Inventory Management Paper 1

1

A physical inventory count showed an entity had inventory costing $1,000,000 on hand at December 31, Year 1. Excluded from this amount were the following: Goods costing $82,000, shipped to a customer free on board (FOB) shipping point on December 28, Year 1. They were expected to be received by the customer on January 4, Year 2. ? Goods costing $122,000, shipped to a customer free on board (FOB) destination December 30, Year 1. They were expected to be received by the customer on January 5, Year 2. Compute the correct ending inventory to be reported on the shipper’s statement of financial position at December 31, Year 1.






2

An entity had the following account balances in the pre-closing trial balance:
Opening inventory...................... $100,000
Closing inventory .........................150,000
Purchases ...................................400,000
Transportation-in .........................6,000
Purchase discounts .......................40,000
Purchase allowances................... ..15,000
Returned purchases....................... 5,000
The entity had net purchases for the period of






3

The following selected data from statements of financial position on December 31, Year 1, and December 31, Year 2, are presented below:
.............................. 12/31/Year 1.... 12/31/Year 2 Inventory................ $120,000........ $140,000
Trade accounts payable... 62,000.......... 49,000
Additional information for Year 2:
1. Cash payments to suppliers of merchandise were $180,000.
Cost of goods sold in Year 2 was






4

An entity with a December 31 year end purchased $2,000 of inventory on account. The seller was responsible for delivery to the shipping point, with freight of $50 paid at destination by the buyer. The invoice date was December 27, Year 1, and the goods arrived on January 3, Year 2. Now assume the terms required the seller to deliver to the destination instead of the shipping point. What is the correct amount of inventory and freight-in relating to this purchase on the Year 1 financial statements?
Inventory ..Freight-In






5

A retail entity maintains a markup of 25% based on cost. The entity has the following information for the current year:
Purchases of merchandise........ $690,000
Freight-in on purchases .............25,000
Sales...................................... 900,000
Ending inventory ......................80,000
Beginning inventory was






6

An entity had the following opening and closing inventory balances during the current year:
.......................................1/1 ........12/31
Finished goods............... $ 90,000... $260,000
Raw materials ..................105,000 ..130,000
Work-in-progress.............. 220,000 ..175,000
The following transactions and events occurred during the current year:
? $300,000 of raw materials were purchased, of which $20,000 were returned because of defects.
? $600,000 of direct labor costs were incurred.
? $750,000 of production overhead costs were incurred
If the entity’s raw materials inventory as of December 31 of the current year (ending inventory) was miscounted and the true figure was higher than $130,000, one effect on the year-end financial statements would be that






7

The following information is available for an entity for the quarter ended March 31, of the current year: Merchandise inventory, as of
January 1 of the current year .......$ 30,000
Sales ...........................................200,000
Purchases ....................................190,000
The gross profit margin is normally 20% of sales. What is the estimated cost of the merchandise inventory at March 31, of the current year?






8

An internal auditor performs an analytical procedure to compare the gross margins of various divisional operations with those of other divisions and with the individual division’s performance in previous years. The internal auditor notes a significant increase in the gross margin at one division. The internal auditor does some preliminary investigation and also notes that there were no changes in products, production methods, or divisional management during the year. The most likely cause of the increase in gross margin is






9

If certain goods owned by an entity were not recorded as a purchase and were not counted in ending inventory, in error, then






10

What is the cost of ending inventory given the following factors?
Beginning inventory............ $ 5,000
Total production costs ............60,000
Cost of goods sold................. 55,000
Direct labor ..........................40,000






Result

Total Questions:
Correct Answers:
Wrong Answers:
Percentage: