The 2021 inventory data for Island Corporation is presented below. Assume that Island uses periodic inventory tracking. 2021 Beginning Inventory (purchased in 2020) 100 units @ $28 per unit Purchases: Purchase 1 on 1/20/21 300 units @ $30 per unitPurchase 2 on 6/15/21 1,100 units @ $34 per unit Sales: Sale 1 on 4/8/21 520 units @ $60 per unitSale 2 on 9/25/21 860 units @ $60 per unit When Island examines the actual units in ending inventory, they see that 30 of the units are from 2021 beginning inventory, 40 units are from the 1/20/21 purchase, and 50 units are from the 6/15/21 purchase. What is Inventory on the 12/31/21 Balance Sheet if Island uses FIFO?$3,400$4,080$45,120$45,800 What is Cost of Goods Sold on the 2021 Income Statement if Island uses LIFO?$3,400$4,080$45,120$45,800 What is Inventory on the 12/31/21 Balance Sheet if Island uses Specific Identification?$3,740$4,080$45,120$45,460 What is Gross Profit on the 2021 Income Statement if Island uses Weighted Average Cost?$3,936$37,536$45,264$78,864 On October 28, 2021, GE sells and ships $400,000 worth of merchandise to Best Buy. The goods are shipped FOB destination and arrive at Best Buy stores on November 4. Which of the following statements is TRUE?Best Buy includes the $400,000 as part of its October 31 Inventory balance.The goods are in transit on October 31 so neither company includes the $400,000 as part of its October 31 Inventory balance.GE includes the $400,000 as part of its October 31 Inventory balance.Both companies include the $200,000 as part of their October 31 Inventory balances. In a period of falling prices, which of the following statements is true?LIFO produces a lower cost for ending inventory than FIFOAverage cost produces a higher net income than FIFO or LIFOLIFO produces a higher cost of goods sold than FIFOFIFO produces a lower amount of net income than LIFO Sleep Inc. uses a periodic inventory system. When a warehouse supervisor counts the inventory on December 31, 2020, he accidentally counts one pile of blankets twice, resulting in 2020 ending inventory being overstated by $200,000. The warehouse supervisor counts the December 31, 2021 inventory correctly. Which of the following statements is true related to Sleep’s 2020 and 2021 financial statements?2020 Cost of Goods Sold will be understated by $200,000.2021 Cost of Goods Sold will be overstated by $200,000.2021 Beginning Inventory will be understated by $200,000.Both a and b are true.All of the above are true. Use Newell Brands, Inc.'s most recent financial statements to answer the following three questions. Which inventory cost flow assumption does Newell Brands use to value its inventories?LIFOFIFOWeighted Average CostSpecific Identification What is the most likely reason that Newell Brands chose this inventory cost flow assumption (given rising price trend)?To report higher Net Income on its Income Statement.To report higher Total Assets on its Balance Sheet.To pay less taxes.Both a and b are true. Which of the following statements about Newell Brands is TRUE?Fiscal year 2020 Gross Profit > Fiscal year 2019 Gross Profit.Fiscal year 2020 COGS < Fiscal year 2019 COGS.Fiscal year 2019 Gross Profit < Fiscal year 2018 Gross Profit.Fiscal year 2020 Operating Income < Fiscal year 2019 Operating Income.Both b and c are true.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The 2021 inventory data for Island Corporation is presented below. Assume that Island uses periodic inventory tracking.

2021 Beginning Inventory (purchased in 2020)		100 units @ $28 per unit

Purchases:
Purchase 1 on 1/20/21		300 units @ $30 per unit
Purchase 2 on 6/15/21		1,100 units @ $34 per unit

Sales:
Sale 1 on 4/8/21		520 units @ $60 per unit
Sale 2 on 9/25/21		860 units @ $60 per unit

When Island examines the actual units in ending inventory, they see that 30 of the units are from 2021 beginning inventory, 40 units are from the 1/20/21 purchase, and 50 units are from the 6/15/21 purchase.

What is Inventory on the 12/31/21 Balance Sheet if Island uses FIFO?
1. $3,400
2. $4,080
3. $45,120
4. $45,800

What is Cost of Goods Sold on the 2021 Income Statement if Island uses LIFO?
1. $3,400
2. $4,080
3. $45,120
4. $45,800

What is Inventory on the 12/31/21 Balance Sheet if Island uses Specific Identification?
1. $3,740
2. $4,080
3. $45,120
4. $45,460

What is Gross Profit on the 2021 Income Statement if Island uses Weighted Average Cost?
1. $3,936
2. $37,536
3. $45,264
4. $78,864

On October 28, 2021, GE sells and ships $400,000 worth of merchandise to Best Buy. The goods are shipped FOB destination and arrive at Best Buy stores on November 4. Which of the following statements is TRUE?
1. Best Buy includes the $400,000 as part of its October 31 Inventory balance.
2. The goods are in transit on October 31 so neither company includes the $400,000 as part of its October 31 Inventory balance.
3. GE includes the $400,000 as part of its October 31 Inventory balance.
4. Both companies include the $200,000 as part of their October 31 Inventory balances.

In a period of falling prices, which of the following statements is true?
1. LIFO produces a lower cost for ending inventory than FIFO
2. Average cost produces a higher net income than FIFO or LIFO
3. LIFO produces a higher cost of goods sold than FIFO
4. FIFO produces a lower amount of net income than LIFO

Sleep Inc. uses a periodic inventory system. When a warehouse supervisor counts the inventory on December 31, 2020, he accidentally counts one pile of blankets twice, resulting in 2020 ending inventory being overstated by $200,000. The warehouse supervisor counts the December 31, 2021 inventory correctly. Which of the following statements is true related to Sleep’s 2020 and 2021 financial statements?
1. 2020 Cost of Goods Sold will be understated by $200,000.
2. 2021 Cost of Goods Sold will be overstated by $200,000.
3. 2021 Beginning Inventory will be understated by $200,000.
4. Both a and b are true.
5. All of the above are true.

Use Newell Brands, Inc.'s most recent financial statements to answer the following three questions.

Which inventory cost flow assumption does Newell Brands use to value its inventories?
1. LIFO
2. FIFO
3. Weighted Average Cost
4. Specific Identification

What is the most likely reason that Newell Brands chose this inventory cost flow assumption (given rising price trend)?
1. To report higher Net Income on its Income Statement.
2. To report higher Total Assets on its Balance Sheet.
3. To pay less taxes.
4. Both a and b are true.

Which of the following statements about Newell Brands is TRUE?
1. Fiscal year 2020 Gross Profit > Fiscal year 2019 Gross Profit.
2. Fiscal year 2020 COGS < Fiscal year 2019 COGS.
3. Fiscal year 2019 Gross Profit < Fiscal year 2018 Gross Profit.
4. Fiscal year 2020 Operating Income < Fiscal year 2019 Operating Income.
5. Both b and c are true.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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