accounting 201 ch 6: inventory and cost of goods sold

The disclosure that shows the difference in the cost of inventory between LIFO and FIFO is referred to as the

LIFO reserve

The difference between LIFO and FIFO disclosed in the notes to the financial statements of a company currently utilizing the LIFO cost flow assumption is sometimes referred to as the _______ _______

LIFO; reserve

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

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

The definition of inventory includes which of the following items?

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

FOB destination means title to the goods passes

when they arrive at the destination.

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

Debit Inventory

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

FIFO

Which of the following methods are available for costing inventory? (Select all that apply.)

Weighted-average LIFO FIFO Specific identification

The shipping term FOB stands for

free on board

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be ______ than cost of goods sold determined using the FIFO inventory assumption.

higher

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be ________ than cost of goods sold determined using the FIFO inventory assumption.

higher

Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are

included in Gerald's inventory.

Purchasing inventory on account:

increases liabilities increases assets

In a LIFO inventory system, inventory costs shown in the balance sheet may be distorted because they may represent costs

incurred several years earlier.

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

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

inventory

Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.

inventory cost of goods sold

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for (Select all that apply.)

inventory. cost of goods sold.

In times of rising prices, ending inventory determined using the LIFO inventory assumption will be _______ than ending inventory determined using the FIFO inventory assumption.

lower

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

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

paid by the supplier.

FOB shipping point means title to the goods passes

when they are shipped.