Q&A Hero

Q: A company uses the retail inventory method and has the following information available concerning its most recent accounting period: At Cost At Retail Beginning-of-period inventory $148,600 $ 245,200 Net purchases 677,400 1,229,800 Sales 1,200,000 (a) What is the cost-to-retail ratio using the retail method? (b) What is the estimated cost of the ending inventory?

Q: Apply the retail method to the following company information to calculate the cost of the ending inventory for the current period: Cost Retail Beginning inventory $20,224 $31,600 Net purchases 59,508 97,000 Sales 89,000

Q: A company's store was destroyed by a fire on February 10 of this year. The only information for the current period that could be salvaged included the following: Beginning inventory, January 1: $34,000 Purchases to date: $118,000 Sales to date: $140,000 Historically, the company's gross profit ratio has been 30%. Estimate the value of the destroyed inventory using the gross profit method.

Q: A company made the following merchandise purchases and sales during the month of May: May 1 purchased 380 units at $15 each May 5 purchased 270 units at $17 each May 10 sold 400 units at $50 each May 20 purchased 300 units at $22 each May 25 sold 400 units at $50 each There was no beginning inventory. If the company uses the FIFO periodic inventory method, what would be the cost of the ending inventory?

Q: A company made the following merchandise purchases and sales during the month of May: May 1 purchased 380 units at $15 each May 5 purchased 270 units at $17 each May 10 sold 400 units at $50 each May 20 purchased 300 units at $22 each May 25 sold 400 units at $50 each There was no beginning inventory. If the company uses the LIFO periodic inventory method, what would be the cost of the ending inventory?

Q: A company made the following merchandise purchases and sales during the month of May: May 1 purchased 380 units at $15 each May 5 purchased 270 units at $17 each May 10 sold 400 units at $50 each May 20 purchased 300 units at $22 each May 25 sold 400 units at $50 each There was no beginning inventory. If the company uses the weighted-average periodic method, what would be the cost of the ending inventory?

Q: A company had the following ending inventory costs: Product Units Available Cost Market A 10 $ 5 $ 6 B 50 8 7 C 35 10 11 Instructions: (a) Calculate the lower of cost or market (LCM) value for the inventory as a whole. (b) Calculate the lower of cost or market (LCM) value for each individual item.

Q: A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory. January 1: Purchased 100 units at $10 per unit February 5: Purchased 60 units at $12 per unit March 16: Sold 40 units for $16 per unit Prepare the general journal entry to record the March 16 sale, assuming the weighted-average method is used.

Q: . During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows. What was the weighted-average cost of the company's January 31 inventory? Units Cost per Unit Beginning inventory 100 $10 Jan. 5 purchase 40 12 10 sale 60 15 purchase 70 13 25 sale 50

Q: . During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows. What was the LIFO cost of the company's January 31 inventory? Units Cost per Unit Beginning inventory 100 $10 Jan. 5 purchase 40 12 10 sale 60 15 purchase 70 13 25 sale 50

Q: . A company made the following merchandise purchases and sales during the month of July: July 1 purchased 380 units at $15 each July 5 purchased 270 units at $20 each July 9 sold 500 units at $55 each July 14 purchased 300 units at $24 each July 20 sold 250 units at $55 each July 30 purchased 250 units at $30 each There was no beginning inventory. If the company uses the first-in, first-out perpetual inventory method, what would be the cost of the ending inventory?

Q: . A company made the following merchandise purchases and sales during the month of May: May 1 purchased 380 units at $15 each May 5 purchased 270 units at $17 each May 10 sold 400 units at $50 each May 20 purchased 300 units at $22 each May 25 sold 400 units at $50 each There was no beginning inventory. If the company uses the weighted-average perpetual inventory method, what would be the cost of its ending inventory?

Q: A company made the following purchases during the year: Jan. 10 15 units at $360 each Mar. 15 25 units at $390 each Apr. 25 10 units at $420 each July 30 20 units at $450 each Oct. 10 15 units at $480 each On December 31, there were 28 units in ending inventory. These 28 units consisted of 1 from the January 10 purchase, 2 from the March 15 purchase, 5 from the April 25 purchase, 15 from the July 30 purchase, and 5 from the October 10 purchase. Using specific identification, calculate the cost of the ending inventory.

