homework 6.1
When does the cost of inventory become an expense?
When inventory is delivered to a customer
A purchase discount decreases the cost of the inventory
true
How is cost of goods sold classified in the financial statements?
as an expense
Service entities report cost of goods sold on the income statement.
false
To document approval of purchase returns, the buyer issues a credit memorandum meaning that accounts payable are reduced for the amount of the return.
false
Ravenna Candles recently purchased candleholders for resale in its shops. Which of the following costs would be part of the cost of the candleholderinventory?
freight in
Which inventory system maintains a running record of inventory on hand, purchased, and sold?
perpetual
Trift Company made total purchases of $295,000 in the most current year. It paid freight in of $1,000 on its purchases. Freightout, the cost to deliver the merchandise when it was sold to Trift's customers, totaled $9,800. Of the total purchases Trift made during theperiod, it returned $24,000 of the merchandise. Trift took advantage of $2,300 of purchase discounts offered by its vendors. What was Trift's cost ofinventory?
$269,700
Cost of Goods Sold is an operating expense on the income statement.
false
Freight in is accounted for as a delivery expense.
false
Inventory is reported on the balance sheet at the selling price of the inventory still on hand.
false
Since a perpetual inventory system continuously updates the inventory account, a physical inventory count is not necessary to prove the inventory records.
false
In a perpetual inventory system, a business maintains a running record of the number of units bought, sold and on hand for each inventory item.
true
The cost of inventory shifts from asset to expense when the seller fulfills its contract with the customer, delivers the goods to the buyer and recognizes revenue.
true
The seller does not include consigned merchandise on hand in its balance sheet, because the seller does not own this inventory
true
Dayton Company sold 13,000 jars of its organic honey in the most current year for $10 per jar. The company had paid $6.50 per jar of honey. (Assume that sales returns are nonexistent.) Calculate the following: 1. Sales revenue 2.Cost of goods sold 3. Gross profit
1. $130,000 2. $84,500 3. $45,500
