Advanced Accounting Ch. 5 (FIFO, LIFO, Inventory)

Goods that are given to a business to sell but for which title remains with the vendor are called a what?

Cosignment

Shipping terms where title to the goods passes to the buyer when the buyer receives the goods is called what?

FOB destination

T/F - A business may fail if it does not have enough inventory on hand, but it will not fail if it has an excess of inventory.

False

T/F - A periodic inventory maintains a continuous record of merchandise inventory increases and decreases.

False

T/F - Each year, a business uses the inventory costing method that results in the most favorable net income.

False

T/F - FOB shipping point means that the title to the goods passes to the buyer when the vendor delivers the goods at the buyer's place of business.

False

T/F - If an inventory is taken once each year, the business must be using the perpetual inventory method.

False

T/F - Most businesses have a merchandise inventory turnover ratio close to 12, since they offer terms of n/30 to their customers.

False

T/F - The consignor owns the goods on consignment and is responsible for selling the goods.

False

T/F - To prepare monthly interim financial statements, a business should take the inventory monthly.

False

T/F - To use the retail method of estimating the inventory, the cost of purchases, sales, and the beginning inventory must be known. In addition, the retail price of items sold must be known.

False

T/F - Using the FIFO method, the units from the beginning inventory will be the first units included in the cost of the ending merchandise inventory.

False

T/F - Using the LIFO method, the units from the beginning inventory will be the first units included in the cost of the ending merchandise inventory.

False

The number of times the average amount of merchandise inventory is sold during a specific period of time is called the what?

Inventory turnover ratio

The costing method that uses the price of merchandise purchased last to calculate the cost of merchandise sold first is called what?

Last in, First out (LIFO)

The costing method that uses the lower of cost or market price to calculate the cost of the ending merchandise inventory is called the what?

Lower of cost or Market method

A form used to show the type of merchandise, quantity received, quantity sold, and balance on hand is called a(n) what?

Stock record

T/F - Comparing inventory costing methods in times of rising prices, the last-in, first-out method will result in the highest cost of merchandise sold.

True

T/F - If ending inventory is overstated, net income will be overstated.

True

T/F - If the ending inventory is understated, retained earnings will be understated.

True

T/F - International financial reporting standards do not allow the use of the last-in, first-out method.

True

T/F - The cost of goods sold calculated using the weighted-average method will always be between the amounts calculated using the LIFO and FIFO methods.

True

T/F - The cost of merchandise available for sale consists of the beginning merchandise inventory and net purchases.

True

T/F - To determine the inventory cost using the lower cost or market method, a business compares the cost of inventory using its normal inventory costing method (FIFO, LIFO, or weighted-average) to the current replacement cost of the inventory. The inventory is valued at whichever cost is lower.

True

A form used during a physical inventory to record information about each item of merchandise on hand is called a(n) what?

Inventory record