Access the Wiki Art Gallery (WAG) instructional case in Connect, and read the case in sufficient depth to answer the following questions.
1. What inventory costing method(s) does Wiki Art Gallery (WAG) use for determining the cost of artwork purchased as individual pieces?
a. WAG uses FIFO.
b. WAG uses Specific Identification.
c. WAG uses a combination of FIFO and Specific Identification.
d. WAG uses a combination of Average Cost and Specific Identification.
2. What assumption is WAG making when accounting for the cost of artwork purchased in lots?
a. WAG is assuming the first artwork purchased is the first artwork sold.
b. WAG is assuming the last artwork purchased is the first artwork sold.
c. WAG is assuming the pieces of artwork are interchangeable and do not vary in value.
d. WAG is assuming the pieces of artwork are uniquely identifiable.
3. For the 20 original oil paintings purchased on August 20, determine the amounts that WAG included in the cost of artwork sold and cost of artwork remaining in ending inventory after the sale of two pieces to TEAC.
a. Cost of artwork sold includes $20,000 and ending inventory includes $20,000.
b. Cost of artwork sold includes $10,000 and ending inventory includes $10,000.
c. Cost of artwork sold includes $18,000 and ending inventory includes $2,000.
d. Cost of artwork sold includes $2,000 and ending inventory includes $18,000.
4. Assume that the two paintings sold to TEAC represented 40 percent of the total value of the 20 original oil paintings purchased on August 20. Determine the amounts that WAG would include in the cost of artwork sold and cost of artwork remaining in ending inventory after the sale of two pieces to TEAC.
a. Cost of artwork sold would include $8,000 and ending inventory would include $12,000.
b. Cost of artwork sold would include $12,000 and ending inventory would include $8,000.
c. Cost of artwork sold would include $8,000 and ending inventory would include $20,000.
d. Cost of artwork sold would include $20,000 and ending inventory would include $8,000.
5. WAG's notes to the financial statements indicate the company reports its inventory at the lower of cost or market. What facts suggest a write-down may be required but has not been recorded by WAG?
a. The market value of inventory is estimated by WAG's management, and Rob may be biased in thinking that WAG's inventory can be sold to TEAC.
b. WAG's inventory contains aging, less attractive items.
c. The 2011 income statement does not include an inventory write-down expense.
d. All of the above.