Intermediate Ch 8
Taking a "big bath" tends to impair a company's
-net income -earnings quality
The gross profit ratio highlights the relationship between which of the following?
-net sales revenue -cost of goods sold
When assets are exchanged and the transaction lacks commercial substance, which of the following occurs?
-no gain is recognized -the asset received is valued at the book value of the asset given
Units sold during the year: 3,000 What is the amount of cost of goods sold that Green Products will report in its income statement for the current year, if it uses the last-in, first-out cost method?
22,500
In a perpetual inventory system, which buyer accounts are reduced at the time a purchase return occurs?
-inventory -accounts payable
A perpetual inventory system continuously records changes in what?
-inventory quantity -inventory cost
Steiner Company's average days in inventory has decreased during 2016 as compared to the prior year. From this information, we can conclude that Steiner
-is selling its inventory faster -has a higher inventory turnover ratio
The definition of inventory includes which of the following items
-items held for resale -items currently in production for future sale -items used currently in the production of goods to be sold
Which of the following costs are capitalized as an asset for an internally developed patent?
-legal fees -filing fees
Which of the following costs should be capitalized in the costs of acquiring a building?
-legal fees to obtain title -purchase price
Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land?
-legal fees to secure title -costs to remove an old building -real estate agent commissions
which of the following gives rise to a note receivable
-loaning money to stockholders -loaning money to an affiliated company -a formal, written extension of the credit period to trade customers
r&d cost
-modification of a formula or design -design, construction and testing of prototype or model
Neumann Company places 100 units on consignment with Hartman Consignments Company. At the end of the accounting period, 45 of those units remain unsold, how many units should be included in Neumanns's ending inventory
45 units
Palmer Company's beginning inventory consist of 1,000 units at $1.00 per unit. During the year, the company purchases 5,000 units costing a total of $5,800. At the end of the accounting period, Palmer still has 1,000 units on hand. If Palmer uses the weighted average cost method, its cost of goods sold (rounded to the nearest dollar) will be.
5,000 x [(1,000 + 5,800)/6,000] = 5667
Units sold during the year: 3,000 What is the amount of ending inventory that Green Products will report in its balance sheet at the end of the year, if it uses the last-in, first-out cost method?
5,500
Chase Company reports gross sales revenue of $7.5 million, net sales revenue of $7 million, and cost of goods sold of $3.5 million. Rounding to the nearest percent, the company's gross profit ratio would be
50% - Gross profit ratio is computed as gross profit/NET SALES. Be sure to use the net sales number, not gross sales. ($7 million -$3.5 million)/$7 million
pernell company reported LIFO reserves of 150,000 and 100,000 in 2010 and 2009 respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that Pernell's pretax income for the 2010 fiscal year would have been
50,000 higher if itt would have used FIFO
Neumann company places 100 units on consignment with Hartman consignments company. At the end if the accounting period, 45 units have been sold. How many units (if any) should be included in Neumann's ending inventory?
55 units
What is included in the cost of merchandise inventory?
Necessary costs incurred to get the goods in location for sale and the purchase price of the goods.
Which of the following would increase the gross profit ratio
The sales price of a product increases by a higher percentage than does cost of goods sold, the sales price decreases by exactly the same amount as does cost of goods sold
If goods are shipped F.O.B. destination, at the time of shipment
The seller still has legal title to the goods.
At year end, CurlZ Inc.'s inventory consists of 100 bottles of CleanZ with a cost of $1, and a selling price of $0.80 per bottle. It also has 100 boxes of DyeZ with a cost of $10, and a selling price of $11 per box. Using the lower of cost and net realizable value method, the year-end Inventory balance should include which of the following amounts?
The selling price of $80 for the CleanZ bottles. The cost of $1,000 for the DyeZ boxes.
Using the perpetual inventory system, what is the effect of a sale of inventory on assets?
assets increase by the sales price of the inventory, assets decrease by the cost of the inventory
Meller purchases inventory on account. As a results, Meller's
assets will increase
A just-in-time inventory system
assists managers with inventory management, allows companies to maintain relatively low inventory balances.
Companies are allowed to report inventory costs by
assuming which specific units of inventory are sold and not sold, even if this does not match the actual flow.
Cash flow _____ are made to assign dollar amounts to the physical quantities of goods sold and remaining in ending inventory.
assumptions
Cost flow ____ are made to assign dollar amounts to the physical quantities of goods sold and remaining in ending inventory.
assumptions
Cost flow _________ are made to assign dollar amounts to the physical quantities of goods sold and remaining in ending inventory.
assumptions
cost flow ________ are made to assign dollar amounts to the physical quantities of goods sold and remaining in ending inventory
assumptions
Determining ownership of goods that are in transit at the end of the accounting period is important to
assure proper inventory cut off
Determine ownership of goods that are in transit at the end of the accounting period is important to
assure proper inventory cutoff
Determining ownership of goods that are in transit at the end of the accounting period is important to
assure propper inventory cutoff
In a periodic inventory system, the inventory account is adjusted
at the end of the accounting period
A periodic inventory system allocates cost of goods available for sale _____; a perpetual inventory system allocates cost of goods available for sale _____.
at the end of the period; each time goods are sold
GAAP requires companies to report inventory
at the lower of cost and net realizable value
Within LIFO inventory pools, all purchases during the period are considered to be made
at the same cost and at the same time
The inventory turnover ratio is computed as cost of goods sold divided by ____________
average inventory
The inventory turnover ratio is computed as cost of goods sold divided by ______________
average inventory
The lower of cost and net realizable value method was developed to
avoid reporting inventory at an amount that exceeds the benefits it provides.
In a sale of an accounts receivable without recourse, if the customer does not pay, the loss is assumed by the ___________________ of the accounts receivable
buyer
who is responsible for shipping cost of FOB shipping point
buyer
Neumann Company places 100 units on consignment with Hartman Consignments Company. At the end of the accounting period, 45 of those units remain unsold. How many units (if any) should be included in Neumann's ending inventory? a) 100 units b) 55 units c) 45 units d) 0 units
c) 45 units
Expenditures needed to get land ready for its intended use should be
capitalized as part of the cost of land
A _____________ or______________ discount represents reductions not in the selling price of a good or services, but in the amount to be paid by the customer.
cash sales
Reston Corp. borrowed 20,000 from first national bank on a 6-month note at 8% interest. Reston has an informal arrangement with no contractual agreement with the bank to maintain a compensation balance of 2,000 until the loan is repaid. Reston should report the 2,000, as
cash and cash equivalents
Weighted-average unit cost is determined by dividing ______________ by quantity of goods available for sale
coat of goods available for sale
A(n) ___________________ is an exclusive right of protection given to a creator of a published work, such as a song, film, photograph, or book
copyright
Under a perpetual inventory system, the entry to record the return of goods previously purchased on account was recorded with a debit to Accounts Payable and a credit to Inventory. This entry is:
correct
When inventory is written down, the reduced inventory value becomes the new _________ _________.
cost basis
In a LIFO inventory system, inventory amounts shown in the balance sheet may be distorted because they may represent.
cost incurred several years earlier
In the LIFO inventory system, inventory amounts shown in the balance sheet may be distorted because they may represent
cost incurred several years earlier
In a periodic inventory system, the inventory account during the accounting period reflects
cost of beginning inventory.
Weighted-average unit cost is determined by dividing __________ by quantity of goods available for sale.
cost of goods available for sale
cost-to-retail percentage formula
cost of goods available for sale/retail of goods available for sale (before net markdowns)
Catalina Bookstore pays freight on books shipped to its store. The shipping cost is debited to Inventory. When the books are sold, the freight costs pertaining to the books are included in:
cost of goods sold
If a company pays freight-in for its inventory, that amount will later be included in
cost of goods sold
The inventory turnover ratio is computed as __________ divided by average inventory.
cost of goods sold
income statement
cost of goods sold
Inventory cost flow assumptions can be used to assign dollar amounts to
cost of goods sold and ending inventory
When a company utilizes a periodic inventory system, a physical count is necessary to determine cost of goods sold because
cost of goods sold is not determined at the time of the sale.
