Q 6.10 : Phantom or paper profits can result in periods of inflation when a company is using the Q 6.11 : Based on the net income of the shop , the sales staff at Francesca ’ s Fashions receive performance bonuses . In periods of declining prices , which inventory costing method would bring the sales staff the most benefit ? Q 6.12 : When determining the cost of inventory items before lower-of-cost-or-market is applied , which of the following costing methods can be used ? Q 6.13 : How is market defined under the lower-of-cost-ormarket basis in valuing inventory ? Q 6.14 : An error was made with the physical count of goods on hand at the end of a period that resulted in a $ 25,000 overstatement of the ending inventory . What is the effect of this error on cost of goods sold and net income , respectively ? Q 6.15 : American Supply sold merchandise on account to Decker Plumbing on March 31 . The sales price was $ 2,300 , and the cost of goods sold was $ 1,500 . Sales revenue was reported immediately , but the cost of goods sold was not reported until April 3 . What happened to the net income for March as a result ? Q 6.16 : To compute the inventory turnover ratio , cost of goods sold should be divided by which of the following ? Q 6.17 : On December 31 , 2012 , Jameson reported the following numbers : beginning inventory $ 80,000 ; ending inventory $ 120,000 ; cost of goods sold $ 700,000 ; and sales $ 1,200,000 . What was Jameson ’ s inventory turnover in 2012 ? Q 6.18 : Where should a company report inventory ? Q 6.19 : If beginning inventory is understated , which of the following will also be understated ? Q 6.20 : Managers at Birdie ’ s Branch Removal , Inc . are confused because they maintain lower inventory amounts than the industry average , but they are a highly successful company , outselling even the big box companies in the chain saw market . Which of the following is the best answer to the managers ’ confusion ? Q 6.21 : Simpson ’ s Sandals , Inc . has five cases of flip-flops that have not been sold and are part of inventory for more than two years . Each case costs $ 300 and originally retailed for $ 500 . Each case has a