at the beginning or at the end of the period, the total purchases will…
A: Cost of sales means actual cost of goods that is being sold to the customers. It includes beginning…
The use of the gross profit method assumes
A. Inventory values have not increased from previous years.
B. The amount of gross profit is the same as in prior years.
C. The relationship between gross profit and sales remains stable over time.
D. Sales and cost of goods sold have not changed from previous years.
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- Ebbers Corporation overstated its ending inventory balance by $15,000 in the current year. What impact will this error have on cost of goods sold and gross profit in the current year and following year?The inventory at the end of the year was understatedby $14,750. (a) Did the error cause an overstatementor an understatement of the gross profit forthe year? (b) Which items on the balance sheet atthe end of the year were overstated or understatedas a result of the error?An increase in the inventory turnover rate is indicative of: Multiple Choice a decrease in the cost of goods sold. a decrease in the supply of inventory. an increase in the supply of inventory. an increase in sales revenue.
- A company experiences inventory shrinkage and records the proper entry to account for it. As a result of this entry: Select one: a. gross profit will decrease and net income will decrease b. gross profit will increase and net income will increase c. gross profit will increase and net income will decrease d. gross profit will decrease and net income will increaseIf beginning inventory is understated by $11800, the effect of this error in the current period is Cost of Goods Sold Net Income Net Income overstated understated understated overstated understated understated overstated overstatedWhen inventory is sold on account, which of the following is true? Operating cash flows are increased at the time of sale. Total assets are increased by the amount of the gross profit. Net income is increased by the amount of the sales price. Revenue is not increased until the cash is received. Both net income and liabilities are increased by the amount of the sales price.
- Which of the following statements is true with regard to the gross profit ratio? An increase in cost of goods sold would increase the gross profit ratio (assuming sales remain constant). An increase in the gross profit ratio may indicate that a company is efficiently managing its inventory. An increase in selling expenses would lower the gross profit ratio. a.1 b.2 c.1 and 2 d.2 and 3Which of the following statements Is/are true? Multiple Cholce In a period of rising costs and stable inventory levels, using the FIFO method leads to a higher taxable income and higher net income compared to the LIFO method. All of the other answer choices are true. In a period of falling costs and stable inventory levels, cost of goods sold is the same under LIFO and FIFO. In a period of rising costs and stable inventory levels, using the LIFO method leads to a lower taxable income and higher net income compared to the FIFO method.Assume that the ending inventory of a merchandising firm is overstated by $40,000. a. By how much and in what direction (overstated or understated) will the firms cost of goods be misstated? b. If this error is not corrected, what effect will it have on the subsequent period's operating income? c. If this error is not corrected, what effect will it have on the total operating income of the two periods (the period in which there is an error and the subsequent period) combined?
- Companies can use various methods to determine the cost of inventory, including FIFO, LIFO, and average cost. In a period in which the cost of inventory is rising, which of the following statements is true? The LIFO method will result in the lowest income tax expense. The LIFO method will result in the highest inventory balance at year-end. The average cost method will result in the highest net income. The LIFO method will result in the lowest cost of goods sold. The average cost method will result in the lowest inventory balance at year-end. The average cost method will result in the highest inventory balance at year-end. The FIFO method will result in the lowest net income. None of the listed choices are correct.Proponents of the LIFO inventory cost flow assumption argue that this costing method is superior to the alternatives because it results in better matching of revenue and expense. Required: a. Under LIFO, the release of the most recent purchase costs to the Cost of Goods Sold account results in better matching of revenue and expense. b. What is the impact on the carrying value of inventory in the balance sheet when LIFO rather than FIFO is used during periods of inflation? a. b. It understates the value of inventory in the balance sheet. It overstates the value of inventory in the balance sheet.Which of the following statements about the use of the FIFO assumption is NOT true? a.The FIFO assumption assigns the more recent purchase costs to the balance sheet inventory asset account. b.The FIFO assumption is not affected by the inventory control method. c.In periods of rising prices it produces a higher profit than LIFO. d.The FIFO assumption produces inventory asset values that are based on older purchase costs.
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