Where can freight-out charge be found
cost of goods sold, selling expenses
What is the formula for the inventory turnover ratio?
cost of goods sold/(beginning inventory+ending inventory/2)
Parker company reports gross sales revenue of 7.5 million, net sales revenue of 7 million, and cost of goods sold of 3.5 million. Its inventory balance was 150,000 at the beginning of the accounting period and 200,000 at the end of the accounting period. The company's inventory turnover ratio is closest to
cost of goods sold/average inventory 3.5 million/ (150,000+200,000/2)
amount of loss from write-down using entire inventory
cost total < nrv total then there is no loss
amount of loss from write-down using categories
cost total-by category total
amount of loss from write-down using individual items
cost total-by individual products total
Weighted-average unit cost is determined by diving _____ by quantity of goods available for sale.
costs of goods available for sale
The gros profit ration gives the percentage of each sales dollar available to cover expenses other than _____.
costs of goods sold
A periodic inventory system measures cost of goods sold by
counting inventory at the end of the period
calculate the year-end balance in the allowance for uncollectible accounts
credit balance-accounts receivable written off during the year + bed debt expense
If a company uses a perpetual inventory system, the entry to record the company's return of goods previously purchased on account includes ______ and _____. (Answer from the viewpoint of the buyer.)
credit to Inventory. debit to Accounts Payable
Smith Corporation began 2016 with a difference of $50,000 between inventory valued internally using FIFO and inventory valued using LIFO. At the end of 2016, this difference increased to $75,000. The journal entry to record this increase would include a
credit to LIFO reserve for $25,000
each of the 3 methods is permissible according to generally accepted accounting principles and frequently used
first-in, first out, weighted average, last in first out
Steiner Company's average days in inventory has decreased during 2016 as compared to the prior year. From he information, we can conclude that Steiner
has a higher inventory turnover ratio, is selling its inventory faster
What of the following could motivate a company that uses LIFO for external reporting to use another method for internal recordkeeping?
high recordkeeping cost, contractual agreements such as bonus contracts
If prices rise continually during the year, cost of goods sold tends to be _______ using the periodic LIFO method than using the perpetual LIFO method.
higher
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
in times of rising prices, cost of goods sold determined using LIFO inventory assumption will be _____ than cost of goods sold determined using the FIFO inventory assumption
higher
When inventory costs are rising, FIFO results in
higher reported amounts for inventory in the balance sheet and higher reported gross profit for the income statement
Initial adoption of IFRS by a company that currently utilizes the LIFO method would likely result in
higher taxable income, lower cost of goods sold
principals that provide guidance for measuring inventory and COGS
historical cost principle matching revenue and expenses
Kilian Company's inventory balance at the end of the current year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered, the effect of this error on financial statements in the following year will be:
overstated net income
Using a percentage of each period's net credit sales to estimate bad debt expense is a(n) __________________________________ ______________________________________ approach to measuring bad debts
income statement
the cost of inventory sold during a period is reported on the
income statement as an expense
Norma Inc. uses the perpetual inventory system. When the company records a sale, it should make entries to:
increase an asset and increase revenue decrease an asset and increase an expense
additional markup
increase in selling price subsequently to initial markup
Under the DVL method, a layer may only be added during the current year if inventory at base-year cost has ___________
increased
under the DVL method, a layer may only be added during the current year if inventory at base-year cost has
increased
Purchasing inventory on account:
increases assets increases liabilities
goodwill
indefinite
Which of the following are characteristics of inventory
it will be used in the production of goods to be sold, it will be sold in the normal course of business
Which of the following are characteristics of inventory?
it will be used in the production of goods to be sold, it will be sold in the normal course of business
which of the following are characteristics of inventory?
it will be used in the production of goods to be sold. it will be sold normal course of business
The definition of inventory includes which of the following items? (Select all that apply.)
items currently in production for future sale; items used currently in the production of goods to be sold; items held for resale
the definition of inventory includes which of the following items
items used currently in production of goods to be sold, items currently in production for future sale, items held for resale
The specific identification method of inventory costing matches each unit with?
its actual cost.
Cost of goods sold is typically the _________ expense in the income statement
larger
The time value of money has a _______ effect on long-term notes receivable versus short-term notes receivable
larger
The FIFO inventory method assumes that units remaining in ending inventory are the _____ unuits purchased
last
The layer year cost index is calculated by dividing the cost in the ______ year by the cost in ___________ year.
layer base
The layer cost index is calculated by dividing the cost in ______ year by the cost in _____ year
layer, base
The layer year cost index is calculated by dividing the cost in __________ year by the cost in ____________ year
layer; base
The average cost method assumes that cost of goods sold and ending inventory each consist of a(n) _________ of the goods available for sale.
mixture
operating income equals gross profit minus
operating expenses
income before income taxes equals
operating income plus nonoperating revenues and minus nonoperating expenses
initial markup
original amount of markup from cost to selling price
Omar company uses a periodic inventory system and erroneously overstates ending inventory by $10,000 for the year ended December 2015. This error would cause the retained earnings balance for the ear ended 2015 to be
overstated by 10,000
Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are
paid by the supplier
Which of the following items that should be classified as inventory for a company that manufacturers accounting textbooks.
paper used, textbooks ready to be shipped
Freight-in on inventory purchases is typically recognized as
part of the cost of purchasing inventory.
Freight-in on purchases is typically recognized as
part of the cost of purchasing inventory.
A _______ is the exclusive right to manufacture a product or use a process granted for a period of __________ years.
patent 20
In which type of inventory system does a reduction in inventory and accounts payable occur at the time of return?
perpetual
Under the ___________ inventory system, purchase discounts are treated as a reduction in the inventory account
perpetual
in a(n) inventory system, the average cost method is applied by computing a moving average unit cost each time inventory is purchased
perpetual
under the _____ inventory system, the inventory account reflects purchases during the year, as well as cost of units sold
perpetual
under the ________ inventory system, purchase discounts are treated as a reduction in the inventory account
perpetual
in a __________ system, each time inventory is purchased or sold the layers are adjusted
perpetual LIFO
Which inventory system recognizes cost of goods sold and decreases inventory each time a sale occurs?
perpetual inventory system
A __________ inventory system continuously records changes in inventory, whereas the __________ inventory system makes an adjustment at the end of the period.
perpetual, periodic
A __________ inventory system recognized cost of goods sold each time a sale occurs; a __________ inventory system decreases inventory each time a sale occurs.
perpetual, perpetual
A ______ inventory system continuously records changes in inventory, whereas the _____ inventory system makes an adjustment at the end of the period.
perpetual; periodic
A _____ inventory system recognizes cost of goods sold each time a sale occurs; a _____ inventory system decreases inventory each time a sale occurs.
perpetual; perpetual
a __ inventory system continuously records changes in inventory, whereas the ___ inventory system makes an adjustment at the end of the period.
perpeutal, periodic
Long-lived assets are classified as intangible assets if they lack ______ substance
physical
Measurement of inventory and cost of goods sold always starts with determining the _____ quantities of goods.
physical
Measurement of inventory and cost of goods sold always starts with determining the _________ quantities of goods.
physical
measurement of inventory and cost of goods sold always starts with determining the _____ quantities of goods.
physical
A LIFO inventory pool consists of inventory groups according to _______.
physical similarities
The dollar-value LIFO inventory method extended the concept of inventory pools by allowing a company to combine a large variety of inventory items into one _______.
pool
The dollar-value LIFO inventory method extends the concept of inventory pools by allowing a company to combine a large variety of inventory items to one ___
pool
A company acquires equipment by signing an interest-bearing note payable. If the interest rate is realistic, the company will record the equipment at the
present value of the note payable, which is the face amount of the note
Bolt corp. acquires equipment valued at 81,630 by signing a 3-year noninterest bearing note payable for 100,000. Calculate the implicit interest rate on the note
present value/face amount 81,630/100000=.8163 8 then look at PV table
In a sale of an accounts receivable with recourse, if the customer does not pay, the loss is assumed by the ____________ of the accounts receivable
seller
if goods are shipped to a F.O.B destination, the _________ usually is responsible for the shipping.
seller
who is responsible for shipping cost of FOB destination
seller
where can freight out charges be found
selling expenses COGS
Net realizable value is ________ __________ minus costs of completion, disposal, and transportation.
selling price
NRV formula
selling price-cost to sell
In a consignment, a company arranges for another company to
sell its products.
True or false: A company may use more than one inventory cost method.
true
The actual flow of a company's inventory must correspond with the cost flow assumption chosen by the company
False
Inventory for a company consists of raw materials, work in process, and finished goods.
manufacturing
What type of company purchases goods that are used to produce another product?
manufacturing companies
A JIT inventory system allows companies to maintain __________ inventory levels
minimal
Is the periodic inventory system useful?
no it sucks and very few companies use it
in a perpetual inventory system, a new weighted-average unit cost is calculated after each __
purchase.
In a perpetual LIFO system, each time inventory is ______ or ______, the LIFO layers are adjusted.
purchased; sold
In a perpetual LIFO system, each time inventory is ____or_____, the LIFO layers are adjusted.
purchased; sold
who includes the inventory on their balance sheet when goods are shipped FOB shipping point with a common carrier
purchaser
If goods are shipped f.o.b. destination, the________ usually is responsible for shipping.
seller
Under US GAAP, companies are required to disclose the inventory costing methods used
true
When inventory costs are rising, LIFO results in lower tax expense when compared to FIFO.
true
In a perpetual inventory system, when a company sells inventory on account, how many entries are required?
two
Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the periodic LIFO method, cost of goods sold will be.
$1,760 (1980/900 x 800) =
On January 1, Bern Company has 100 units costing $100 in beginning inventory. On January 2, Bern purchases an additional 400 units of $1.50 per unit, and sells 300 units. On January 3, the company sells an additional 100 units. On January 4, Bern purchases 200 additional units for $1.60 per unit. If Bern utilizes a perpetual LIFO system, per units cost of goods sold for the January 3 sale will be
$1.50
On January 1, Bern Company has 100 units costing $100 in beginning inventory. On January 2, Bern purchases and additional 400 units for $1.50 per unit, and sells 300 units. On January 3, the company sells an additional 100 units. On January 4, Bern purchases 200 additional units for $1.60 per unit. If Bern utilizes a perpetual LIFO system, per unit cost of goods sold for the January 3 sale will be.
$1.50
Green Corp. uses a periodic inventory system. Cost of beginning inventory is $1,000. During the year, Green purchases inventory costing $11,000. Based on physical count, Green determines that inventory costing $1,800 is still on hand. Green Corporation's cost of goods sold will be
$10,200
Pernell Company reported LIFO reserves of $150,000 and $100,000 in 2016 and 2015, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that at the end of 2016, Pernell's ending inventory would have been
$150,000 higher if it had used FIFO.