Q: . A company reported the following data: Year 1 Year 2 Year 3 Cost of goods sold $238,000 $375,000 $495,000 Ending inventory 120,000 150,000 180,000 Required: 1. Calculate the days' sales in inventory for each year. 2. Comment on the trend in inventory management.

Q: The City Store reported the following amounts on their financial statements for 2012, 2013, and 2014: For the Year Ended December 31 2012 2013 2014 Cost of goods sold $75,000 $87,000 $77,000 Net income 22,000 25,000 21,000 Total current assets 155,000 165,000 110,000 Equity 287,000 295,000 304,000 It was discovered early in 2015 that the ending inventory on December 31, 2012, was overstated by $6,000 and the ending inventory on December 31, 2013, was understated by $2,500. The ending inventory on December 31, 2014, was correct. Ignoring income taxes, determine the correct amounts of cost of goods sold, net income, total current assets, and equity for each of the years 2012, 2013, and 2014.

Q: Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income. Inventory Error Cost of Goods Sold Net Income Understatement of beginning inventory Understatement of ending inventory Overstatement of beginning inventory Overstatement of ending inventory

Q: Monitor Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for their first year of operation: MONITOR COMPANY Income Statement For the year ended December 31 Sales $50,000 Cost of goods sold 23,000 Gross profit $27,000 Expenses 13,000 Income before taxes $14,000 Monitor's ending inventory using the LIFO method was $8,200. Monitor's accountant determined that had they used FIFO, the ending inventory would have been $8,500. a. Determine what the income before taxes would have been had Monitor used the FIFO method of inventory valuation instead of LIFO b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?

Q: Derick Pearson and Felecia Hatcher founded Feverish Ice Cream. Why is managing inventory an important issue for their company?

Q: Explain the difference between the retail inventory method and gross profit inventory method for valuing inventory.

Q: Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

Q: Explain why the lower of cost or market rule is used to value inventory.

Q: Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

Q: What is the effect of an error in the ending inventory balance on the income statement?

Q: How do the consistency concept and the full disclosure principle affect inventory valuation?

Q: Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

Q: Describe the internal controls that must be applied when taking a physical count of inventory.

Q: Identify the items that are included in merchandise inventory. (In your answer address the special situations of goods in transit, consigned goods, and damaged goods.)

Q: Identify the inventory valuation method that is being described for each situation below. In all cases, assume a period of rising prices. Use the following to identify the inventory valuation method: FIFO First in, first out LIFO Last in, first out SI Specific identification WA Weighted average a. The method that can only be used if each inventory item can be matched with a specific purchase and its invoice. b. The method that will cause the company to have the lowest income taxes. c. The method that will cause the company to have the lowest cost of goods sold. d. The method that will assign a value to inventory that approximates its current cost. e. The method that will tend to smooth out erratic changes in costs.

Q: Use the following information to estimate the third quarter ending inventory under the gross profit method. This company's gross profit ratio is 20%. Third quarter beginning inventory: $54,000 Net sales for third quarter: $85,000 Net purchases for third quarter: $21,000 A. $101,000 B. $58,000 C. $35,000 D. $7,000 E. $14,000

Q: On December 31, a company needed to estimate its ending inventory to prepare its fourth quarter financial statements. The following information is currently available: Inventory as of October 1: $12,500 Net sales for fourth quarter: $40,000 Net purchases for fourth quarter: $27,500 The company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit method would be: A. $4,000 B. $6,000 C. $10,000 D. $16,000 E. $34,000

Q: A company that has operated with a 30% average gross profit ratio for a number of years had $100,000 in sales during the first quarter of this year. If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending inventory using the gross profit method is: A. $30,000 B. $21,000 C. $20,000 D. $18,000 E. $27,000

Q: On June 30 a company needed to estimate its ending inventory to prepare its second quarter financial statements. The following information is available: Beginning inventory, April 1: $6,000 Net sales: $70,000 Net purchases: $36,000 The company's gross margin ratio is 12%. Using the gross profit method, the cost of goods sold would be: A. $8,400 B. $34,000 C. $61,600 D. $40,000 E. $35,200

