Financial accounting procedures chapter 7
is the cost to replace the merchandise on the inventory date
lower-of-cost-or-market method
manufacturers sometimes ship merchandise to retailers who act as the
manufacturers agent
used to determine the cost of each sale entil another purchse is made and a new average is computed. this averaging technique is called a ______ _______
moving average
is the estimated selling price less any sales commissions or special advertising
net realizable value
merchandise that is out of date, spoiled, or damaged should be written down to its
net realizable value
does the actual flow of goods have to be LIFO
no
does the physical flow have to match the accounting method chosen
no
measures the length of time it takes to acquire, sell, and replace the inventory
number of days sales in inventory
a ________ _________ or count of inventory should be taken near year-end to make sure that the quality of inventory reported in the financial statements is accurate
physical inventory
authorizes the purchase of the inventory from an approved vendor
purchase order
establishes an initial record of the receipt of the inventory
receiving report
controls for safeguarding inventory should include _________ measures to prevent damage and customer or employee theft
security
under the ________ _____________ _________ ____ ___ _______ the unit sold is identified with a specific purchase
specific identification inventory cost flow method
recording inventory using a perpetual inventory system is also an effective means of control. the amount os always available in the
subsidiary inventory ledger
uses the average unit cost for determining cost of merchandise sold and the ending merchandise inventory
the average cost method/weighted average method
using FIFO, the earliest batch purchased is considered
the first batch of merchandise sold
using LIFO the most recent batch purchased is considered
the first batch of merchandise sold
average cost unit cost equation
total cost of units available for sale / units available for sale
the average cost method is sometimes called
weighted average method
cost and replacement cost can be determined for the following
-each item in the inventory -each major class or category of inventory -total inventory as a whole
some reasons that inventory errors may occur include the following
-physical inventory on hand was miscounted -costs were incorrectly assigned to inventory -inventory in transit was incorrectly included or excluded from inventory -consigned inventory was incorrectly included or executed form inventory
some examples of security measures include the following
-storing inventory in areas that are restricted to only authorized employees -locking high-priced inventory in cabinets -using two-ways mirrors, cameras, security tags, and guards
inventory may be valued at other than cost in the following cases
-the cost of replacing items in inventory is below the recorded cost -the inventory cannot be sold at normal prices due to imperfections, style changes, or other causes
what happens to the average cost method is used in a perpetual system
an average unit cost for each item is computed each the a purchase is made
number of days sales in inventory equation
average inventory / average daily cost merchandise sold
under the _______ _________ ____ ____ ______ the cost of teh units sold and in ending inventory is an average of the purchase costs
average inventory cost flow method.
inventory errors often arise from
consigned inventory
such merchandise is said to be shipped on consignment to the retailer
consignee
retains title until the goods are sold
consigner
manufacturers are called
consignor
inventory turnover equation
cost of merchandise sold / average inventory
merchandise inventory is usually presented in the _______ ______ section of the balance sheet, following receivables
current assets
under the ____-__ _____ ___ (____) _________ ____ ____ ______ the last units purchased are assumed to be sold first and the ending inventory is made up of the first units purchased
last-in first out (LIFO) inventory cost flow method
what should be method should be shown for determining the cost of the inventory and the method of valung the inventory
determining the cost of inventory (FIFO, LIFO, or weighted average) determining value of inventory (cost or the lower of cost or market)
net realizable value equation
estimated selling price - direct costs of disposal
cost is the primary basis for valuing and reporting inventories in the
financial statements
under the _____-__, _____ ___ (____) _________ ____ ____ ______ the first units purchased are assumed to be sold first and the ending inventory is made up of the most recent purchases
first-in first out (fifo) inventory cost flow method
measures the relationship between cost of merchandise sold and the amount of inventory carried during the period
inventory turnover