True or false: A periodic inventory system allows management to determine the amount of goods on hand without having to take a physical count.
False
Which of the following are included in inventory?
Goods that manufactures produce for resale and assets a retail company acquires for resale.
Match the inventory cost flow assumption with the financial statement approach.
Lifo= income statement approach Fifo= balance sheet approach
Gerhard Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1,200 units, COGS would have been
$2,000 higher
Pernell Company reported LIFO reserves of $150,000 and $100,000 in 2016 and 2015, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that Pernell's cost of goods sold for the 2016 fiscal year would have been
$50,000 higher if it had used FIFO
Joachim Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company ha purchased 1,200 units, pretax income would have been
$2,000 lower Currently cost of goods sold is computed using the 1,000 units at $20 plus 200 units at $10 so the units from the beginning inventory are liquidated. If they had purchased as least 1,200 units, cost of goods sold would have been higher resulting in lower pretax income
Pernell Company reported LIFO reserves of $150,000 and $100,000 in 2016 and 2015, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that Pernell's pretax income for the 2016 fiscal year would have been
$50,000 higher if it has used FIFO
Joachim Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased 1,200 units, pretax income would have been
$2,000 lower - Currently cost of goods sold is computed using the 1,000 units at $20 plus 200 units at $10 so the units from beginning inventory are liquidated. If they had purchased at least 1,200 units, cost of goods sold would have been higher resulting in lower pretax income.
Joachim Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1,200 units, pretax income would haven been
$2,000 lower.
Smith Corp. uses a periodic inventory system. Cost of beginning inventory is $5,000. During the year, Smith purchases inventory costing $24,000. Based on a physical count at the end of the period, Smith determines that inventory costing $2,500 is still on hand. Smith Corporation's cost of goods sold will be
$26,500
Bethany Corp. uses a periodic inventory system. Cost of beginning inventory is $150,000. During the year, bethany purchases inventory costing $250,000. Based on a physical count at the end of the period, Bethany determines that inventory costing $25,000 is still on hand. Bethany Corportation's cost of goods sold will be
$375,000 ($150,000 +$250,000 - $25,000)
Bern Co has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1980. At the end of the year, 200 units remain unsold. If Bern Co utilizes the LIFO method, ending inventory will be...
$420 (1980/900X100)+200=$420
Which of the following are characteristics of inventory?
It will be sold in the normal course of business and it will be used in the production of goods to be sold.
Pernell Company reported LIFO reserves of $150,000 and $100,000 in 2010 and 2009, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that Pernell's cost of goods sold for the 2010 fiscal year would have been
$50,000 lower if it had used FIFO
Pernell Co reported LIFO reserves of $150000 and $100000 in 2010 and 2009, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that Pernell's cost of goods sold for the 2010 fiscal year would have been...
$50000 lower if it had used FIFO
Smith Company has 150 units costing $450 in beginning inventory. During the year, the company purchases 1,000 units for a total cost of $3,300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the periodic LIFO method, ending inventory will be
$615
Smith Company has 150 units costing $450 in beginning inventory. During the year, the compnay purchases 1,000 units for a total cost of $3,300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the periodic LIFO method, ending inventory will be
$615
Trivia Company reports a gross profit of $100, income tax expense of $15, selling, general, and administrative expenses of $35, nonoperating revenues of $10, and nonoperating expenses of $15. What is the company's operating income?
$65
Smith Company has 150 units costing $450 in beginning inventory. During the year, the compnay purchases 1,000 units for a total cost of $3,300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, ending inventory will be
$660
Smith Co has 150 units costing $450 in beginning inventory. During the year, the company purchases 1000 units for a total cost of $3300. At the end of the year, a physical count reveals that 200 units remain in the ending inventory. If the company uses the FIFO method, ending inventory will be
$660 200 units remain. (3300/1000)=3.30x200=$660
Units sold during the year: 3,000 What is the weighted-average unit cost?
$7.00
Smith Company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $690,000. Its inventory as of December 31, 2016, was $758,100 at year-end costs and the cost index was 1.05. What was DVL inventory on December 31, 2016?
$723,000 -
Western company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $715,000. Its inventory as of December 31, 2016, was $815,400 at year-end costs and cost index was 1.08. What was DVL inventory on December 31, 2016?
$758,200
Western Company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $715,000. Its inventory as of December 31, 2016, was $815,400 at year-end costs and the cost index was 1.08. What was DVL inventory on December 31, 2016?
$758,200 - $815,400/1.08 = $755,000 giving 2 layers of $715,000 and $40,000. $715,000 x 1.0 = $715,000 $40,000 x 1.08 = $43,200 $715,000 + $43,200 = $758,200
Ziegler Company properly applies the lower of cost and net realizable value rule and determines that its inventory value has declined by 10,500 below cost. Which of the following accounts could be credited for this write-down
-allowance -inventory
Bern Company has 100 units costing $200 and beginning inventory. During the year, the company purchases not hundred additional units for $1,980. At the end of the year, 200 units remain unsolved. If Bern Company utilizes the LIFO method, cost of goods sold will be
($1980/900×800) = $1760
Chase Company reports gross sales revenue of $7.5 million, net sale revenue of $7 million, and cost of goods sold of $3.5 million. Rounding to the nearest percent, the company's gross profit ratio would be
(7 mil - 3.5 mil)/7 mill = 50%
What is the formula for the gross profit ratio?
(net sales revenue-cost of goods sold)/net sales revenue
intangible with estimated useful life
-
Werner Company's accountant discovered that the prior-year financial statements were misstated due to an inventory-related error. Werner must
- restate its prior-year financial statements -adjust account balances that are incorrect as a result of the error
Match the inventory cost flow assumptions on the left with the scenario on the right
--------------
Correctly match the type of company with the type of inventory purchased
-----------------
Math each scenario with the type of invenory system
------------------
match the account names with the correct financial statement.
----------------------
Estimated future sales returns must be
-Deducted from costs of goods sold -Included in ending inventory
What type of expenditures should be included in the cost of inventory of a manufacturing company?
-Expenditures necessary to acquire inventory. -Expenditures necessary to bring inventory to sales location.
What type of expenditures should be included in the cost of inventory of a merchandising company?
-Expenditures necessary to bring inventor to necessary condition and sales location -Expenditures necessary to acquire inventory
The retail inventory method can be used to approximate
-FIFO -LIFO -average cost
Which of the following inventory methods result in the same ending inventory and cost of goods sold?
-FIFO periodic inventory system -FIFO perpetual inventory system
What methods are acceptable in accounting for purchase discounts?
-Gross method -Net method
Which of the following must be known to apply the retail inventory method?
-Inventory and purchases based on cost -inventory and purchases based on retail value
Which of the following are costs of extending credit terms to customers
-increased investment in receivables -increase in uncollectible accounts
Inventory includes
-Items currently in production for future sale -Items held for resale -Items used currently in the production of goods to be sold
Which of the following cost flow assumptions currently are acceptable under U.S. GAAP?
-LIFO -FIFO -weighted-average
The dollar-value LIFO retail method is a combination of which of the following?
-LIFO retail method -dollar-value LIFO method
perpetual inventory system
-Neumann company can determine the cost of inventory still on hand by referring to the inventory account - freight is added directly to the inventory account
non-r&d cost
-Routine efforts to improve an existing product -adaptation of an existing capability for a customer
periodic inventory system
-Shelly company must first take a physical inventory to determine the cost of inventory still on hand -a separate freight-in account is used
Which of the following are disadvantages of unit LIFO?
-Significant recordkeeping costs -Possibility of LIFO liquidation
Advantages of using LIFO include
-Simplify record keeping -Reduce the risk of LIFO layer liquidation
What assumptions are currently acceptable under US GAAP?
-Weighted average -FIFO -LIFO
The specific identification method
-Would be beneficial to a company that makes fine jewelry -Matches each unit of inventory with its actual cost
cash that is restricted and is not available for current use may be reported in the balance sheet as
-a noncurrent asset -investments and funds -other assets
The two important account issues related to self-constructed assets are
-allocation of overhead -treatment of interest charges
Which of the following are included in inventory>
-assets a retail company acquires for resale -goods that manufacturers produce for sale
Within LIFO inventory pools, all purchases during the period are considered to be made
-at the same time -at the same cost
Which accounts would an analyst investigate to detect if accounts receivable may impact earnings quality?
-bad debt expense -allowance for uncollectible accounts
cash and cash equivalent sheet includes
-balance in checking account -balance in savings account -undeposited customer checks -currency and coins on hand -U.S. treasury bills that is under 3 months
cash and cash equivalent sheet does not include
-balance in savings account when the savings account is being used to accumulate cash considering the cash is not of use at this point -balance in checking account when the funds can't be used at this point -u.s. treasury bills that are longer than 3 months
Tore Company's records reveal the following information regarding its inventory. Beginning inventory was $100,000 at cost and 160,000 at retail. Purchases during the year were $300,000 at cost and $500,00 at retail. Markups were $10,000 and markdowns 20,000. Assuming the conventional retail method is used and net sales were 500,000, ending inventory at retail would be?
