Financial accounting procedures chapter 7

is the cost to replace the merchandise on the inventory date

lower-of-cost-or-market method

manufacturers sometimes ship merchandise to retailers who act as the

manufacturers agent

used to determine the cost of each sale entil another purchse is made and a new average is computed. this averaging technique is called a ______ _______

moving average

is the estimated selling price less any sales commissions or special advertising

net realizable value

merchandise that is out of date, spoiled, or damaged should be written down to its

net realizable value

does the actual flow of goods have to be LIFO

no

does the physical flow have to match the accounting method chosen

no

measures the length of time it takes to acquire, sell, and replace the inventory

number of days sales in inventory

a ________ _________ or count of inventory should be taken near year-end to make sure that the quality of inventory reported in the financial statements is accurate

physical inventory

authorizes the purchase of the inventory from an approved vendor

purchase order

establishes an initial record of the receipt of the inventory

receiving report

controls for safeguarding inventory should include _________ measures to prevent damage and customer or employee theft

security

under the ________ _____________ _________ ____ ___ _______ the unit sold is identified with a specific purchase

specific identification inventory cost flow method

recording inventory using a perpetual inventory system is also an effective means of control. the amount os always available in the

subsidiary inventory ledger

uses the average unit cost for determining cost of merchandise sold and the ending merchandise inventory

the average cost method/weighted average method

using FIFO, the earliest batch purchased is considered

the first batch of merchandise sold

using LIFO the most recent batch purchased is considered

the first batch of merchandise sold

average cost unit cost equation

total cost of units available for sale / units available for sale

the average cost method is sometimes called

weighted average method

cost and replacement cost can be determined for the following

-each item in the inventory -each major class or category of inventory -total inventory as a whole

some reasons that inventory errors may occur include the following

-physical inventory on hand was miscounted -costs were incorrectly assigned to inventory -inventory in transit was incorrectly included or excluded from inventory -consigned inventory was incorrectly included or executed form inventory

some examples of security measures include the following

-storing inventory in areas that are restricted to only authorized employees -locking high-priced inventory in cabinets -using two-ways mirrors, cameras, security tags, and guards

inventory may be valued at other than cost in the following cases

-the cost of replacing items in inventory is below the recorded cost -the inventory cannot be sold at normal prices due to imperfections, style changes, or other causes

what happens to the average cost method is used in a perpetual system

an average unit cost for each item is computed each the a purchase is made

number of days sales in inventory equation

average inventory / average daily cost merchandise sold

under the _______ _________ ____ ____ ______ the cost of teh units sold and in ending inventory is an average of the purchase costs

average inventory cost flow method.

inventory errors often arise from

consigned inventory

such merchandise is said to be shipped on consignment to the retailer

consignee

retains title until the goods are sold

consigner

manufacturers are called

consignor

inventory turnover equation

cost of merchandise sold / average inventory

merchandise inventory is usually presented in the _______ ______ section of the balance sheet, following receivables

current assets

under the ____-__ _____ ___ (____) _________ ____ ____ ______ the last units purchased are assumed to be sold first and the ending inventory is made up of the first units purchased

last-in first out (LIFO) inventory cost flow method

what should be method should be shown for determining the cost of the inventory and the method of valung the inventory

determining the cost of inventory (FIFO, LIFO, or weighted average) determining value of inventory (cost or the lower of cost or market)

net realizable value equation

estimated selling price - direct costs of disposal

cost is the primary basis for valuing and reporting inventories in the

financial statements

under the _____-__, _____ ___ (____) _________ ____ ____ ______ the first units purchased are assumed to be sold first and the ending inventory is made up of the most recent purchases

first-in first out (fifo) inventory cost flow method

measures the relationship between cost of merchandise sold and the amount of inventory carried during the period

inventory turnover