Chapter 6 Concept Questions

Which of the following should be included in the physical inventory of a company? a) Goods in transit to another company shipped FOB shipping point. b) Goods in transit to or from another company shipped FOB shipping point. c) Goods held on consignment from another company. d) Goods in transit from another company shipped FOB shipping point.

d) Goods in transit from another company shipped FOB shipping point.

Freight terms of FOB shipping point mean that the a) seller must debit freight out. b) seller must bear the freight costs. c) goods are placed free on board at the buyer's place of business. d) buyer must bear the freight costs.

d) buyer must bear the freight costs.

Beginning inventory plus the cost of goods purchased equals a) net purchases. b) cost of goods sold. c) total goods purchased. d) cost of goods available for sale.

d) cost of goods available for sale.

The factor which determines whether or not goods should be included in a physical count of inventory is a) whether or not the purchase price has been paid. b) physical possession. c) management's judgment. d) legal title.

d) legal title.

Under a consignment arrangement, the a) consigned goods are included in the inventory of the consignee. b) consignor has ownership until goods are shipped to the consignee. c) consignor has ownership until goods are sold to a customer. d) consignee has ownership when the goods are in the consignee's possession.

c) consignor has ownership until goods are sold to a customer.

Inventory is reported in the financial statements at a) market. b) the higher-of-cost-or-market. c) the lower-of-cost-or-market. d) cost.

c) the lower-of-cost-or-market.

If goods in transit are shipped FOB destination a) the transportation company has legal title to the goods while the goods are in transit. b) the buyer has legal title to the goods until they are delivered. c) the seller has legal title to the goods until they are delivered. d) no one has legal title to the goods until they are delivered.

c) the seller has legal title to the goods until they are delivered.

Of the following companies, which one would not likely employ the specific identification method for inventory costing? a) Hardware store b) Music store specializing in organ sales c) Antique shop d) Farm implement dealership

a) Hardware store

Inventory is a) reported as a current asset on the balance sheet. b) reported under the classification of Property, Plant, and Equipment on the balance sheet. c) often reported as a miscellaneous expense on the income statement. d) generally valued at the price for which the goods can be sold.

a) reported as a current asset on the balance sheet.

Goods in transit should be included in the inventory of the buyer when the a) terms of sale are FOB shipping point. b) public carrier accepts the goods from the seller. c) terms of sale are FOB destination. d) goods reach the buyer.

a) terms of sale are FOB shipping point.