ch 6 concept overview videos

For the current year, Theta Corporation has beginning and ending inventories of $40,000 and $60,000, respectively. Cost of goods sold for the year is $240,000. What is the company's inventory turnover ratio?

4.8 times

Which of the following steps in the flow of inventory costs for a manufacturing company occurs first?

Purchasing raw materials

Which of the following is an advantage of using LIFO in a period of rising costs?

Results in lower taxes

Inventory is typically reported as a(n):

asset on the balance sheet

Wholesalers resell inventory to end users.

false

The FIFO method assumes that:

the first units purchased are the first ones sold.

A high inventory turnover ratio generally indicates that the company's inventory policies are effective.

true

FOB shipping point means title passes when the seller ships the inventory, not when the buyer receives it.

true

The cost of inventory sold during a period is reported on the income statement.

true

The costs of beginning inventory plus additional purchases during the year make up the cost of inventory available for sale.

true

When inventory costs are rising, LIFO results in lower tax expense when compared to FIFO.

true

Products that have been started in the production process but are not yet complete at the end of the period are known as:

work-in-process inventory

Travis Corporation begins the year with $50,000 of tire inventory. The company purchases tires worth $150,000 during the year. At the end of the year, the purchase cost of remaining inventory is $30,000. What is the cost of goods sold?

$170,000

A company has total sales revenue of $500,000 for the year. Sales discounts, returns, and allowances total $50,000 and the cost of goods sold is $300,000. What is the company's gross profit ratio?

33.33%

For the current year, Delta Corporation has beginning and ending inventories of $80,000 and $100,000, respectively. Cost of goods sold for the year is $450,000. What is the company's average days in inventory?

73 days

A company that returns items that were previously purchased on account will debit:

Accounts Payable

When inventory costs are rising, the _____ results in a higher reported inventory.

FIFO method

Which of the following is an example of a nonoperating expense for a merchandising company?

Interest expense

Which of the following is true of a period of falling inventory costs?

LIFO will report higher gross profit than FIFO.

The LIFO conformity rule requires that _____.

a company that uses LIFO for tax reporting to also use LIFO for financial reporting

A gross profit ratio of 32% indicates that for every $1 of net sales, the company spends $0.32 on inventory.

false

An appropriate use of the specific identification method is in accounting for low-cost, similar inventory items that are difficult to separately identify.

false

Companies that purchase inventories in finished form from suppliers are known as manufacturing companies.

false

The multiple-step income statement begins by reporting that a company's sales revenues minus cost of goods sold equals net income.

false

A _____________ inventory system is one that is continually updated to reflect inventory purchases and sales.

perpetual

Walmart is an example of a:

retailer

Accountants often call FIFO the balance-sheet approach because _____.

the amount it reports for ending inventory better approximates the current cost of inventory

The weighted-average method assumes that:

the cost of goods sold consists of a random mixture of all goods available for sale.

The LIFO method assumes that:

the last units purchased are the first ones sold.

Inventory is reported on the balance sheet at:

the lower of original cost and net realizable value

Due to technological advances in recent years, most companies use a perpetual inventory system to track inventory purchases and sales.

true

The cost of freight-in is initially added to the balance of the Cost of Goods Sold account.

true

The inventory transactions of Green Products Inc.are shown below. DateTransactionNumber of UnitsUnit CostJan. 1Beginning inventory 500 $5 May 15Purchase 1,000 6 Jun. 10Purchase 500 7 Oct. 25Purchase 2,000 8 Units sold during the year: 3,000 What is the amount of cost of goods sold that Green Products will report in its income statement for the current year, if it uses the first-in, first-out cost method?

$20,000

Dane Stores begins the year with $30,000 of DVD inventory. It purchases DVDs worth $80,000 during the year. The cost of goods sold for the year is $70,000. What is the amount of ending inventory?

$40,000

Trivia Company reports a gross profit of $100, income tax expense of $15, selling, general, and administrative expenses of $35, nonoperating revenues of $10, and nonoperating expenses of $15. What is the company's operating income?

$65

A supplier offers a company terms 3/10, n/30 for a $10,000 purchase on account on January 1. The company uses a perpetual inventory system to record transactions. If the company makes the payment on January 10, the entry to record the payment will include a:

Credit to Inventory for $300