Chapter 6: Inventor and Cost of Goods Sold

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

Which of the following methods are not used for inventory costing?

(1) Simple-average (2) NIFO

Which of the following methods are available for costing inventory?

(1) FIFO (2) Weighted-average (3) LIFO (4) Specific identification

Where is inventory classified in the financial statements?

Current asset in the balance sheet

FIFO

Most closely approximates the actual physical flow of inventory

Which of the following sells inventory to end users?

Retailers

Raw materials

cost of components that will become part of the finished product but have not yet been used in production

Merchandising companies purchase inventory in __________ form, whereas manufacturing firms __________ the goods.

finished; produce

Net sales revenue minus cost of goods sold is

gross profit

A major difference between companies that provide services and companies that manufacture or sell goods is that those that manufacture or sell goods must account for:

inventory

Finished goods

items for which the manufacturing process is complete

When a sale occurs under the periodic inventory system, we record:

only the sale, but not the related cost of goods sold

Which of the following accounts are typically reported in the balance sheet of a manufacturing company?

(1) Finished goods (2) Raw materials (3) Work in process

Inventory cost flow assumptions can be used to assign dollar amounts to

(1) ending inventory (2) cost of goods sold

A multi-step income statement reports multiple levels of

income

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

FIFO

True or false: Income tax expense may be disclosed either on the income statement or in the notes to the financial statements

False

Perpetual inventory system

Neumann Company can determine the cost of inventory still on hand by referring to the inventory account.

LIFO

Provides better matching of current revenues with current inventory costs

Wholesale and retail companies

Purchase goods that are primarily in completed form

Manufacturing companies

Purchase goods that are used to produce another product

The average cost method assumes that ending inventory consists of

a mixture of all the goods available for sale

Work-in-process

cost of products that have been started in production but not yet completed

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

inventory

Income before income taxes is calculated by combining operating income with

non-operating income

On a multiple step income statement, the category of revenues and expenses reported immediately after operating income is referred to as __________ revenues and expenses.

nonoperating

Raw materials, direct labor, and manufacturing __________ are the three costs related to the manufacturing of products.

overhead

Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are

paid by the supplier

The __________ inventory cost flow assumption typically approximates the actual physical flow of inventory items of most companies.

FIFO

Meller purchases inventory on account. As a results, Meller's

assets will increase

__________ __________ inventory consists of items for which the manufacturing process is complete.

Finished goods

Perpetual

"Inventory"

Periodic

"Purchases"

__________ inventory refers to the products that have been started in production, but are still incomplete.

Work-in-process

The estimated __________ __________ of inventory less costs necessary to sell the inventory is referred to as net realizable value.

selling price

Purchasing inventory on account

(1) increases assets (2) increases liabilities

The Work-in-Process inventory account typically includes which costs?

(1) raw materials (2) direct labor (3) indirect manufacturing costs

A company is most likely to utilize the specific identification method if its inventory consists of

(1) unique products (2) very expensive products

In a perpetual inventory system the inventory account is adjusted

(1) when inventory is sold (2) when inventory is purchased

In a manufacturing company, raw materials, direct labor, and overhead flow from one account to the next in the following order:

(1) work in process (2) finished goods

The specific identification method:

(1) would be beneficial to a company that makes fine jewelry (2) matches each unit of inventory with its actual cost

Which of the following companies would be unlikely to utilize the specific identification method?

A company with many different low-cost inventory items

Which of the following concepts or principles is especially relevant to the lower of cost and net realizable value rule?

Conservatism

True or false: The inventory cost flow assumption must match the physical flow of inventory units

False

__________ __________ inventory includes the cost of components that will become part of the finished product but have not yet been used in production.

Raw materials

The FIFO inventory method assumes that units remaining in ending inventory are the __________ units purchased.

newest

Periodic inventory system

Shelly Company must first take a physical inventory to determine the cost of inventory stll on hand.

__________ resell inventory to retail companies or to professional users, whereas retailers ell inventory to end users.

Wholesalers

In a periodic inventory system, the inventory account is adjusted

at the end of the accounting period

The estimated selling price of inventory less any costs of completion, disposal, and transportation is referred to as:

net realizable value

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

FOB shipping point means title to the goods passes

when they are shipped

How is the cost of goods sold classified in the financial statements?

Expense in the income statement

Companies that serve as intermediaries between manufacturers and end users typically are referred to as __________ companies.

merchandising


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