-beginning inventory at retail 160,000 + net purchases at retail 500,000 + markups 10,000 - markdowns 20,000 -net sales 500,000= 150,000
inventory at retail component with the correct cost-to-retail percentage assuming that the LIFO retail method is used. -Beginning inventory -Current period layer
-beginning-inventory cost-to-retail percentage -current-inventory cost-to-retail percentage
Which of the following are services performed by a factor?
-buy accounts receivable -handle billing and collection of accounts receivable
What can affect earnings quality for a company?
-choice of inventory method -inventory write-downs -change in inventory method
which of the following are adjustments to the book balance in a bank reconciliation?
-company errors -collections made by the bank on the company's behalf -bank service charges -SUBTRACTED ITEMS 1.NSF checks 2. Service and other charges made by the bank
arrange the steps in determining the impairment of receivables under IFRS in the correct sequence
-consider whether individual significant receivables are impaired -group individual significant receivables for which impairment is not indicated with other receivables of similar risk characteristics -perform impairment test
The retail inventory and gross profit methods are similar in that they both rely on the relationship between which of the following to estimate ending inventory and cost of goods sold?
-cost -selling price
which of the following items are included in cash
-currency and coins -balances in checking accounts, items acceptable for deposits in these accounts (checks and money orders
Panther Company's bookkeeper debited supplies expense for the cost of goods sold during that month. The bookkeeper discovered the error prior to closing the books. The correcting entry would include a
-debit to cost of goods sold -credit to suppies expense
Which costs would be properly classified as manufacturing overhead?
-depreciation of manufacturing equipment - electricity to operate facility
steps to calculate ending inventory using the inventory retail method
-determine cost of goods available for sale at retail -determine sales revenue at retail -subtract sales revenue from cost of goods available for sale -multiply ending inventory (at retail) by the cost-to-retail %
The cost of natural resources includes which of the following?
-development -acquisition cost for the use of land -exploration costs before production begins -restoration costs at the end of extraction
What are the cost components for self-constructed assets?
-direct material -manufacturing overhead -direct labor
A trade discount is a reduction from the list price, which is to
-disguise real prices from competitiors -give quantity discounts to customers -change prices without publishing a new catalog.
A periodic inventory system
-does not continuously track the cost of merchandise sold -does not continuously track the quantity of merchandise
Exploration costs include expenditures for
-drilling a well -excavating a mine -relating to a search for natural resources
Internal control consists of plans to
-encourage adherence to company policies and procedures -safeguard company assets -minimize errors and theft
The lower of cost and net realizable value approach can be applied to
-individual inventory items -logical categories of inventory (groups of interntory items) -entire inventory
What type of expenditures should be included in the cost of inventory of a merchandising company?
-expenditures necessary to acquire inventory -expenditures necessary to bring inventory to necessary condition and sales location
The cost of inventory includes
-expenditures to acquire the inventory -the cost to bring inventory to its desired location -the cost to bring inventory to its desired condition
How do you do a closing entry for a periodic inventory system?
-first calculate COGS beginning inventory+net purchases= cost of goods available for sale cost of goods available for sale-ending inventory=COGS -make closing entry *debits COGS ending inventory purchase returns *credits beginning inventory purchases freight-in
Restrictions on cash may be
-formal by contract -informal arising from management intent
Indicate which costs would be capitalized as part of the cost of manufacturing equipment
-freight-in -insurance during transit -set-up cost
added in the cost column
-freight-in(Before calculating the cost-to-retail %) -employee discounts (if sales are recorded net of discounts) (after calculating the cost-to-retail %)
The two generally accepted methods for oil gas accounting for U.S. GAAP are the
-full-cost method -successful efforts method
Ownership of inventory at the end of the accounting period is determined for
-goods shipped by suppliers -goods shipped to customers
ownership of inventory at the end of the accounting period is determined for
-goods shipped to customers and suppliers
Which of the following are included in inventory?
-goods that manufactures produce for sale -assets a retail company acquires for resale
Which of the following methods can be used to estimate inventory when a physical count is not possible?
-gross profit method -retail inventory method
which of the following are potential benefits of offering cash discounts to customers?
-increase sales volume -accelerate customer payment, reduce bad debts
which of the following are classified as natural resources?
-oil deposits -mineral deposits
When is it appropriate to recognize a liability for an asset retirement obligation?
-over the asset's life as incurred -at the inception of the asset's life if a legal obligation exists.
What are disadvantages of unit LIFO?
-possibility of LIFO liquidation -significant record keeping costs
A slowing turnover ratio combined with higher than normal inventory levels may indicate which of the following?
-potential for inventory becoming obsolete -potential for decreased production
A typical note receivable requires payment of a specified dollar amount at a specified maturity date in the future. What are terms for the specified dollar amount?
-principal -face amount
deducted in both the cost and retail columns
-purchase returns(Before calculating the cost-to-retail %) -abnormal shortages (spoilage, breakage theft)
Which of the following accounts are typically reported on the balance sheet of a manufacturing company?
-raw materials -work in process -finished goods
Which of the following can be used to write-down inventory according to the lower of cost and net realizable value rule?
-recognize the write-down as an addition to costs of goods sold -recognize the write-down as a separate line item on the income statement
An intangible asset with an indefinite life is
-recorded at cost -tested for impairment
When the retail inventory method is used to approximate average cost, the cost-to-retail percentage should be based on the weighted average
-retail amounts of goods available for sale -costs of goods available for sale
The dollar-value LIFO (DVL) method
-simplifies record keeping -reduces the risk of liquidation of layers
Daryl corp. purchases 10,000 units of inventory on account for 50,000. Two days after receiving the inventory, Daryl discovers that 1,000 units are defective and returns the the defective units to the vendor. The company utilizes a perpetual inventory system. As a result of this return
-the accounts payable balance decreases -the inventory balance decreases
which of the following are the two approaches of estimating future bad debts
-the balance sheet approach -income statement approach
Which of the following must be included in the disclosure note related to a change in inventory method?
-the effect of the change on items not reported on the face of the primary statements -the cumulative effect of the change on retained earnings -justification that the change is appropriate
Multi Company changed its inventory method from LIFO to FIFO. Multi must disclose the following information in its notes:
-the effect on earnings per share amounts -the cumulative effect pf the change on retained earnings
What is included in the cost of merchandise inventory?
-the purchase price of the goods -necessary costs incurred to get the goods in location for sale
Which of the following indicate surrender of control over the assets transferred?
-the transferor will have no continuing involvement -Received are sold without recourse
What are reasons why managers closely monitor inventory levels?
-to minimize costs of ordering and carrying inventory -to ensure that sufficient units are available
A company is most likely to utilize the specific identification method if its inventory consists of
-unique products -very expensive products
The LIFO reserve shows how ending inventory would have differed if the company had utilized _______ or ______, instead of LIFO.
-weighted average -FIFO
Consistent with international financial reporting standards, which of the following cost flow assumptions are currently permitted?
-weighted-average -first in, first out
In a perpetual inventory system the inventory account is adjusted
-when inventory is purchased -when inventory is sold
The specific identification method
-would be beneficial to a company that makes fine jewelry -matches each unit of inventory with its actual cost
3 influences of a company's choice of inventory method
1 - actual flow of inventory 2 - effect on reported net income 3 - effect on tax liability
motivates a company that uses LIFO for external reporting to use another method for internal recordkeeping
1 - contractual agreements such as bonus contracts 2 - high recordkeeping cost of LIFO
inventory cost flow assumptions can be used to assign dollar amounts to
1 - ending inventory 2 - COGS
specific identification method
1 - matches each unit of inventory with its actual cost 2 - would be beneficial to a company that makes fine jewelry
characteristics of inventory
1 - used in the production of goods sold 2 - sold in the normal course of business
Which of the following does the chosen inventory method affect?
1) Analysis of a company's profitability 2) Analysis of a company's liquidity
Bring the steps necessary to calculate ending inventory using the dollar-value LIFO method. 1) Total the cost to determine ending inventory. 2) Compare ending inventory to beginning inventory at base-year cost. 3) Convert the ending inventory to basic-year cost. 4) Identify any new layers and multiply by acquisition-year index.
1) Convert the ending inventory to base-your cost. 2) Compare ending inventory to beginning inventory at base-your cost. 3) Identify any new layers and multiply by acquisition-year index. 4) Total the cost to determine ending inventory.
Proper order to reflect the typical cost flow for a manufacturing company.
1. Raw materials are used and recorded as work in process. 2. Direct labor is applied to work in process. 3. Manufacturing overhead is applied to work in process. 4. Cost of completed units are transferred to finished goods. 5. Costs flow to cost of goods sold when goods are sold.
Place the following in the order to reflect the typical cost flow for a manufacturing company. Costs of completed units are transferred to finished goods. Manufacturing overhead is applied to work in process. Raw materials are used and recorded in work in process. Cost flow to cost of goods sold when goods are sold. Direct labor is applied to work in process.
1) Raw materials are used and recorded in work in process. 2) Direct labor is applied to work in process. 3) Manufacturing overhead is applied to work in process. 4) Costs of completed units are transferred to finished goods. 5) Cost flow to cost of goods sold when goods are sold.
Advantages of using LIFO inventory pools include which of the following?
1) Reduce the risk of LIFO layer liquidations 2) Simplify recordkeeping
Which of the following items should be classified as inventory for a company that manufactures accounting textbooks?
