Chapter 5 Smartbook and quiz

The owner of consigned goods is called the ______ and the one who sells goods for the owner is called the ______.

consignor; consignee

The adjusting entry to decrease merchandise inventory due to LCM computations, includes:

credit to Merchandise Inventory.

When purchase costs are ______, LIFO will report the lowest cost of goods sold yielding the highest gross profit and net income.

declining

When costs regularly ______, FIFO gives the highest cost of goods sold yielding the lowest gross profit and income.

decrease

Assuming purchase costs are rising, determine which of the statements below are correct regarding the cost of goods sold under FIFO, LIFO and weighted average cost flow methods.

- Companies using FIFO will pay higher taxes than companies using LIFO, assuming all else being equal. - Weighted average cost of goods sold will be between FIFO and LIFO costs of goods sold. - Companies using FIFO will report the smallest cost of goods sold. - Companies using FIFO will report the highest gross profit and net income.

Assuming purchase costs are declining and a periodic inventory system is used, determine the statements below which correctly describe what is happening to cost of goods sold under FIFO, LIFO and weighted average cost flow methods.

- Companies using LIFO will report the lowest cost of goods sold. - Weighted average cost of goods sold will be between FIFO and LIFO costs of goods sold. - Companies using LIFO will report the highest ending inventory on their balance sheets, as compared to companies using FIFO or weighted average.

Which statement(s) below is(are) correct regarding the purpose of taking a physical inventory count?

- The physical count is used to determine if there has been any theft, loss, damage or errors in inventory. - The physical count is used to adjust the Inventory account balance to the actual inventory available.

Identify the safeguards that companies implements when taking a physical inventory count.

- Using prenumbered inventory tickets. - Taking a second count by a different counter.

Assuming purchase costs are declining, determine which statements below correctly describe what happens to cost of goods sold under FIFO, LIFO and weighted average cost flow methods.

- Weighted average cost of goods sold will be between FIFO and LIFO costs of goods sold. - Companies using LIFO will report the highest ending inventory on their balance sheets (as compared to companies using FIFO or weighted average,) - In a situation where prices are declining, companies using LIFO will report the smallest cost of goods sold. - Companies using LIFO will pay higher taxes than companies using FIFO, assuming all else being equal.

Which of the following statements is correct regarding goods in transit?

Goods shipped FOB shipping point will be included in the buyer's inventory.

All of the following are safeguards for inventory except:

Using counters that are responsible for inventory.

The ______ principle states that inventory costs are expensed as cost of goods sold when inventory is sold.

expense recognition

Damaged goods which can be sold are reported in inventory at:

net realizable value.