Q: On September 30 a company needed to estimate its ending inventory to prepare its third quarter financial statements. The following information is available: Beginning inventory, July 1: $4,000 Net sales: $40,000 Net purchases: $41,000 The company's gross margin ratio is 15%. Using the gross profit method, the cost of goods sold would be: A. $4,000 B. $5,000 C. $21,000 D. $25,000 E. $34,000

Q: A company reported the following information regarding its inventory. Beginning inventory: cost is $70,000; retail is $130,000. Net purchases: cost is $65,000; retail is $120,000. Sales at retail: $145,000. The year-end inventory showed $105,000 worth of merchandise available at retail prices. What is the cost of the ending inventory? A. $48,300 B. $56,700 C. $56,441 D. $78,300 E. $105,000

Q: A company's warehouse was destroyed by a tornado on March 15. The following information was salvaged from the ruins: Inventory, beginning: $28,000 Purchases for the period: $17,000 Sales for the period: $55,000 Sales returns for the period: $700 The company's average gross profit ratio is 35%. What is the estimated cost of the lost inventory? A. $9,705 B. $25,995 C. $29,250 D. $44,000 E. $45,000

Q: Interim statements: A. Are required by Congress. B. Are necessary to achieve full disclosure about a business's operations. C. Are usually monthly or quarterly statements prepared in between the traditional, annual statement dates. D. Require the use of the perpetual method for inventories. E. Cannot be prepared if the company follows the conservatism principle.

Q: A company sells a climbing kit and uses the periodic inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows: January 1: Beginning balance of 18 units at $13 each January 12: Purchased 30 units at $14 each January 19: Sold 24 units at a selling price of $30 each January 20: Purchased 24 units at $17 each January 27: Sold 27 units at a selling price of $30 each If the ending inventory is reported at $357, what inventory method was used? A. LIFO B. FIFO C. Weighted average D. Specific identification E. Retail inventory method

Q: A company uses the periodic inventory system and had the following activity during the current monthly period:. November 1: Beginning inventory 100 units @ $20 November 5: Purchased 100 units @ $22 November 8: Purchased 50 units @ $23 November 16: Sold 200 units @ $45 November 19: Purchased 50 units @ $25 Using the weighted-average inventory method, the company's ending inventory would be reported at: A. $2,000 B. $2,200 C. $2,250 D. $2,400 E. $4,400

Q: A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12, they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO periodic inventory method, what is the value of the inventory at August 15 after the sale? A. $140 B. $160 C. $210 D. $380 E. $590

Q: Given the following information, determine the cost of goods sold at December 31 using the weighted-average periodic inventory method: December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit. A. $282.15 B. $332.10 C. $284.70 D. $290.70 E. $210.30

Q: Given the following information, determine the cost of goods sold at December 31 using the LIFO periodic inventory method: December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit. A. $284.70 B. $332.10 C. $281.25 D. $290.70 E. $297.00

Q: Given the following information, determine the cost of goods sold for December 31 using the FIFO periodic inventory method: December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit. A. $282.15 B. $332.10 C. $281.25 D. $297.00 E. $284.70

Q: A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold? A. $120 B. $124 C. $128 D. $130 E. $140

Q: Per Unit Total LCM Applied to Units Cost Market Cost Market Items Whole A 10 $3 $2.50 $ 30.00 $ 25.00 $ 25.00 B 40 $9 $9.50 00 380.00 360.00 C 75 $8 $7.50 $990.00 $967.50

Q: A company has the following per unit original costs and replacement costs for its inventory: Part A: 10 units with a cost of $3 and replacement cost of $2.50. Part B: 40 units with a cost of $9 and replacement cost of $9.50. Part C: 75 units with a cost of $8 and replacement cost of $7.50. Under the lower of cost or market method, the total value of this company's ending inventory must be reported as: A. $990.00. B. $947.50. C. $967.50 or $947.50, depending upon whether LCM is applied to individual items or the inventory as a whole. D. $967.50. E. $990.00 or $947.50, depending upon whether LCM is applied to individual items or to the inventory as a whole.

