Inventory Systems and Recording Quiz
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Inventory Systems and Recording Quiz

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Questions and Answers

What is the formula for calculating the estimated cost of goods sold (COGS) based on a gross profit rate on sales?

  • Net sales / (100% + gross profit rate)
  • Beginning inventory + Net purchases
  • Net sales x (100% - gross profit rate) (correct)
  • Net sales + inventory

    • Which of the following components needs to be subtracted to find the estimated cost of ending inventory?

  • Estimated cost of goods sold (correct)
  • Net purchases
  • Beginning inventory
  • Gross profit amount

    • If Cristian Company has a gross profit rate of 25% on sales, what would be the estimated cost of goods sold based on their sales of P1,500,000?

  • P1,125,000
  • P1,500,000
  • P750,000 (correct)
  • P1,200,000

    • What amount represents Cristian Company's net purchases after accounting for purchase returns and discounts?

    <p>P980,000</p> Signup and view all the answers

    Based on a gross profit rate of 25% on cost of goods sold, what is the adjusted formula to estimate COGS?

    <p>Net sales / (100% + gross profit rate)</p> Signup and view all the answers

    How is the cost of goods available for sale computed?

    <p>Inventory at the beginning of the period plus net purchases</p> Signup and view all the answers

    Which of the following does not affect the computation of Cost of Goods Sold?

    <p>Sales discounts</p> Signup and view all the answers

    What is the approach to calculate ending inventory using a percentage of sales?

    <p>Multiply total cost of goods available for sale by 25% and subtract estimated Cost of Goods Sold</p> Signup and view all the answers

    What was the average cost per unit after the purchase on April 1?

    <p>P11.33</p> Signup and view all the answers

    When computing net sales, which item can be deducted?

    <p>Sales returns</p> Signup and view all the answers

    How many units were available for sale after the May 1 sale?

    <p>350 units</p> Signup and view all the answers

    What is the cost of goods sold (COGS) for the units sold on May 1?

    <p>P2,832.50</p> Signup and view all the answers

    How is estimated Cost of Goods Sold calculated when using the 25% on cost approach?

    <p>Divide total cost of goods available for sale by 125%</p> Signup and view all the answers

    What was the new average cost per unit after the purchase on July 15?

    <p>P12.90</p> Signup and view all the answers

    What is the total cost of the units remaining after the May 1 sale?

    <p>P3,965.50</p> Signup and view all the answers

    How many units were purchased on October 8?

    <p>140 units</p> Signup and view all the answers

    What is the total value of the remaining inventory right before the November 28 sale?

    <p>P10,965.50</p> Signup and view all the answers

    After all transactions in the period, how can it be concluded that FIFO and moving average yield the same results?

    <p>Because they yield the same ending inventory under specific conditions.</p> Signup and view all the answers

    Which inventory costing method implies that the ending inventory consists of the earlier purchases?

    <p>LIFO</p> Signup and view all the answers

    In the given transactions for JK Inc., how many units were sold on March 19?

    <p>8,000 units</p> Signup and view all the answers

    What method uses a mix of multiple methods to determine inventory costs?

    <p>Weighted Average</p> Signup and view all the answers

    If JK Inc. purchased 4,000 units at P9.50 on March 30, what is the unit cost for those units?

    <p>P9.50</p> Signup and view all the answers

    Which method is not permitted under IAS 2 for inventory costing?

    <p>LIFO</p> Signup and view all the answers

    What distinguishes segregated goods from other types of inventory?

    <p>They are specially ordered based on customer preference.</p> Signup and view all the answers

    Which statement is true about goods sold with buyback agreements?

    <p>They remain part of the seller's inventory.</p> Signup and view all the answers

    How does the perpetual inventory system primarily differ from the periodic inventory system?

    <p>It updates inventory records consistently.</p> Signup and view all the answers

    What happens to goods sold with refund offers when returns are predictable?

    <p>They are excluded from the inventories of the seller.</p> Signup and view all the answers

    What is a major disadvantage of using a perpetual inventory system?

    <p>It is more expensive to maintain than periodic systems.</p> Signup and view all the answers

    What kind of control does the periodic inventory system provide to management?

    <p>None, until the end of the fiscal period.</p> Signup and view all the answers

    In which case would temporary accounts be utilized?

    <p>In a periodic inventory system.</p> Signup and view all the answers

    Which statement about the cost of maintaining inventory systems is correct?

    <p>Perpetual systems require trained personnel and are expensive.</p> Signup and view all the answers

    Study Notes

    Inventory Systems

    • Consignment Goods: Remain the property of the consignor, who ships them to a consignee for sale.
    • Segregated Goods: Specially ordered or manufactured goods become the property of the customer once completed, excluding them from the seller's inventory.
    • Conditional and Installment Sales: Title passes to the buyer, thus the goods are not part of the seller's inventory.
    • Goods Sold with Buyback Agreement: The seller retains ownership of the goods, making them part of their inventory.
    • Goods Sold with Refund Offers: Predictable returns exclude goods from the seller's inventory; otherwise, they remain part of the inventory.

    ### Inventory Recording Systems

    • Perpetual System: Maintains continuous record of the cost of inventories.
      • Ending inventory is determined through updated records.
      • Physical stock count is done for verification.
      • Offers high level of control.
      • Recording is done directly into the inventory account.
    • Periodic System: Inventory records are updated periodically.
      • Ending inventory is determined by physical stock count.
      • Physical stock count is used to calculate cost of goods sold.
      • Lower level of control as inventory levels are only known at the end of the period.
      • Temporary accounts are used to track purchases, returns, and sales.

    Inventory Costing Methods

    • Specific Identification: The cost of each item is tracked from the point of purchase to the point of sale.
    • First In, First Out (FIFO): Assumes oldest inventory is sold first. Ending inventory reflects the most recent purchases/production.
    • Last In, First Out (LIFO): Not permitted under IAS 2. Assumes newest inventory is sold first. Ending inventory reflects the oldest purchases/production.
    • Weighted Average Method: Uses a weighted average cost to value inventory.

    Moving Average Method

    • Requires recalculation of the average cost per unit after each purchase.
    • Calculation of the average cost is done by dividing the total cost of the inventory by the total number of units.
    • Used to determine the cost of goods sold and ending inventory.

    Estimating Inventory Cost

    • Gross Profit Rate: Can be calculated as a percentage of sales or cost of goods sold.
    • Estimated Cost of Ending Inventory: Can be calculated by subtracting the estimated cost of goods sold from the total cost of goods available for sale.

    Key Concepts

    • Cost of Goods Available for Sale: Sum of beginning inventory and net purchases.
    • Cost of Goods Sold: Cost of goods sold, including purchase returns and discounts.
    • Net Sales: Total sales less sales returns and discounts.

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    Related Documents

    Inventory Management PDF

    Description

    Test your understanding of various inventory systems, including consignment goods, segregated goods, and conditional sales. Explore different inventory recording methods, such as perpetual systems and their benefits. Assess your knowledge on how these systems impact inventory management.

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