1) Textbooks ready to be shipped to bookstores 2) Paper used in the printing process
In a manufacturing company, raw materials, direct labor, and overhead flow from the one account to the next in the following order:
1) Work in process 2) Finished goods 3) Cost of goods sold
Which of the following could cause a difference between the quantities of inventory determined by physical count and the quantities tracked by a perpetual inventory system
1) breakage 2) thefts 3) system errors 4) spoilage
Which of the following would be an important consideration for management in choosing a particular inventory system
1) cost 2) management control
The definition of inventory includes:
1) items used currently in the production of goods to be sold 2) items currently in production for future sales 3) items held for resale
The DVL method
1) reduces the risk of liquidation of layers 2) simplifies record keeping
When a company determines that quantity of inventory items, it must consider
1) units it currently possesses 2) units in transit 3) units on consignment
what would increase the Gross Profit Ration
1- sale price decrease by exactly the same amount as does COGS 2 - sale price of a product increases by a higher % than does COGS
Which of the following costs flow assumptions are acceptable under international financial reporting standards?
1. 1st-in, 1st-out 2. Weighted average
Rank the steps necessary to calculate ending inventory using the dollar-value LIFO method.
1. Convert the ending inventory to base-year cost. 2. Compare ending inventory to beginning inventory at base-year cost. 3. Identify any new layers and multiply by acquisition-year index. 4. Total the cost to determine ending inventory.
What may offset the income tax motivation for using LIFO in periods of rising prices?
desire to report higher net income
steps that pertain to the dollar-value LIFO retail method in the correct order.
1. ending inventory at year-end retail prices is converted to base-year retail prices 2. Inventory layers at base-year retail prices are identified 3. Using layer indexes and cost-to-retail ratios, inventory layers convert to LIFO cost.
steps for capitalizing interest on self-construction assets in their proper order
1. identify assets that qualify for interest capitalization 2. identify the period of capitalization 3. Calculate average accumulated expenditures 4. apply the appropriate interest rate -qualifying asset -period of capitalization -applicable interest rate -average accumulated expenditures
typical cost flow for a manufacturing company
1. raw materials are used and recorded in work in process 2. direct labor is applied to work in process 3. manufacturing overhead is applied to work in process 4. costs of competed units are transferred to finished goods. 5. costs flow to cost of goods sold when goods are sold.
Place the following in the proper order to reflect the typical cost flow for a manufacturing company
1. raw materials are used and recorded in work in process 2. direct labor is applied to work in process 3. manufacturing overhead is applied to work in process 4. costs of completed units are transferred to finished goods 5. costs flow to cost of goods sold when goods are sold
Which of the following steps are necessary to account for and report a change in inventory method?
1. revise comparative financial statements 2. the affected accounts are adjusted 3. A disclosure note provides additional information ANSWER -adjust appropriate balance sheet accounts -disclose additional information in the financial statement notes. -revise comparative financial statements
On Jan 1, Bern Company has 100 units costing $100 in beginning inventory. On Jan 2, Bern Purchases an additional 400 units for 1.50 per unit, and sells 300 units. On Jan 3, the company sells an additional 100 units. On jan 4, Bern purchases 200 additional units for 1.60 per unit. If bern utilizes a perpetual LIFO system, per unit of cost of goods sold for the Jan 3 sale will be
1.50
Rank the steps necessary to calculate ending inventory using the dollar-value LIFO method
1.Convert the ending inventory to base year cost 2.compare ending inventory to beginning inventory at base year cost. 3.identify any new layers and multiply by acquisition year index. 4.Total the cost to determine ending inventory
Place the following in the proper order to reflect the typical cost flow for a manufacturing company.
1.Raw materials are used and recorded in work in progress. 2.Direct labor is applied to work in process. 3.Manufacturing overhead is applied to work in progress. 4.Costs of completed units are transferred to finished goods. 5.Costs flow to cost of goods sold when goods are sold.
match the effect of each error with the specific error scenario 1. net income is overstated 2. net income is understated 3. net income is not affected
1.during the physical inventory, certain inventory items were double counted 2. inventory currently out on consignment was not included in the inventory count 3. a purchase in transit that was shipped f.o.b. shipping point was neither counted nor recorded.
IN a manufacturing company, raw materials, direct labor, and overhead flow from one account to the next in the following order
1.work in process 2. finished goods 3. cost of goods sold
trademark
10 years renewable, possibly indefinite exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company
the FIFO method assumes that units sold are the units acquired and the units remaining in ending inventory are the units purchased
first, last
Calculate the amount to be reported for ending inventory of Model A.
10,000
Green Corp uses a periodic inventory system. Cost of beginning inventory is 1,000. During the year, Green purchases inventory costing 11,000. Based on a physical count, Green determines that inventory costing 1,800 is still on hand. Green Corporation's cost of goods sold will be
10,200
At year end, CurlZ, Inc.'s inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box. The net realizable values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. Using the lower of cost and net realizable value method, CurlZ should report its inventory at:
1000, The lower of cost and net realizable value method requires the DyeZ boxes be recorded at the lower selling price of $8 instead of the higher cost of $10. Thus, Inventory equals $1,000 = ((200 bottles x $1) + (100 boxes x $8)).
Spartan Corp. purchases inventory, land, building, and equipment for $540,000 from Klein Corp. The value of the assets are as follows inventory book value $80,000 fair value $100,000 land book value 140,000 fair value 180,000 equipment 80,000 fair 120,000 building 200,000 fair 200,000 At what amount should spartan record the invenotry
100000/600000 *540=90000
Rudy Company reports gross sales revenue of $5.2 million, net sales revenue of $5 billion, and cost of goods sold of $3 million. Its inventory balance was $250,000 at the beginning of the accounting period and $300,000 at the end of the accounting period. The company's inventory turnover ratio is close to
11
Rudy Company reports gross sales revenue of $5.2 million, net sales revenue of $5 million, and cost of goods sold of $3 million. Its inventory balance was $250,000 at eh beginning of the accounting period and $300,000 at the end of the accounting period. The company's inventory turnover ratio is closest to
11 (10.9 rounded)
On dec 31, Salz Company sells 1,000 units of merchandise to Welner Corp. and 2,000 units to Torr Corp. Shipping terms are F.O.B. destination for the 1,000 unit sale and F.O.B. shipping point for the 2,000 unit sale and the goods have shipped. If salz still has , 10,000physical units in its inventory after there sales, how many units should Salz include in its ending inventory on dec 31?
11,000
On December 31, Salz Company sells 1,000 units of merchandise to Weiner Corp. and 2,000 units to Torr Corp. Shipping terms are F.O.B. destination for the 1,000-unit sale and F.O.B. shipping point for the 2,000-unit sale and the goods have shipped. If Salz still has 10,000 physical units in its inventory after these sales, how many units should Salz include in its ending inventory on December 31?
11,000 units
below is information from the financial statements of thornton company accounts receivable net 2014:1,100 accounts receivable net 2013:900 net sales 2013:8,000 which is the average collection period?
1100+900/2=1000 8000/1000=8 365/8=45.63
Smith Company has 150 units costing 450.00 in beginning inventory. During the year, the company purchases 1,000 units for a total cost of 3,300.00. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company used the LIFO method, cost of goods sold will be
1150 total units-200 units=950 units sold=(3300/1000)=3135
All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. What is the amount of LIFO adjustment needed to adjust FIFO inventory records reported for the year to LIFO for external reporting purposes?
1300
On dec. 30 20x1, brighton corp. disposed with a historical cost of 150,000 and accumulated depreciation of 60,000. The equipment was sold for 70,000 cash. What is the gain or loss on disposal of the equipment?
150000-60000=90000-70000=20000 loss
Bethany Corp. use a periodic inventory system. Cost of beginning inventory is $150,000. During the year, Bethany purchases inventory costing $250,000. Based on a physical count at the end of the period, Bethany determines that inventory costing $25,000 is still on hand. Bethany Corporation's cost of goods sold will be
150k + 250k - 25k = 375k
Travis Corporation begins the year with $50,000 of tire inventory. The company purchases tires worth $150,000 during the year. At the end of the year, the purchase cost of remaining inventory is $30,000. What is the cost of goods sold?
170,000
Doris recently started her position at Monro Company. The company uses the dollar-value LIFO inventory method. On her first day at work, Doris was asked to calculate the cost index for a new inventory layer. The company's records reveal that the cost in terms of the base year was $50,000 and the cost in terms of the layer year was $100,000. What is the cost index for the new layer?
2
Doris recently started her position at Monro Company. The company uses the dollar-value LIFO inventory method. On her first day at work, Doris was asked to calculate the cost index for a new inventory layer. The company's records reveal that the cost in terms of the base year was $50,000 and the cost in terms of the layer year was $100,000. What is the cost index for the new layer?
2 - Cost index in layer year = Cost in layer year / Cost in base year
Calculate the amount to be reported for ending inventory of Model B.
2,000
Gerhard Company has 300 units costing 10.00 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing 20.00 per unit and sales 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1,200 units, COGS would have been
2,000 higher
Joachim Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1,200 units, pretax income would have been.
2,000 lower
Joachim Company has 300 unites costing $10 per unit in beginning inventory. During the year, the company purchases an additional $1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1,200 units, pretax income would have been
2,000 lower * the lower cost of units liquidated, the more severe the effect on income
On December 31, Richard Company purchases 1,000 units of merchandise, F.O.B destination, from Neumann Corp. and 2,000 units, f.o.b. shipping point from Smith Corp. The goods are shipped on December 31. How many units should Richard include in its inventory on December 31 from this purchase?