Q: Per Unit Total LCM Applied to Units Cost Market Cost Market Items Whole A 50 $5 $4.50 $ 250 $ 225.00 $225 B 75 $6 $6.50 450 50 450 C 160 $3 $2.50 $1,180 $1,112.50

Q: A company has the following per unit original costs and replacement costs for its inventory: Part A: 50 units with a cost of $5 and replacement cost of $4.50. Part B: 75 units with a cost of $6 and replacement cost of $6.50. Part C: 160 units with a cost of $3 and replacement cost of $2.50. Under the lower of cost or market method, the total value of this company's ending inventory must be reported as: A. $1,180.00. B. $1,075.00. C. $1,112.50 or $1075.00, depending upon whether LCM is applied to individual items or the inventory as a whole. D. $1,112.50. E. $1180.00 or $1075.00, depending upon whether LCM is applied to individual items or to the inventory as a whole.

Q: A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this company's inventory at the lower of cost or market. A. $2,550 B. $2,600 C. $2,700 D. $3,000 E. $3,200

Q: The conservatism constraint: A. Requires that when more than one equally likely estimate of amounts is expected to be received or paid in the future, then the less optimistic amount should be used. B. Requires that a company use the same accounting methods period after period. C. Requires that revenues and expenses be reported in the period in which they are earned or incurred. D. Requires that all items of a material nature be included in financial statements. E. Requires that all inventory items be reported at full cost.

Q: Generally accepted accounting principles require that the inventory of a company be reported at: A. Market value B. Historical cost C. Lower of cost or market D. Replacement cost E. Retail value

Q: In applying the lower of cost or market method to inventory valuation, market is defined as: A. Historical cost B. Current replacement cost C. Current sales price D. FIFO E. LIFO

Q: Given the following information, determine the cost of goods sold at December 31 using the weighted-average perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit. A. $282.30 B. $332.10 C. $281.25 D. $290.70 E. $210.30

Q: Given the following information, determine the cost of goods sold at December 31 using the LIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit. A. $282.15 B. $332.10 C. $281.25 D. $290.70 E. $210.30

Q: Given the following information, determine the cost of goods sold for December 31 using the FIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit. A. $282.15 B. $332.10 C. $281.25 D. $290.70 E. $210.30

Q: Given the following information, determine the cost of ending inventory at December 31 using the weighted-average perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit. A. $51.75 B. $83.22 C. $41.30 D. $49.75 E. $50.75

Q: Given the following information, determine the cost of ending inventory at December 31 using the LIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit. A. $51.75 B. $83.22 C. $41.30 D. $94.00 E. $50.75

Q: Given the following information, determine the cost of ending inventory at December 31 using the FIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit. A. $51.75 B. $83.22 C. $41.30 D. $94.00 E. $50.75

Q: Given the following information, determine the cost of ending inventory at December 31 using the weighted-average perpetual inventory method. Assume this is the first month of the company's operations. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 12: 2 units were sold. A. $17.20 B. $111.80 C. $129.00 D. $94.00 E. $8.60

Q: Given the following information, determine the cost of ending inventory at June 30 using the LIFO perpetual inventory method. Assume this is the first month of the company's operations. June 1: 15 units were purchased at $20 per unit. June 15: 12 units were sold. June 29: 8 units were purchased for $25 per unit. A. $200 B. $220 C. $260 D. $275 E. $300

Q: Given the following events, what is the per-unit value of ending inventory on November 30 if this company uses a weighted-average perpetual inventory system? November 1: 5 units were purchased at $6 per unit. November 12: 10 units were purchased at $7.50 per unit. November 14: 7 units were sold for $14 per unit. November 24: 12 units were purchased at $10 per unit. A. $6.00 B. $7.00 C. $8.80 D. $13.00 E. $21.80

Q: A company uses a weighted-average perpetual inventory system. August 2: 10 units were purchased at $12 per unit. August 18: 15 units were purchased at $15 per unit. August 29: 20 units were sold. August 31: 14 units were purchased at $16 per unit. What is the per-unit value of ending inventory on August 31? A. $12.00 B. $13.80 C. $15.42 D. $16.00 E. $17.74

Q: A company markets a climbing kit and uses the perpetual inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows: January 1: Beginning balance of 18 units at $13 each. January 12: Purchased 30 units at $14 each. January 19: Sold 24 units at $30 selling price each. January 20: Purchased 24 units at $17 each. January 27: Sold 27 units at $30 selling price each. If the ending inventory is reported at $276, which inventory method was used? A. LIFO method B. FIFO method C. Weighted-average method D. Specific identification method E. Retail inventory method

