Suppose Ajax Corporation overstates its ending inventory amount. What effect will this have on the reported amount of cost of goods sold in the year of the error? a. Overstate cost of goods sold.b. Understate cost of goods sold.c. Have no effect on cost of goods sold.d. Not possible to determine with information given.

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: complete the following table which compares the effects of LIFO,  FIFO and weighted-average…

A: Inventory valuation in costing is done using mainly three methods namely FIFO, LIFO and weighted…

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: 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: Assuming no beginning inventory, what is the trend of inventory prices if cost of goods sold…

A: Definition:   First-in-First-Out (FIFO): In this method, items purchased initially are sold first.…

Q: When net realizable value is lower than cost, and the loss method applying the…

A: As per Accounting Standards on Inventory valuation, each item of inventory is calculated at cost or…

Q: When using the periodic FIFO inventory cost method, which of the following statements is true? a.The…

A: Under FIFO method the oldest products in stock is used to assess the cost of products sold. To put…

Q: 3. Indicate the effect of the following errors on gross profit and cost of goods sold (COGS), i.e.,…

A: Solution Concepts Purchase account is an expense and if it is understated profit will increase and…

Q: If the ending inventory of a firm is overstated by $49,000, by how much and in what direction…

A: Computation of Income: Gross Profit = Sales – COGS COGS = Opening Inventory + Purchases – Closing…

Q: The Rider Company uses the gross profit method to estimate ending inventory and cost of goods sold.…

A: In order to accurately estimate the ending inventory under the gross profit method, the cost…

Q: On December 31, 2018, Stevenson Company overstated ending inventory by $36,000. How does this error…

A: Cost of goods sold: Cost of goods sold is the total of all the expenses incurred by a company to…

Q: A company's inventory cost was lower in FIFO than it would have been using LIFO. Assuming no…

A: Inventory is the stock of goods with the company which is ready to sell out. It covers large…

Q: For each of the following inventory errors occurring in 2018, determine the effect of the error on…

A: Retained earnings means the amount of profit left to company which has been left after paying…

Q: Which of the following statements is incorrect?

A: Cost of Goods Sold: Cost of Goods sold is the Cost of the items that are sold it is calculated for…

Q: Company A recent required to record an inventory write down of $5,200 because the net realizable…

A: Journal Entry: Journal entry is the act of keeping records of transactions in an accounting journal.…

Q: gross profit method assumes

A: The gross profit technique calculates the value of inventory by combining current period data on net…

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: For all exercises, assume the perpetual inventory system is used unless stated otherwise. Measuring…

A: a. Correct Cost of goods sold = Cost of goods sold + overstated Ending merchandise inventory =…

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: Vaughn Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Vaughn…

A: a. VAUGHN CO. Income Statement For the Year Ended December 31 LIFO   2018 2019 2020…

Q: Under the perpetual inventory system, cost of goods sold is debited when inventory is sold and…

A: Solution: Under perpetual inventory system, inventory is updated with every purchase and sales. Cost…

Q: When a periodic inventory system is used, a.only revenue is recorded each time a sale is made.…

A: Under perpetual inventory, both the sales entry and cost of goods sold entry are recorded each time…

Q: The accountant for Suzanne Company made the following errors related to inventory in 2020: 1. The…

A: Formula: Cost of goods sold = Beginning inventory + purchases - Closing stock. Closing stock is to…

Q: Assume that a firm separately determined inventory under FIFO and LIFO and then compared the…

A: FIFO is a method of costing inventory in which the inventory purchased first is out first for…

Q: During a period of falling prices, which of the following inventory methods generally results in the…

A: There are 3 types of methods for inventory valuation: a.FIFO b. LIFO c. Weighted average FIFO: In…

Q: Explain how the inventory valuation method (LIFO or FIFO) chosen by a company affects the cost of…

A: Inventory management refers to the valuation of inventory in three ways FIFO, LIFO and weighted…

Q: the ending inventory of a firm is overstated by $49,000, by how much and in what direction…

A: Solution Concept Mathematically Cost of goods sold       =beginning inventory + purchase – ending…

Q: Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of…

A: The Various methods used to valuate inventory are (1) Last In, First Out (LIFO) (2) First In, First…

Q: The gross profit technique implies that A. The value of the inventory has not grown from prior…

A: The amount of ending inventory for a reporting period is estimated using the gross profit technique.…

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…

Q: The inventory at the end of the year was understatedby $14,750. (a) Did the error cause an…

A: (a)

Q: Merchandise inventory at the end of the year was understated. Which of the following statements…

A: Merchandise inventory at the end of the year refers to the value of inventory that is available for…

Q: Assume that Audio Outfitter Inc. in Discussion Question 9 experienced an abnormal inventory…

A: Adjustment entry for abnormal inventory shrinkage:

Q: Merchandise inventory at the end of the year is overstated. Which of the following statements…

A: Merchandise inventory at the end of the year is the closing stock which is reported in the balance…

Q: When using the periodic LIFO inventory cost method, which of the following statements is true? a.The…

A: As per the LIFO method, goods purchased last or most recent purchases would be sold first.   Which…

Q: If Wakowski Company's ending inventory was actually $86,000 but was adjusted at year end to a…

A: Solution: Small error in inventory valuation would cause a complete error in a financial statement.…

Q: At December 31, 2018, Stevenson Company overstated ending inventory by $36,000. How does this error…

A: Cost of goods sold: Cost of goods sold is the total of all the expenses incurred by a company to…

Q: If ending inventory is overstated in the current fiscal year, what effect will this have on net…

A: The question is multiple choice question and related with overstated ending inventory. The ending…

Q: answer the following regarding inventories.   The inventory costing method which in a period of…

A: The correct Answer is Last-in, First-out (LIFO) Method

Q: In a period of falling prices, the use of which inventory cost flow method would typically result in…

A: The inventory valuation is done at the end of the accounting period. Different techniques are…

Q: 3. Indicate the effect of the following errors on gross profit and cost of goods sold (COGS), i.e.,…

A: Cost of goods sold (COGS)- The cost incurred on the goods sold during the period is referred to as…

Q: An error in the physical count of goods on hand at the end of a period resulted in a $18,000…

A: Answer: Overstatement of inventory on hand means the company has shown less cost of goods sold and…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.