2,000 units
Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals 200 units remain in ending inventory. If the company uses the FIFO method, the cost of goods sold will be.
2,540
Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals 200 units remain in ending inventory. If the company uses the FIFO method, the cost of ending inventory will be.
2,880/900 x 200 = 640
Parker Company reports gross sales revenue of $7.5 millions, net sales revenue of $7 million, and cost of goods sold of $3.5 million. Its inventory balance was $150,000 at the beginning of the accounting period and $200,000 at the end of the accounting period. The company's inventory turnover ratio is closest to
20
Parker Co reports gross sales revenue of $7.5 million, net sales revenue of $7 million, and cost of goods sold of $3.5 million. Its inventory balance was $150,000 ad the beginning of the accounting period and $200,000 at the end of the accounting period. The company's inventory turnover ratio is closet to ____
20 $3.5m/(150000+200000/2)
Patent
20 years -exclusive right to produce a product or use a process
Units sold during the year: 3,000 What is the amount of cost of goods sold that Green Products will report in its income statement for the current year, if it uses the first-in, first-out cost method?
20,000
Berta company recently lost its entire inventory in a fire. The following information is available from its accounting records: Beginning inventory: 1,000 purchases: 13,000 net sales $20,000 the company's average gross profit percentage is 40%. using the gross profit method, a reasonable estimate of the lost inventory would be
20,000*40%=8,000 20,000-8,000=12,000 1,000+13,000-12,000=2,000
Smith Company has 150 units costing $450 in beginning inventory. During the year, the company purchases 1000 units for a total cost of $3300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method ending inventory will be
200 units remain. (3300/1000) = 3.30 x 200 = 660
Gerhard company has 300 unis costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1000 units costing $20 per unit and sells 1200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1200 units, COGS would have been.
2000 higher
On December 31, Richard Company purchases 1000 units of merchandise from Neumann Corp. in 2000 units from Smith Corp. shipping terms are F.O.B. destination for the 1000-unit purchase and F.O.B. shipping for the 2000-unit purchase. How many units should Richard include in its ending inventory on December 31 from this purchase?
2000 units
Geese Company utilizes the dollar-value LIFO retail inventory method. Its cost-to-retail percentage is 60% based on beginning inventory and 64% based on current-period purchases. The company determined that beginning inventory at retail was $200,000 and that ending inventory at current-year retail prices was $250,000. The current-year price index is 1.10. During the current year, a new inventory layer at base-year retail prices was added in the amount of?
250,000/1.10=$227,273-200,000=27,273
Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, cost of goods sold will be
2540, 800 units have been sold. 100 units from beginning inventory at $300 plus 700 units from the units purchased at $2,240 ($2,880/900 x 700) equals $2,540
Rudy Company reports gross sales revenue of 5.2 million, net sales revenue of 5 million, and cost of goods sold for 3 million. It's inventory balance was 250,000 at the beginning of the accounting period and 300,000 at the end of the accounting period. The company's inventory turnover ratio is closest to
3 million/(250k+300k/2)=10.9 Rounds to 11
Smith Company has 150 units costing $450 in beginning inventory. During the year, the company purchases 1000 units for a total cost of $3300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method cost of goods sold will be
3,090 - 950 units sold (3300/1000) = 330 X 800 = 2640 + 450 = 3090
Smith Company has 150 units costing $450 in beginning inventory. During the year, the compnay purchases 1,000 units for a total cost of $3,300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the LIFO method, ending inventory will be
3135
A company has total sales revenue of $500,000 for the year. Sales discounts, returns, and allowances total $50,000 and the cost of goods sold is $300,000. What is the company's gross profit ratio?
33.33%
All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. What is the ending balance of Inventory under the FIFO method?
4,500
For the current year, Theta Corporation has beginning and ending inventories of $40,000 and $60,000, respectively. Cost of goods sold for the year is $240,000. What is the company's inventory turnover ratio?
4.8 times
Rudy Company reports gross sales revenue of $5.2 million, net sales revenue of $5 million, and cost of goods sold of $3 million. Rounding to the nearest percent, the company's gross profit ratio would be
40%
Rudy Company reports gross sales revenue of $5.2 million, net sales revenue of $5 million, and cost of goods sold of $3 million. Rounding to the nearest percent, the company's gross profit ration would be___
40% ($5m-$3m)/$5m
Rudy Company reports gross sales revenue of 5.2 million, net sales revenue of 5 million, and cost of goods sold for 3 million. Rounding to the nearest percent, the company's gross profit ratio would be
40% (5 - 3 ) / 5
Dane Stores begins the year with $30,000 of DVD inventory. It purchases DVDs worth $80,000 during the year. The cost of goods sold for the year is $70,000. What is the amount of ending inventory?
40,000
Baker is building a new warehouse. The warehouse qualifies as a self-constructed asset. During the year, Baker has weighted-average expenditures on the construction project of 600,000. Although baker does not borrow money specifically to build the warehouse, it has 2 loans outstanding during the year. Loan a is for 400,000 at 6% interest. Loan b is for 800,000 at 9% interest. What is the interest rate used to capitalize interest on the warehouse?
400,000x6%=24000 800,000x9%=72,000 total interest is 24,000+72,000=96,000 the weighted-average rate is 96000/1200000=8%
Neumann Co places 100 units on consignment with Hartman Consignments Co. At the end of the accounting period, 45 of those units remain unsold. How many units should be included in Neumann's ending inventory?
45 units
Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, the cost of ending inventory will be
640; 2,880/900 x 200= 640
Units sold during the year: 3,000 What is the amount of ending inventory that Green Products will report in its balance sheet for the current year, if it uses the weighted-average method?
7,000
For the current year, Delta Corporation has beginning and ending inventories of $80,000 and $100,000, respectively. Cost of goods sold for the year is $450,000. What is the company's average days in inventory?
73 days
Units sold during the year: 3,000 What is the amount of ending inventory that Green Products will report in its balance sheet at the end of the year, if it uses the first-in, first-out cost method?
8,000
Adam Company has 100 units costing $300 in beginning inventory. During the year the company purchases 900 units for a total cost of $2880. At the end of the year, a physical count reveals that 200 units remain and ending inventory. If the company uses the FIFO method, cost of goods sold will be
800 units have been sold. 100 units from beginning inventory at $300 plus 700 units from the units purchased at $2240 ($2880/900×700) equals $2540
All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. The entry to record the transaction on December 10 will involve a debit to Cost of Goods Sold for _____.
9,800
Bottom, Inc. paid an invoice for $1,000, with discount terms of 1/7, n/30, within the discount period. The net amount paid was:
990; The discount is 1% if paid within 7 days or the full amount is due within 30 days.
Which of the following are characteristics of inventory?
It will be used in the production of goods to be sold It will be sold in the normal course of business
The average cost method assumes that ending inventory consists of
A mixture of all the goods available for sale.
terms like 2/10, n/30 represent what?
A purchase discount
What is a perpetual inventory system?
A system that involves recording inventory purchases and sales on a perpetual (continual) level
Which of the following are included in inventory? A. Assets a retail company acquires for resale. B. Goods that manufacturers produce for sale. C. Assets used in daily operations of the company.
A. Assets a retail company acquires for resale. B. Goods that manufacturers produce for sale.
A company that returns items that were previously purchased on account will debit:
Accounts Payable
Which of the following would be recognized as inventory?
An item that is manufactured and held for future resale.
Which of the following would be recognized as inventory? An item that is manufactured and held for resale. An item that is manufactured and will be used in the company's day to day operations. An item that is held as an investment until its market price increases.
An item that is manufactured and held for resale.
In a periodic inventory system, purchases returns
Are recorded in a separate contract purchases account.
Inventory is an ________
Asset
Cost flow ________ are made to assign dollar amounts to the physical quantities of goods sold and remaining in ending inventory.
Assumptions
In a periodic inventory system, cost of goods sold is recorded when?
At the end of each reporting period
In a periodic inventory system, the inventory account is adjusted
At the end of the accounting period. (Not adjusted as purchases and sales are made.)
The difference between LIFO and FIFO disclosed in the notes to the financial statements of a company currently utilizing the LIFO cost flow assumption is sometimes referred to as the
LIFO reserve
Which inventory costing method assumes that cost of goods sold and ending inventory consist of a mixture of all the goods available for sale?
Average cost
Which of the following would be recognized as inventory? A. An item that is held as an investment until its market price increases. B. An item that is manufactured and held for future resale. C. An item that is manufactured and will be used in the company's day to day operations.
B. An item that is manufactured and held for future resale.
Which of the following items should be classified as inventory for a company that manufactures beach umbrellas? A. The office building where wholesale umbrella sales occur. B. The canvas used in production of the umbrellas. C. Office and administrative desks and computers. D. The finished umbrellas ready for sale.
B. The canvas used in production of the umbrellas. D. The finished umbrellas ready for sale.
Which of the following accounts are typically reported on the balance sheet of a manufacturing company? A. Cost of goods sold B. Work in process C. Raw materials D. Finished goods
B. Work in process C. Raw materials D. Finished goods
Match the account names with the correct financial statement.
Balance Sheet-Inventory Income Statement-Cost of Goods Sold
Green Corp. uses a periodic inventory system. Cost of beginning Inventory is $1,000. During the year, Green purchases inventory costing $11,000. Based in physical count, Green determines that inventory costings $1,800 is still on hand. Green Corporation's cost of goods sold will be
Beginning Inventory + Purchase inventory - closing inventory = cost of goods sold. $10,200.