Q: A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, they sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold? A. $395 B. $410 C. $450 D. $510 E. $520

Q: A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12, they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory on August 15 after the sale? A. $140 B. $160 C. $210 D. $380 E. $590

Q: Acme-Jones Corporation uses a LIFO perpetual inventory system. August 2, 25 units were purchased at $12 per unit. August 5, 10 units were purchased at $13 per unit. August 15, 12 units were sold at $25 per unit. August 18, 15 units were purchased at $14 per unit. What was the amount of the cost of goods sold? A. $184.53 B. $163.00 C. $174.43 D. $154.00 E. $144.00

Q: A corporation uses a LIFO perpetual inventory system. August 2, 25 units were purchased at $12 per unit. August 5, 10 units were purchased at $13 per unit. August 15, 12 units were sold at $25 per unit. August 18, 15 units were purchased at $14 per unit. What was the amount of the ending inventory for the month of August? A. $496.00 B. $486.00 C. $492.57 D. $300.00 E. $510.00

Q: A corporation uses a FIFO perpetual inventory system. August 2, 25 units were purchased at $12 per unit. August 5, 10 units were purchased at $13 per unit. August 15, 12 units were sold at $25 per unit. August 18, 15 units were purchased at $14 per unit. What was the amount of the ending inventory for the month of August? A. $496.00 B. $486.00 C. $492.57 D. $300.00 E. $510.00

Q: Acme-Jones Corporation uses a weighted-average perpetual inventory system. August 2, 10 units were purchased at $12 per unit. August 18, 15 units were purchased at $14 per unit. August 29, 12 units were sold. What was the amount of the cost of goods sold for this sale? A. $148.00 B. $150.50 C. $158.40 D. $210.00 E. $330.00

Q: A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 5, 8 units were sold for $55 each. Using the weighted-average perpetual inventory method, what was the value of the inventory on November 30? A. $304.00 B. $404.00 C. $299.33 D. $280.00 E. $276.00

Q: A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the FIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale? A. $304 B. $296 C. $288 D. $280 E. $276

Q: A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale? A. $304 B. $296 C. $288 D. $280 E. $276

Q: The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the: A. Weighted-average inventory method, B. First-in, first-out method, C. Last-in, first-out method, D. Specific identification method, E. Retail inventory method,

Q: Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its days' sales in inventory equals: A. 0.21 B. 4.51 C. 4.79 D. 76.1 days E. 80.9 days

Q: A company had gross profit of $134,200 on net sales of $205,000. If ending inventory was $8,000 and average inventory was $7,080, what is the company's inventory turnover? A. 10.0 B. 8.85 C. 16.77 D. 18.95 E. 28.95

Q: Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. The inventory turnover equals: A. 0.21 B. 4.51 C. 4.79 D. 76.1 days E. 80.9 days

Q: Days' sales in inventory is calculated as: A. Ending inventory divided by sales times 365. B. Cost of goods sold divided by ending inventory. C. Ending inventory divided by cost of goods sold times 365. D. Cost of goods sold divided by ending inventory times 365. E. Ending inventory divided by cost of goods sold.

Q: The inventory turnover ratio is calculated as: A. Cost of goods sold divided by average merchandise inventory. B. Sales divided by cost of goods sold. C. Ending inventory divided by cost of goods sold. D. Cost of goods sold divided by ending inventory. E. Cost of goods sold divided by ending inventory times 365.

Q: Days' sales in inventory: A. Is also called days' stock on hand. B. Focuses on average inventory rather than ending inventory. C. Is used to measure solvency. D. Is calculated by dividing cost of goods sold by ending inventory. E. Is a substitute for the acid-test ratio.

Q: The inventory turnover ratio: A. Is used to analyze profitability. B. Is used to measure solvency. C. Measures how quickly a company turns over its merchandise inventory. D. Validates the acid-test ratio. E. Calculation depends on the company's inventory valuation method.

Q: An overstatement of ending inventory will cause A. An overstatement of assets and equity on the balance sheet. B. An understatement of assets and equity on the balance sheet. C. An overstatement of assets and an understatement of equity on the balance sheet. D. An understatement of assets and an overstatement of equity on the balance sheet. E. No effect on the balance sheet.