86. Busch, Inc. is a successful company, but has a lower inventory turnover rate than the industry average. Of the following, the most likely explanation is that Busch
A. Has a just-in-time inventory system.
B. Uses LIFO (assume rising purchase costs).
C. Offers its customers an unusually large selection of merchandise.
D. Sells unusually popular items.
87. The gross profit method of valuing inventory:
A. Is the most accurate of the commonly used methods.
B. Is a satisfactory substitute for taking a physical inventory for annual financial statements.
C. Assumes that the gross profit rate will remain the same for the current year as it has in the past year or so.
D. A, B, and C are all true statements.
88. Short-term creditors are likely to view a higher-than-average inventory turnover rate as indicating that:
A. A company is in financial difficulty.
B. The company is able to sell its inventory quickly.
C. The company probably has an excessive amount of inventory.
D. The company has a longer-than-average operating cycle.
89. Which of the following types of businesses would you expect to have the highest inventory turnover?
A. An antique shop.
B. An electronics store.
C. A dairy store.
D. A boat manufacturer.
Beech Soda, Inc. uses a perpetual inventory system. The company’s beginning inventory of a particular product and its purchases during the month of January were as follows:
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On January 14, Beech Soda, Inc. sold 25 units of this product. The other 28 units remained in inventory at January 31.
90. Refer to the above data. Assuming that Beech Soda uses the FIFO flow assumption, the cost of goods sold to be recorded at January 14 is:
A. $278.
B. $268.
C. $393.
D. Some other amount.
91. Refer to the above data. Assuming that Beech Soda uses the LIFO flow assumption, the cost of goods sold to be recorded at January 14 is:
A. $393.
B. $268.
C. $278.
D. Some other amount.
92. Refer to the above data. Assuming that Beech Soda uses the average cost flow assumption, the cost of goods sold to be recorded at January 14 is (round cost per unit to nearest cent):
A. $317.50.
B. $308.25.
C. $273.25
D. Some other amount.
93. Refer to the above data. Assuming that Beech Soda uses the FIFO flow assumption, the 28 units of this product in inventory at January 31 have a total cost of:
A. $400.
B. $395.
C. $405.
D. Some other amount.
94. Refer to the above data. Assuming that Beech Soda uses the LIFO flow assumption, the 28 units of this product in inventory at January 31 have a total cost of:
A. $400.
B. $395.
C. $405.
D. Some other amount.
At year-end, the perpetual inventory records of Anderson Co. indicate 60 units of a particular product in inventory, acquired at the following dates and unit costs:
Purchased in August: 30 units at $750 per unit
Purchased in November: 30 units at $700 per unit
However, a complete physical inventory taken at year-end indicates only 50 units of this product actually are on hand.
95. Refer to the above data. Assuming that Anderson uses the LIFO flow assumption, it should record this inventory shrinkage by:
A. Debiting Cost of Goods Sold $7,000.
B. Crediting Cost of Goods Sold $7,500.
C. Debiting Cost of Goods Sold $7,500.
D. Crediting Cost of Goods Sold $7,000.
