Chapter 6 test

¡Supera tus tareas y exámenes ahora con Quizwiz!

Inventory turnover

A ratio that measures the number of times and on average the inventory sold during the period; computed by dividing the cost of good sold by the average inventory during the period

Specific identification method

An actual physical flow costing method in which items still in inventory are specifically costed To arrive at the total cost of the ending inventory

Cost of goods sold is computed from the following equation

BEGINNING INVENTORY+COGS-ENDING INVENTORY

If beginning inventory is understated by $13,000, the effects of this error in the current period is

COGS= understated NET INCOME=overstated

The entry to replenish a petty cash fund includes a credit to

Cash

Under a consignment arrangement the

Consignor has ownership until goods are sold to a customer

Overstating ending inventory will overstate all of the following except

Cost of goods sold

Understanding beginning inventory will understate

Cost of goods sold

A petty cash fund of $100 is replenished when the fun contains $4 in cash and receipts for $93. The entry to replenish the funds would be

Debit cash over and short for $3

A debit memorandum could show the collection of a note receivable by the bank

FALSE

Checks from customers who pay their account promptly are called outstanding checks

FALSE

Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods and the company

FALSE

Only large companies need to be concerned with a system of internal control

FALSE

Personnel who handle cash receipt should have the option of taking a vacation or not

FALSE

The petty cash fund eliminates the need for a bank checking account

FALSE

The specific identification method of inventory valuation is desirable when a company sells a large number of low - unit cost items

FALSE

And periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is close to current cost is the

FIFO Method

The term FOB denotes

Free on Board

Which of the following should be included in the physical inventory of a company

Goods In transit from another company shipped FOB shipping point

First-in First-out method

Inventory costing method that assumes that the cost of the earliest goods purchased are the first to be recognized as cost of good sold

Last-in First-out Method (LIFO)

Inventory costing method that assumes the cost of the latest units purchased are the first to allocate to cost of goods sold

Average cost method

Inventory costing method that uses the weight-average unit cost to allocate to ending inventory and COGS the cost of goods available for sale

The factor which determines whether or not good should be included in a physical count of inventory is

LEGAL TITLE

Merchandise inventory

Merchandise on hand (not sold) at the end of an accounting period.

A debit balance in cash over and short is reported as a

Miscellaneous expense

A petty cash fund is generally established an order to

Pay relatively small expenditures

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash

TRUE

Goods out on consignment should be included in the inventory of the consignor

TRUE

Goods that have been purchased FOB destination but are in transit, should be excluded from physical count of goods

TRUE

The first -in, first -out (FIFO) Inventory method results and an ending inventory valued at the most recent costs

TRUE

The two key parties to a note are the maker and the payee

TRUE

FOB shipping point

Terms indicating that ownership of the goods pass to the buyer on the public carrier excepts the goods from the seller

Work in progress

That portion of manufactured inventory that has begun the production process but is not yet complete

Current replacement cost

The current cost to replace an inventory item.

The LIFO Inventory method assumes that the cost of the latest units purchased are

The first to be allocated to the cost of good sold

If employees are bonded

They have been insured against misappropriation of assets

Which of the following statement is correct with respect to inventories

Under FIFO, The ending inventory is based on the latest units purchased

Freight terms of FOB shipping point mean that the

buyer must bear the freight costs.

FOB destination

ownership of the goods remains with the seller until the goods reach the buyer

If goods in transit are shipped FOB destination

the seller has legal title to the goods until they are delivered.


Conjuntos de estudio relacionados

Ethics, Privacy, and Regulatory Legislation Regulatory Legislation for Health Information

View Set

Science - The Earth's Atmosphere

View Set

PDI ~ Insurance Underwriting and Claims

View Set