Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 9, Problem 9.7E
Exercise 9.7
LO 2
Effects of inventory error If the ending inventory of a firm is overstated by $60,000, by how much and in what direction (overstated or understated) will the firm’s operating income be misstated? (Hint: Use the cost of goods sold model, enter hypothetically “correct” data, and then reflect the effects of the ending inventory error and determine the effect on cost of goods sold.)
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QUESTION 9
Which of the following statements is NOT true of Economic Order Quantity?
O A. The economic order quantity mathematically determines the minimum total inventory cost
O B. The EOQ is directly proportional to the sales per period
OC. The optìmal order size is determined by the EOQ model
O D. The EOQ ignores inventory reorder costs and inventory carrying costs
Exercise 9-9 (Static) Effects of inventory error LO 9-2
If the ending inventory of a firm is overstated by $70,000, by how much and in what direction (overstated or understated) will the firm's
operating income be misstated? (Hint: Use the cost of goods sold model, enter hypothetically "correct" data, and then reflect the
effects of the ending inventory error and determine the effect on cost of goods sold.)
Operating income
by
Exercise 9-7 (Algo) Effects of inventory error LO 2
If the ending inventory of a firm is overstated by $49,000, by how much and in what direction (overstated or understated) will
the firm's operating income be misstated? (Hint: Use the cost of goods sold model, enter hypothetically "correct" data, and
then reflect the effects of the ending inventory error and determine the effect on cost of goods sold.)
Operating income
by
overstated
understated
Chapter 9 Solutions
Accounting: What the Numbers Mean
Ch. 9 - Prob. 9.1MECh. 9 - Mini-Exercise 9.2 LO 5 Calculate operating income...Ch. 9 - Mini-Exercise 9.3 LO 6 Calculate basic EPS Net...Ch. 9 - Mini-Exercise 9.4
LO 10
Calculate cash flows from...Ch. 9 - Exercise 9.5
LO 1
Calculate earned revenues Big...Ch. 9 - Exercise 9.6 LO 1 Calculate earned revenues...Ch. 9 - Exercise 9.7 LO 2 Effects of inventory error If...Ch. 9 - Exercise 9.8 LO 2 Effects of inventory error...Ch. 9 - Prob. 9.9ECh. 9 - Prob. 9.10E
Ch. 9 - Exercise 9.11 LO 5 Operating income versus net...Ch. 9 - Prob. 9.12ECh. 9 - Prob. 9.13ECh. 9 - Prob. 9.14ECh. 9 - Prob. 9.15ECh. 9 - Prob. 9.16ECh. 9 - Prob. 9.17ECh. 9 - Prob. 9.18ECh. 9 - Problem 9.19 LO 5 Calculate operating income and...Ch. 9 - Prob. 9.20PCh. 9 - Problem 9.21
LO 3
Use gross profit ratio to...Ch. 9 - Prob. 9.22PCh. 9 - Prob. 9.23PCh. 9 - Problem 9.24
LO 10
Prepare a statement of cash...Ch. 9 - Problem 9.25
LO 10
Cash flows from operating,...Ch. 9 - Prob. 9.26PCh. 9 - Prob. 9.27PCh. 9 - Problem 9.28 LO 10. 11 Complete balance sheet and...Ch. 9 - Prob. 9.29PCh. 9 - Prob. 9.30PCh. 9 - Prob. 9.31CCh. 9 - Prob. 9.32CCh. 9 - Prob. 9.33C
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- QUESTION 15 During a period when inventory costs are steadily increasing, which of the following is true? O a. Net income will be higher under LIFO than under FIFO. O b. Cost of goods sold will be lower under LIFO than under FIFO. O c. Ending inventory value will be higher under LIFO than under FIFO. O d. Income taxes will be lower under LIFO than under FIFO.arrow_forwardIncorrect Question 23 Assume a company receives an actual return of goods. Which of the following needs to happen? O Sales Refunds Payable needs to decrease. Sales Refunds Payable needs to increase. COGS needs to decrease. Inventory needs to decrease. Sales revenue needs to decrease.arrow_forwardQUESTION 33 Under generally accepted accounting principles, a company can choose among different cost flow assumptions for valuing cost of goods sold that can result in different income reporting. However, a company cannot frequently change the cost flow assumption adopted in order to measure the highest income possible because of the: conservatism principle. going concern principle. stable-dollar principle. consistency principle.arrow_forward
