Accounting 3rd Exam

If the amount assigned to ending inventory is incorrect then:

Both the balance sheet and the income statement is affected

When the market value of inventory items has declined below their cost, which method would be most appropriate in complying with GAAP?

Lower Cost or Market

Assets classified as property, plant, and equipment are reported at:

each asset's original cost less depreciation since acquisition

Transportation-in is:

part of the cost of net purchases

The cost of goods sold is equal to:

the cost of goods available for sale less ending inventory

Depreciation is:

the process of systematically and rationally allocating the cost of a fixed asset over its useful life

What effects occur on a retail store's accounting equation when it records the purchase of merchandise on account, assuming the use of a perpetual inventory system?

Assets and Liabilities increase

Which inventory costing method assigns the cost of the most recent items purchased to ending inventory?

FIFO

If a company understates its inventory at the end of the period (ending inventory), what are the effects on the cost of goods sold and net income for the current year?

Cost of Goods Sold will be overstated and Net Income will understand

A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under:

investing activities

At the year-end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of

the seller