Accounting Chapter 6

The shipping term FOB stands for

Free on Board

Using the perpetual inventory system, what is the effect of a sale of inventory on assets?

Assets decrease by the cost of the inventory, Assets increase by the sales price of the inventory

Meller purchases inventory on account. As a results, Meller's

Assets will increase

Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption?

FIFO

Which of the following methods are available for costing inventory?

FIFO, LIFO, Weighted Average Cost, Specific Identification

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be _____ than cost of goods sold determined using the FIFO inventory assumption.

Higher

Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are

Included in Gerald's inventory

A multiple-step income statement reports multiple levels of

Income

Items held for sale in the normal course of business are referred to as

Inventory

Margot Inc, which uses the perpetual inventory system, purchases 500 units of inventory to be held for resale. Margot should debit the purchase to

Inventory

Companies are free to choose FIFO, LIFO, or weighted-average cost to report inventory and cost of goods sold. The reported amounts for ending inventory and cost of goods sold will not be the same across inventory reporting methods because

Inventory costs change overtime

When prices increase, the _____ inventory method provides the best matching of revenue and expenses.

LIFO

The cumulative difference between reporting inventory at LIFO rather than FIFO is commonly referred to as the

LIFO Reserve

Which of the following methods are not used for inventory costing?

NIFO, Simple Average

Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are

Paid by supplier

What is the effect of recording a sale of inventory under the perpetual inventory system on the financial statements? (Assume that the sales price is higher than the cost of inventory)

Stockholder's Equity, Total Assets, and Net Income increase

In a perpetual inventory system, when a company sells inventory on account, how many entries are required?

Two

FOB destination means title to the goods passes

When they arrive at the destination

Which of the following accounts are typically reported in the balance sheet of a manufacturing company?

Work in progress, finished goods, raw materials

Inventory is classified as a

Current Asset

Norma Inc. uses the perpetual inventory system. When the company records a sale, it should make entries to

Decrease an asset increase expense, increase asset increase revenue

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest ending inventory?

LIFO

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest pretax income?

LIFO

In times of rising prices, ending inventory determined using the LIFO inventory assumption will be _____ than ending inventory determined using the FIFO inventory assumption.

Lower

What type of company purchases raw materials and makes goods to sell?

Manufacturers

Which of the following accounts would be found in the balance sheet of a manufacturing company?

Merchandise Inventory

Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.

Cost of goods sold, inventory

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest cost of goods sold?

FIFO