- Question 63 Modified True or False T means Correct and F means Wrong I. The longer its customers normally hold inventory, the longer the credit period supplier firms normally offer. Still, suppliers have some flexibility in the credit terms they offer. If a supplier lengthens the credit period offered, this will shorten the customer's cash conversion cycle but lengthen the supplier firm's own CCC. II. The cash conversion cycle (CCC) combines three factors: The inventory conversion period, the receivables collection period, and the payables deferral period, and its purpose is to show how long a firm must finance its working capital. Other things held constant, the shorter the CCC, the more effective the firm's working capital management. III. The target cash balance is typically (and logically) set so that it does not need to be adjusted for either seasonal patterns or unanticipated random fluctuations. IV. A firm's peak borrowing needs will probably be overstated if it bases its…arrow_forward-8 Effects of inventory error Assume that the ending inventory of a merchandising a 2 firm is overstated by $40,000. Required: a. By how much and in what direction (overstated or understated) will the firm's cost of goods sold be misstated? b. If this error is not corrected, what effect will it have on the subsequent period's operating income? If this error is not corrected, what effect will it have on the total operating income of the two periods (the period in which there is an error and the subse- quent period) combined? с.arrow_forwardquestion 7 In a period of rising prices, the inventory method which tends to give the highest reported cost of goods sold and the lowest net income is Group of answer choices 1)LIFO 2)Average cost 3)FIFO 4)None of these answer choices are correct.arrow_forward
- QUESTION 4 Which of the following is used to analyze the efficiency and effectiveness of inventory management? a. inventory turnover only b. number of days' sales in inventory only c. both inventory turnover and number of days' sales in inventory d. neither inventory turnover or number of days' sales in inventoryarrow_forwardQuestion 19 If inventory prices are rising the method of inventory valuation that gives the highest profit and the highest ending inventory is: a. FIFO. b. LIFO. c. Weighted average. d. Perpetual method.arrow_forwardChapter 12 Exploration 12.2e - Using the Information - Number of Days of Sales in Inventory Ratio (13) Goal: Learn to calculate and interpret the number of days of sales in inventory ratio. Instructions: Use the values given to calculate the number of days of sales in inventory ratio. Indicate whether the change in this ratio is favourable or unfavourable. Correct Spelling is vital! Moodle is brutal! Consult the Chart of Accounts for help here. If there are more than one debit or credit the account names must be in alphabetical order. Do not include the $ sign in your answers. Your answers must be correct to exactly 2 decimal places. Do not include the, indicating thousands in your answers. Date Column: Enter the date in the form MMM DD, e.g. January 3 would be entered as Jan 3 2025 Average Merchandise Inventory 30,000 Cost of Goods Sold 59,500 Number of days of sales in inventory: Rounded to 2 decimal places. 2025 2024 202.46 Hint: The textbook example demonstrates how to calculate…arrow_forward
- Question 21Cost of goods sold is often the largest expense on a merchandising company income statement.A TrueB Falsearrow_forwardQuestion 7 of 20 View Policies Under the direct method, cash payments to suppliers equals cost of goods sold: minus an increase in inventory and plus a decrease in accounts payable. O plus an increase in inventory and minus an increase in accounts payable. minus a decrease in inventory and accounts payable. O plus an increase in inventory and accounts payable.arrow_forwardQUESTION 11 Match the term on the left to the appropriate description on the right. v Cost of goods available for sale (COGAS) A. A valuation rule applied to ending inventory. v LIFO reserve B. The maximum value that cost of goods sold (COGS) can be in a period. C. The amount by which inventory measured under FIFO would exceed inventory measured under LIFO v Lower-of-cost-or-market v Inventory turnover ratio. D. An inventory cost flow assumption. E. A measure for evaluating a company's inventory management. v FIFO (first-in, first out) v Periodic inventory F. A system for calculating COGS based on ending inventory value.arrow_forward
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