Ch 6

Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1,980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the LIFO method, cost of goods sold will be

$1,760.

For internal record keeping, most companies carry their inventory using the______ basis.

FIFO

Margot Inc, which uses the perpetual inventory system, purchases 500 units of inventory to be held for resale. Margot should debit the purchase to:

Inventory

Which of the following methods are not used for inventory costing? (Select all that apply.)

Simple-average NIFO

The lower of cost and net realizable value method was developed to

avoid reporting inventory at an amount that exceeds the benefits it provides.

A periodic inventory system measures cost of goods sold by:

counting inventory at the end of the period

When inventory is sold, the cost of inventory is recognized as a(n) ___.

expense

The FIFO method assumes that units sold are the ___ units acquired.

first

The purchase discount term, 2/10, n/30, means that the purchaser

has 10 days from the purchase date in which to pay and receive a 2% discount

A multiple-step income statement reports multiple levels of ___.

income

Items held for sale in the normal course of business are referred to as ___.

inventory

The FIFO inventory method assumes that units remaining in ending inventory are the ___ units purchased. Note: this question is asking about ending inventory.

last

The ______ method of valuing inventory was developed to avoid reporting inventory at an amount that is ______than the benefits it can provide.

lower of cost and net realizable value; greater

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ___ income statement.

multiple-step

The LIFO inventory method assumes that the units sold are

the most recent units purchased.

The LIFO inventory method assumes that the units that remain in ending inventory are

the oldest units in inventory.

Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, cost of goods sold will be

$2,540.

Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?

Debit Inventory

Which of the following methods are available for costing inventory?

Specific identification Weighted-average FIFO LIFO

Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption?

FIFO

Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1,980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the LIFO method, ending inventory will be

$420.

Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, the cost of ending inventory will be what? Note: this question is asking for the ending inventory value, not cost of goods sold.

$640.

Bottom, Inc. paid an invoice for $1,000, with discount terms of 1/7, n/30, within the discount period. The net amount paid was:

$990

The definition of inventory includes which of the following items?

Items held for resale Materials used currently in the production of goods to be sold Items currently in production for future sale

Inventory not yet sold is classified as a(n) ___ in the ___ ___.

asset balance sheet