Which of the following require inventory to be valued at the lower of cost and net realizable value?
Both U.S. GAAP and IFRS
If a company has a policy of not including shipping charges in cost of goods sold, which of the following must occur?
Both the amount of freight-out charges incurred during the period and the income statement classification of charges must be disclosed
Sabina Company, a fashion retailer, shows the following selected assets on its balance sheet. Indicate which account would be properly classified as inventory. Options: 1) office supplies 2) deliver trucks 3) business attire
Business attire
Inventory Turnover Ratio
COGS / Average Inventory
which of the following correctly reflects the determination of COGS in a periodic inventory system?
COGS=BI+NP-EI
The disclosure that shows the difference in the cost of inventory between LIFO and FIFO is referred to as the
LIFO reserve
Arranging for another company to sell a company's product is referred to as ______.
Consignment
In a perpetual inventory system the inventory account is
Continually adjusted
In a perpetual inventory system the inventory account is?
Continually adjusted
franchise
Contract term Contractual agreement in which an entity may use a company's name, products and formulas.
Inventory cost below assumptions can be used to assign dollar amounts to
Cost of Goods Sold Ending Inventory
Determining the physical quantities of goods is the first step in measuring what?
Cost of Goods Sold and Inventory
The year-end adjustment to mark inventory down to net realizable value will involve a debit to _____.
Cost of Goods Sold for $500
Expense is classified as____
Cost of goods sold
In a periodic inventory system, purchase returns are close to what account at the end of the reporting period?
Cost of goods sold
Suppose that Michale Company operates in an environment of rising prices and utilizes the periodic inventory system. If the company were to use the LIFO inventory method, its cost of goods would be $500,000; if it were to use the FIFO method, its cost of goods sold would be $400,000. Based on this information, which of the following predictions would be correct with respect to the weighted-average cost method?
Cost of goods sold would be between $400,000 and $500,000.
Western company begins the year with $50,000 of inventory on hand. During 2018, western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry to record the purchase of inventory during the year includes which of the following?
Credit Cash 100,000 Debit Purchases 100,000
Western Company begins the year with $50,000 of inventory on hand, During 2018 western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000 and the cost of the inventory sold was $40,000. Assuming Western uses a perpetual inventory system, the journal entry to record the sale and cost of inventory during the year includes which of the following
Credit Sales revenue $70,000 Debit Accounts receivable $70,000 Debit cost of goods sold $40,000 Credit inventory $40,000
Western company begins the year with $50,000 of inventory on hand. During 2018, western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming western uses a periodic inventory system, the journal entry at the end of the year once the physical count occurs includes which of the following
Credit purchases $100,000 Debit cost of goods sold $40,000 Debit inventory (ending) $110,000 Credit inventory (beginning) $50,000
All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. Which of the following will be recorded on May 21?
Credit to Accounts Payable for $4,800
A supplier offers a company terms 3/10, n/30 for a $10,000 purchase on account on January 1. The company uses a perpetual inventory system to record transactions. If the company makes the payment on January 10, the entry to record the payment will include a:
Credit to Inventory for $300
All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. Which of the following will be recorded on February 25?
Credit to Sales Revenue for $6,000
True or false: A periodic inventory system allows management to determine the amount of goods on hand without having to take a physical count.
False - A periodic inventory system does not track inventory changes and a physical count is necessary.
At the end of an accounting period, it is important to ensure proper inventory ____________ to determine the ownership of goods in transit
Cutoff
Clark uses the perpetual inventory system. Clark sells goods to a customer on account for $1,000. The cost of the goods sold was $700. Which of the following entries are required?
Debit Accounts Receivable $1,000; credit Sales Revenue $1,000 Debit Cost of Goods Sold $700; credit Inventory $700
Josh Corporation uses the perpetual inventory system. Josh sells goods to a customer on account for $2,000. The cost of goods sold is $1,500. What is the entry required to record the expense of the inventory sold?
Debit Cost of Goods Sold $1,500; credit Inventory $1,500
Maier Company purchases inventory from Kunze Corporation and debits inventory and credits accounts payable to record the transaction. Which of the following journal entries would Kunze make to record the sale?
Debit accounts receivable, credit sales revenue
How do we record the purchase of inventory?
Debit inventory (an asset), if paid in cash credit cash, or more likely if paid on account credit accounts payable, which increases total liabilities wi
A LIFO liquidation occurs when inventory quantities _____.
Decline
A LIFO liquidation occurs when inventory quantities____.
Decline
When a company returns inventory to the seller, net purchases
Decrease
What is the first step in measuring inventory and cost of goods sold?
Determining the physical quantities of goods.
The ____inventory cost flow assumption typically approximates the actual physical flow of inventory items of most companies.
FIFO
The amount reported on the balance sheet approximates current cost of inventory.
FIFO
Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption?
FIFO
markup cancellation
Elimination of an additional markup
Inventory cost flow assumptions can be used to assign dollar amounts to
Ending inventory Cost of goods sold
Which inventory cost flow method approximates the physical flow of inventory items?
FIFO
Which inventory costing method assumes that items in ending inventory are the most recently acquired?
FIFO
Which inventory costing method assumes that items sold are those that were acquired first?
FIFO
Which of the following are noncurrent tangible assets?
Equipment machinery land
the ____ inventory cost flow assumption typically approximates the actual physical flow of inventory items of most companies.
FIFO
the _______ inventory cost flow assumption typically approximates the actual physical flow of inventory items of most companies
FIFO
which inventory costing method assumes that items in ending inventory are most likely required?
FIFO
The LIFO reserve shows how ending inventory would have differed if the company had utilitzed __________ or __________, instead of LIFO.
FIFO Weighted-Average
The three major inventory cost flow assumptions are
FIFO (first-in, first-out), LIFO (last-in, first-out), and weighted-average cost
The purchase discount term, 2/10, n/30, means that the purchaser ______.
has 10 days from the purchase date in which to pay and receive a 2% discount
What type of expenditures should be included in the cost of inventory of a merchandising company?
Expenditures necessary to bring inventory to necessary condition and sales location and expenditures necessary to acquire inventory
What type of expenditures should be included in the cost of inventory of a manufacturing company? (Select all that apply.)
Expenditures necessary to bring inventory to sales location, Expenditures necessary to acquire inventory.
What type of expenditures should be included in the cost of inventory of a manufacturing company
Expenditures necessary to bring inventory to sales location. Expenditures necessary to acquire inventory.
What type of expenditures should be included in the cost of inventory of a manufacturing company?
Expenditures necessary to bring inventory to sales location. Expenditures necessary to acquire inventory.
When inventory is sold, the cost of inventory is recognized as an _____________
Expense
Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest cost of goods sold?
FIFO
Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest pretax income?
FIFO
Determine which method will result in higher profitability when inventory costs are rising.
FIFO
For internal record keeping, most companies carry their inventory using the _____ basis.
FIFO
Generally, if a company wants its inventory cost flows to be the same as the inventory's physical flows, what inventory method would it use?
FIFO
Most closely approximates the actual physical flow of inventory
FIFO
The ____________ inventory cost flow assumption typically approximates the actual physical flow of inventory items of most companies
FIFO
Match the inventory cost flow assumptions on the left with a scenario on the right Words 1) FIFO 2) LIFO Possible definitions A) Provides better matching of current revenues with current inventory cost B) Most closely approximates that actual physical flow of inventory
FIFO - Most closely approximates the actual physical flow of inventory LIFO - provides better matching of current revenues with current inventory cost
Which of the following inventory methods result in the same ending inventory and cost of goods sold
FIFO - periodic and perpetual
When inventory costs are rising, the _____ results in a higher reported inventory.
FIFO Method
Bernie Corp. uses the FIFO inventory method to calculate cost of goods sold for financial reporting purposes. Which of the following methods can Bernie use for tax purposes?
FIFO or weighted average only
Which of the following inventory methods result in the same ending inventory and cost of goods sold?
FIFO periodic inventory system FIFO Perpetual Inventory System
Which of the following inventory methods result in the same ending inventory and cost of goods sold?
FIFO perpetual inventory and FIFO periodic inventory system
Which inventory methods result in the same ending inventory and cost of goods sold?
FIFO perpetual inventory system FIFO periodic inventory system
Consistent with IFRS, which of the following cot flow assumptions are currently permitted?
FIFO, weighted average
Many companies maintain their internal records using _____ or the average cost method, but use ______ for external reporting and income tax purposes.
FIFO; LIFO
Consistent with IFRS, which of the following cost flow assumptions are currently permitted?
FIFO; weighted-average
The LIFO reserve shows how ending inventory would have differed if the company had utilized _____ or ____, instead if LIFO.
FIFO; weighted-average
A periodic inventory system allows management to determine the amount of goods on hand without having to take a physical count. T/F
False
Goods shipped F.O.B. destination are included in the purchaser's inventory while the goods are in transit. T/F
False
True or False: the measurement of inventory and cost of goods sold starts with determining the cost per unit of inventory.
False: regardless of the inventory system used, the first step in measuring inventory and cost of goods sold is determining the physical quantities of goods
Which of the following is true regarding the use of gross and the net method of accounting for purchase discounts?
Financial statements do not differ under gross and net methods if discounts are always taken, the net method results in a higher gross margin than the gross method if discounts are not taken
Inventory costs that relate to products that are ready for sale are transferred to
Finished goods inventory
The FIFO method assumes that units sold are the___ units acquired.
