Which of the following is true about the issues of the gross profit method of estimating inventory? O A. This method provides an estimate amount for the ending inventory. O B. Since this method provides estimated amount for the ending inventory, it is not acceptable for financial reporting purposes. OC. This method uses past ratios to make the computation. O D. All of the answers are correct. Question 2 of 5 A Moving to another question will save this response.

Which of the following is true about the issues of the gross profit method of estimating inventory? O A. This method provides an estimate amount for the ending inventory. O B. Since this method provides estimated amount for the ending inventory, it is not acceptable for financial reporting purposes. OC. This method uses past ratios to make the computation. O D. All of the answers are correct. Question 2 of 5 A Moving to another question will save this response.

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Description: Which of the following is true about the issues of the gross profit method of estimating inventory?O A. This method provides an estimate amount for the ending inventory.O B. Since this method provides estimated amount for the ending inventory, it is

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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1.At a time of declining prices, which cost flow assumption will result in the highest ending inventory? A. FIFO B. LIFO C. Weighted average D. Either A or C 2. When the cost of inventory is rising, which inventory cost flow method will produce the lowest amount of cost of goods sold? A. FIFO B. Weighted Average. C. All methods will produce the same amount of cost of goods sold. D. LIFO 200 The inventory records for Raymond Co. reflected the following Beginning Inventory @ May 1 200 units @ $1.00 First Purchase @ May 7 Second Purchase @ May 17 Third Purchase @ May 23 Sales @ May 31 B. $1.15 C. $1.14 D. $1.31 B. $130 C. $324 D. $340 300 units @ $1.10 = 400 units @ $1.20 100 units @ $1.30 = 120 900 units @ $1.50 1350 30 go 3. Determine the weighted average cost per unit for May. A. $1.22 .4.Determine the amount of cost of goods sold assuming the LIFO cost flow method. A. $1,140 B. $1,040 C. $1,000 D. $940 5. Determine the amount of gross margin assuming the FIFO cost flow method. A. $114
H7. For the same transactions, why does the weighted-average cost method provide different value for ending inventory and COGS depending on whether the periodic or perpetual inventory system is used? Select one: a. Perpetual inventory calculates and assigns costs as items are sold, while periodic inventory calculates and assigns costs at the end of the period. b. Perpetual inventory calculates and assigns costs at the end of the period, while periodic inventory calculates and assigns costs as items are sold. c. Perpetual inventory counts all the purchases for the month first before calculating the average cost, while periodic calculates the average cost after every transaction. d. Perpetual inventory and periodic inventory will not provide different values using Explain also wrong options and explain with details
Problem 2: Multiple choice- Theory 1. Which of the following statements is correct? a.PAS 2 Inventories does not allow the use of inventory estimates. b. If the cost ratio is 80%, the gross profit rate based on cost is 20%. c. If the gross profit based on cost is 25%, the cost ratio is 75%. d. PAS 2 allows the use of estimates if the estimate reasonably approximates the cost.
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Petco Inc. uses the periodic inventory system. Assess the effect on net income of including goods in transit f.o.b shipping point in purchases, but not in ending inventory. a. Overstate net income. b. No effect on net income. O c. Not sufficient information is provided to assess the effect on net income. O d. Understate net income.
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.