Acctg 201: Chapter 6 Learnsmart Questions
Which 3 are reported in operating income?
1) Selling expenses 2) Revenue 3) Advertising expenses
What are the 3 costs that are recognized in work in process for a manufacturing company?
1) overhead 2) raw materials 3) direct labor
The average cost method assumes that the ending inventory consists of what?
A mixture of all the goods available for sale
What type of companies purchase inventory that is primarily in finished form and ready for resale to customers?
Merchandising companies
In a periodic inventory account, the inventory account is (blank)
Not adjusted as purchases and sales are made
Wholesale and retail companies
Purchase goods that are primarily in completed form
Net realizable value is referred to as what?
The estimated selling price of inventory less costs necessary to sell the inventory
Specific identification method definition
The inventory costing method that matches each unit of inventory with its actual cost
What are the 4 methods used for inventory costing?
1) FIFO 2) LIFO 3) Weighted average 4) Specific identification
The lower cost and net realizable value method represents an application of what principle?
Conservatism principle
The difference between the 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 what?
LIFO reserve
Which method of valuing inventory was developed to avoid reporting inventory at an amount that is smaller than the benefits it can provide?
Lower of cost and net realizable method
FOB destination means title to the goods passes when (blank)
Passes when they arrive at the destination
Manufacturing companies
Purchase goods that are used to produce another product
Which inventory account includes the cost of components that will become part of the finished product but have not yet been used in production?
Raw materials inventory
Freight-out
Recognized as operating expense
Perpetual inventory system
Company recognizes cost of goods sold each time it recognizes a sale
Gross profit equation
(Net sales revenue) - (cost of goods sold)
Which 3 are included in calculating operating income?
1) General and administrative expenses 2) Utility expense 3) Cost of goods sold
Freight-in
Added to cost of inventory
Where is inventory reported in the financial statements?
Balance sheet as a current asset
Manufacturing companies definition
Companies that produce the inventory they sell
Periodic inventory system
Company recognizes cost of goods sold after completing a physical inventory
For internal record keeping, most companies carry their inventory using which basis?
FIFO basis
The work in process inventory account typically includes which costs?
Indirect manufacturing costs (overhead), raw materials, and direct labor
Items held for sale in the normal course of business are referred to as what?
Inventory
On a multistep income statement, the category of revenues and expenses reported immediately after operating income is referred to as what?
It's referred to as non-operating revenues and expenses
A company is most likely to utilize the specific identification method if its inventory consists of what types of products?
Unique products and very expensive products
Which following accounts are typically reported in the balance sheet of a manufacturing company?
Work in process, raw materials, finished goods