accounting questions 494276

Assignment 2 Eye openers 1. Before inventory purchases are recorded, the receiving report should be reconciled to what documents? 2. What security measures may be used by retailers to protect merchandise inventory from customer theft? 3. Which inventory system provides the more effective means of controlling inventories (perpetual or periodic)? Why? 4. Why is it important to periodically take a physical inventory if the perpetual system is used? 5. Do the terms FIFO and LIFO refer to techniques used in determining quantities of the various classes of merchandise on hand? Explain. 6. Does the term last-in in the LIFO method mean that the items in the inventory are assumed to be the most recent (last) acquisitions? Explain. 7. If merchandise inventory is being valued at cost and the price level is decreasing, which of the three methods of costing—FIFO,LIFO, or average cost—will yield (a) the highest inventory cost,(b) the lowest inventory cost,(c) the highest gross profit, and (d) the lowest gross profit? 8. Which of the three methods of inventory costing—FIFO, LIFO, or average cost will in general yield an inventory cost most nearly approximating current replacement cost? 9. If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing—FIFO, LIFO, or average cost—will yield the lowest annual income tax expense? Explain. 10. Can a company change its method of costing inventory? Explain. 11. Because of imperfections, an item of merchandise cannot be sold at its normal selling price. How should this item be valued for financial statement purposes? 12. How is the method of determining the cost of the inventory and the method of valuing it disclosed in the financial statements? 13. The inventory at the end of the year was understated by $12,750. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were…