Chapter 5

Which of these should be included in its inventory? (which of these should a company include in its ending inventory?

1) goods in transit it sold with terms FOB destination and 4) goods in transit it purchased with terms FOB shipping point

which of these should be included in its inventory

1. goods in transit it sold with terms FOB destination and 4. goods in transit it purchased with terms FOB shipping point

sales revenue is 100000, cost of goods purchased is 480000, ending inventory is 40000 and cost of goods sold is 540000. How much is beginning inventory

100000

sales rev: 100000 cost of goods purchased: 620,000 beginning inventory: 60,000 cost of goods sold: 550,000. How much is ending inventory

130,000

which of these should a company include in its ending inventory

2) goods in transit it purchased with terms FOB shipping point and 3) goods in transit sold with terms FOB destination

A company uses the periodic inventory method. If beginning inventory is understated by $1,000 because the prior's year's ending inventory was understated by $1,000. The company's ending inventory for this period is correct. The effect of this error in the current period is that cost of goods sold is (i) _________________ and net income is (ii) ___________________.

345,000

days sales in inventory=

365 x ending inventory/cost of goods sold

cost of goods purchased;500000 beginning iventory: 20000 cost of goods sold: 460,000

60,000

sales renveue is 1000000, cost of goods purchased is 500000 ending inventory is 20,000 and cost of goods sold if 560,000. How much is beginning inventory

80,000

sales revenue is 100000, cost of goods purchased is 480000, beginning inventory is 40000 and cost of goods sold is 440000. How much is ending inventory

80000

CGP: 620,000 ending inven: 60000 cgs: 650,000

90000

in a period of decling inventory costs, which inventory flow assumption will result in the lowest net income

FIFO

which inventory method ususally results in ending inventory being the closet to the current cost of replacing inventory

FIFO Method

in a period of inflation, the costs allocated to ending inventory will approximate their current cost if the

FIFO method is used

two companies report the same cost of goods available for sale but each employs a differnt inventory costing method. If the price of goods purchased as inventory has increased during the period, then the company using

FIFO will have the highest retained earnings

two companies report the same cost of goods avialbe for sale...

FIFO will have the highest retained earnings

two companies report

FIFO will have the lowest cost of goods osld

ownership passes to the buyer when purchased goods are received by the buyer from a public carrier if the goods are shipped

FOB destination

ownership passes to the buyer when the public carrier accepts the goods if the goods are shipped

FOB shipping point

in a period of rising prices, which of the following inventory metods generally results in the lowest net income figure

LIFO method

Two companies report the same cost of goods avaialble for sale but each employs different inventory costing method. If the price of goods prucased as inventory has increased during the period, then the company using

LIFO will have the lowest ending inventory

two companies report the same cost of goods avaialble for sale but each employs a differnt inventory costing method. If the price of goods purchased as inventory has increased during the period, then the company using

LIFO will have the lowest net income

Which situation requires using the lower of cost or market basis to valuing inventory instead of the cost basis

a decline in the current replacement cost of the inventory

a low days; sales in inventory may indicate

all of these- -the company has a realtively small amount of funds tied up in inventory -there is a realtively high chance that sales opprotunities may be lost becuase of inventory shortages -there is a relatively low chance of inventory becoming obsolelete before it can be sold

inventory is accounted for at cost. After a company determined the quantity of units of inventory, it applies unit costs to the quantities to determine the total cost of inventory and the cost of goods sold. Which of the following statements is not a method for computing the cost of inventory?

allowance estimation

a company uses the peridoic inventory method. An unverstatement of ending inventory in one period results in

an overstatement of net income of the next period

cost of goods sold=

beginning inventory + purchases -ending inventory

which of the following would most likely employ the specific identification method of the inventory costing

car dealer

what accouting concept is employed when using the lower-of-cost-or-market valuation

conservatism

inventory turnover ratio=

cost of goods sold/ average inventory

inventory costing methods place primary reliance on assumptions about the flow of

costs

when applying the lower of cost or market rule to inventory valuation, market generally means

current replacement cost

placing goods on consignement

doesnt transfer the ownership of the goods

which of the followin should not be included in the inventory of a company

goods held on consignemnet from another company

Which of the following statements is true?

goods held on consignment are not owned by the company that holds them, and they should not be included in the ending inventory of the company that holds them

which of the following should not be included in the physical inventory of a company

goods held on consignment from another company

which of the following should be included in the physical inventory of a company

goods shipped on consignment to another company

in periods of deflation, what will LIFO produce

higher net income than FIFO

A company uses the periodic inventory method. An error in the physical count of goods on hand at the end of a period resulted in a $1,000 understatement of the ending inventory. The effect of this error in the current period is that cost of goods sold is (i) _________________ and net income is (ii) __________________.

i) overstated ii) unverstated

a companys ending inventory is understated by 1000. What are the effects of this error on the current years i) cost of goods sold and ii) net income, respectively

i) overstated ii) understated

A company uses the periodic inventory method. Beginning inventory is overstated by $1,000 because the prior's year's ending inventory was overstated by $1,000. The company's ending inventory for this period is correct. The current period's gross profit is (i) _________________ and this year's ending retained earnings is (ii) ___________________.

i) understated ii) neither overstated nor understand

ending inventory includes

inventory owned at year-end

which of the following is true of the FIFO inventory method

it assumes that the cost of the earliest units purchased are the first to be allocated to cost of goods sold

Which of the following would most liekly employ the specific identificaiton method in inventory costing

jewerly store

in periods of rising prices, what will LIFO produce

lower net income than FIFO

in periods of rising prices, what will LIFO produce

lower total assets than FIFO

Which is true if the ending inventory is overstated?

net income will be overstated and the stockholders equity will be overstated

goods held on consignment are

not owned by the company holding them

when terms are FOB destination

ownership of the goods remains with the seller until the goods reach the buyer

gross profit=

sales revenue-cost of goods sold

which of the following statemets is true

specifc identification method inventory valuation requires the physical flow of goods to be repsrentative of the cost flow

if goods in transit are shipped FOB shipping point

the buyer has title once the goods are given to the transportation company

companies must arrive at an accurate count of inventory for finacnial reporting purposed. What determines whether goods should be included in the inventory it reports on its balance sheet

the company title or owenrship of the goods

if goods in transit are shipped FOB destination

the seller has title to the goods until they are delivered

a low days' sales in inventory may indicate

there is a realtively high chance that sales opporutnites may be lost becuase of inventory shortages

a low days in inventory may indicate

there is a realtively low chance of inventory becoming obsolete before it can be sold

tom places goods on consignment with jerry. At the end of the accounting period, the goods have not been sold. Which of the following paties includes in its inventory the consigned goods

tom

which statement concerning lower of cost or market (LCM) is false?

under the LCM basis, inventory is recorded at market if it increases in value after it is acquired

a company uses the periodoic inventory method. An error in the physical count of goods on hand at then end period resulted in a 1000 overstatment of the ending inventory. The effect of this error in the current period is that cost of goods sold is ___ and net income ___

understated and overstated