Acct. - Jackson - Ch. 7

¡Supera tus tareas y exámenes ahora con Quizwiz!

Inventory Turnover Ratio

-The process of buying and selling inventory -The number of times inventory turns over during the period -A higher ratio means faster turnover -Cost of Goods Sold - Average Inventory [(BI+EI)/2]

Goods Available for Sale

-The sum of beginning inventory (BI) and purchases for the period (P)

A company's inventory records contain the following information: Beginning inventory 300 units@$2.60 Purchased on June 10 400 units @$2.925 Purchased on June 15 500 units @2.52 Purchased on June 28 300 units @3.30 The company sold 1,000 units during June. If the company uses the LIFO method, what is the cost of ending inventory?

-$1,365

If the company uses the weighted average inventory costing method, what is the cost of the ending inventory?

-$1,400

If the company uses the FIFO method, what is the cost of the ending inventory?

-$1,494

Your company sells $469,300 of goods during the year at a cost of goods sold of $398,600. Inventory was $29,783 at the beginning of the year and $34,038 at the end of the year. What is the inventory turnover ratio?

-12.5

Purchase Discount

-A cash discount received for prompt payment of a purchase on account

Which of the following companies would be least concerned about a low inventory turnover ratio?

-A hardware company selling drywall screws

An adjustment to ending inventory under the lower of cost or market (LCM) rule would be least likely to be recorded by a company that sells

-A household staple like laundry detergent

Days to Sell

-A measure of the average number of days from the time inventory is bought to the time it is sold -Average number of days from purchase to sale -A higher number means a longer time to sell -[(365)/(Inventory Turnover Ratio)]

Purchases Returns and Allowances

-A reduction in the cost of inventory purchases associated with unsatisfactory goods

Lower of Cost or Market (LCM)

-A valuation rule that requires Inventory to be written down when its market value falls below its cost

Weighted Average Cost

-An inventory costing assumption that uses the weighted average unit cost of goods available for sale for both cost of goods sold and ending inventory -Cost of Goods Available for Sale/Number of Units Available for Sale

First-In, First-Out (FIFO)

-Assumes that the costs of the first goods purchased (first in) are the costs of the first goods sold (first out)

Last-In, First-Out (LIFO)

-Assumes that the costs of the last goods purchased (last in) are the costs of the first goods sold (first out)

Merchandise Inventory

-Consists of products acquired in a finished condition, ready for sale without further processing

How is transportation cost on inventory purchases recorded?

-Debit inventory

The specific identification method would probably be most appropriate for which of the following goods?

-Diamond necklaces at a Tiffany's & Co. jewelry store

Cost of Goods Sold (COGS)

-Expresses the relationship between inventory on hand, purchased, and sold; shown as either (BI+P-EI=COGS) or (BI+P-COGS=EI)

Consignment Inventory

-Goods a company is holding on behalf of the goods' owner

A rising balance in the inventory account and a falling inventory turnover ratio implies that the inventory build up is occurring because

-Goods are not selling as fast as anticipated

Finished Goods Inventory

-Goods are ready for sale just like merchandise inventory

Inventory

-Goods that are held for sale in the normal course of business or are used to produce other goods for sale

Personal Inventory System

-It maintains an up-to-date balance in the Inventory account at all times

In a period of rising prices, FIFO will have a

-Lower cost of goods sold than LIFO

Primary Goals of Inventory Managers

-Maintain a sufficient quantity of inventory to meet customers' needs -Ensure inventory quality meets customers' expectations and company standards -Minimize the cost of acquiring and carrying inventory (including costs related to purchasing, production, storage, spoilage, theft, obsolescence, and financing)

Periodic Inventory System

-Maintains separate accounts for purchases, transportation, and so on

Raw Material Inventory

-Plastic, steel, or fabrics

Work in Process Inventory

-Raw materials enter the production process

Specific Identification

-The inventory costing method that identifies the cost of the specific item that was sold


Conjuntos de estudio relacionados

Section 1.4 The Cell in its Environment

View Set

History 1310 Test 1 Study Guide TXST

View Set

Chapter 5: The marketing environment

View Set

Urinary system (Med. Term. Chp 7)

View Set

Chapter 20: Discrimination in Employment

View Set