First
The shipping term FOB stands for
Free on board
Perpetual inventory
Freight is added directly into the inventory account
Inventory cost flow assumptions can be used to assign dollar amounts to (Select all that apply.)
Goods Sold; ending inventory
Ownership of Inventory at the end of the accounting period is determined for
Goods shipped by suppliers. Goods shipped to customers.
Ownership of inventory at the end of the accounting period is determined for
Goods shipped to customers and by suppliers
Gross Profit Ratio
Gross Profit / Net Sales
The gross profit ratio is computed as _____ divided by net sales.
Gross profit
If prices rise continually during the year, cost of goods sold tends to be _______ using the periodic LIFO method than using the perpetual LIFO method.
Higher
Dollar amounts are assigned to goods sold and goods remaining in ending inventory by making an assumption regarding what?
How units of goods and their associated costs flow through the system.
Dollar amounts are assigned to goods sold and goods remaining in ending inventory by making an assumption regarding what?
How units of goods are their associated costs flow though the system
Which method(s) permit the offsetting of bank overdrafts against cash balances?
IFRS only
In a LIFO inventory system, inventory costs shown in the balance sheet may be distorted because they may represent costs
Incurred several years earlier
Items held for sale in the normal course of business are referred to as __________.
Intentory
_____ consist of assets that a retail or wholesale company acquires for resale or goods that manufacturers produce for sale.
Inventories
__________ consist of assets that a retail or wholesale company acquires for resale or goods that manufacturers produce for sale.
Inventories
Items a company intends to sell in the normal course of business, has in production for future sale, or uses currently in production, are all examples of what?
Inventory
Items held for sale in the normal course of business are referred to as ______.
Inventory
Which of the following is true of a period of falling inventory costs?
LIFO will report higher gross profit than FIFO.
The Dollar Value LIFO method extends the concept of ___________ __________ by allowing a company to combine a large variety of goods into one pool.
Inventory Pools
In a perpetual inventory system, which buyer accounts are reduced at the time a purchase return occurs?
Inventory and accounts payable
The year-end adjustment to mark inventory down to net realizable value will involve a credit to _____.
Inventory for $500
A perpetual inventory system continuously records changes in what?
Inventory quantity and cost
In a perpetual inventory system, when inventory is returned which accounts will the purchaser adjust to reflect the effect of the return.
Inventory, accounts payable
Which of the following is a correct interpretation of the information provided by the gross profit margin?
It indicates the percentage of each sales dollar available to cover other expenses.
Which of the following is a correct interpretation of the information provided by the gross profit ratio?
It measures the amount by which the inventory sale exceeds its cost.
A ___________ inventory pool groups items based on physical similarities
LIFO
A(n) _____ inventory pool groups items based on physical similarities.
LIFO
A(n) __________ inventory pool groups items based on physical inventories.
LIFO
Assuming that prices raise 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 highest cost of goods sold?
LIFO
Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest cost of goods sold?
LIFO
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
If a company uses _____ to measure taxable income, they must use the same method for external financial reporting.
LIFO
If a company uses __________ to measure taxable income, they must use the same method for external financial reporting.
LIFO
If a company uses ___________ to measure taxable income, they must use the same method for external financial reporting
LIFO
In which type of inventory costing system are inventory costs on the balance sheet generally out of date?
LIFO
Most closely approximates the actual physical flow of inventory
LIFO
The ____ inventory method assumes that the units in ending inventory were the items acquired first.
LIFO
The __________ inventory method assumes that units in ending inventory were the items acquired first.
LIFO
The ______________ method assumes that units sold are those most recently acquired
LIFO
The amount reported on the income statement approximately matches current cost with current revenue.
LIFO
The primary benefit for choosing this method is that it tends to save taxes.
LIFO
When prices increase, the _____ inventory method tends to decrease a company's tax liability during a particular fiscal period.
LIFO
When prices increase, the ______ inventory method provides the best matching of revenue and expenses.
LIFO
When prices increase, the ______________ inventory method tends to decrease a company's tax liability during a particular fiscally period.
LIFO
When prices rise, which inventory method tends to result in lower income and a lower tax liability?
LIFO
Which inventory costing method assumes that the units sold are the most recent units purchased
LIFO
Which inventory costing method assumes that the units sold are the most recent units purchased?
LIFO
__ inventory pool groups items based on physical similarities.
LIFO
inventory cost on the BS generally out of date with ______ inventory costing system
LIFO
which inventory costing method assumes that units sold are the most recent units purchased
LIFO
Vogel Company maintains its inventory records using the FIFO assumption, but reports its inventory consistent with LIFO. At the end of the year, Vogel converts its inventory balance from FIFO to LIFO by using the
LIFO adjustment
AKA for LIFO reserve
LIFO allowance
Another name for the LIFO reserve account is
LIFO allowance
If a company uses LIFO to measure its taxable income, the IRS requires that LIFO also be used to measure income reported to investors and creditors.This is know as the
LIFO conformity rule
if a company uses LIFO to measure its taxable income, the IRS requires that LIFO also be used to measure income reported to investors and creditors. This is know as the
LIFO conformity rule
Turn Co utilizes the LIFO inventory method to calculate taxable income. Which method is available to Turn for financial reporting purposes?
LIFO only
Turn Company utilized the LIFO inventory method to calculate taxable income. Which method is available for financial reporting purposes?
LIFO only
Turn Company utilizes the LIFO inventory method to calculate taxable income. Which method is available to Turn for financial reporting purposes?
LIFO only
The layer year cost index is calculated by dividing the cost in ______ year by the cost in ______ year.
Layer; base
If goods are shipped f.o.b shipping point, at time of shipment
Legal title passes to the buyer.
Use of LIFO inventory pools reduces the chance of unintentional LIFO layer _______________.
Liquidations
Use of LIFO inventory pools reduces the chance of unintentional LIFO layer___
Liquidations
When assets are purchased in a group for a single sum, it is referred to as a
Lump-sum purchases
Finished goods is a type of inventory found on a _____ company's balance sheet.
Manufacturing
Inventory for a ____ company consists of raw materials, work in process, and finished goods.
Manufacturing
Inventory for a ______ company consists of raw materials, work in process, and finished goods.
Manufacturing
The goods a wholesale company purchases in finished for are referred to as what?
Merchandise inventory
The goods a wholesale company purchases in finished form are referred to as what?
Merchandise inventory
FIFO
Most closely approximates the actual physical flow of inventory
Orange Co., a computer retailer, shows the following selected assets on its balance sheet. Indicate which account would be properly classified as inventory. Desks, Mouse pads, Office supplies, Patents.
Mouse Pads
Orange Co., a computer retailer, shows the following selected assets on its balance sheet. Indicate which account would be properly classified as inventory.
Mouse pads
Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are
included in geralds inventory
Which of the following methods are acceptable in accounting for purchases discounts?
Net method Gross method
The gross profit ratio highlights the relationship between which of the following?
Net sales revenue and cost of goods sold
Perpetual Inventory System
Neumann Company can determine the cost of inventory still on hand by referring to the inventory account
The FIFO inventory method assumes that units remaining in ending inventory are the ___________ units purchased.
Newest
deducted in the retail column
Normal shortages (spoilage, breaekage, theft) (after calculating the cost-to-retail %)
Freight-in on purchases is typically recognized as
Part of the cost of purchasing inventory.
A physical count of inventory is necessary in a __________ inventory system to determine cost of goods sold.
Periodic
In a(n) _____ inventory system, cost of goods sold is recorded at the end of the accounting period.
Periodic
Purchase returns are recorded in a separate contra purchase account in a ___ inventory system.
Periodic
Purchase returns are recorded in a separate contra purchase account in a __________ inventory system
Periodic
Which inventory system allocates cost of goods available for sale only at the end of each reporting period?
Periodic inventory system
Which inventory system allocates cost of goods available for sale only from time to time?
Periodic inventory system
Which inventory system allocates cost of goods available for sale only from time to time??
Periodic inventory system
Match each Inventory system with the method for recognizing freight-in on purchases. Periodic Inventory Perpetual Inventory
Periodic: A separate freight-in account used. Perpetual: Freight is added directly to the inventory account.
A(n) _________ inventory system adjusts inventory at the end of the each reporting period.
Periodical
A _______ inventory system units from purchase to sale.
Perpetual
A(n)________ inventory system adjusts for each change caused by a purchase, a sale, or a return of merchandise.
Perpetual
In a(n) _____ inventory system, the average cost method is applied by computing a moving average unit cost each time inventory is purchased.
Perpetual
Match each scenario with the type of inventory system.
Perpetual inventory system - Neumann Company can determine the cost of inventory still on hand by referring to the inventory account. Periodic inventory system - Shelly Company must first take a physical inventory to determine the cost of inventory still on hand.
Which inventory system recognizes cost of goods sold and decreases inventory each time a sale occurs?
Perpetual inventory system.
Perpetual inventory system
Peter Company recognizes cost of goods sold each time it recognizes a sale.
Inventory units are grouped in LIFO inventory pools based on similar ____ characteristics.
Physical
Measurement if inventory and cost of good sold always starts with determining the ________ quantities of goods.
Physical
A slowing turnover ratio combined with higher than normal inventory levels may indicate which of the following?
Potential for decreased production, potential for inventory becoming obsolete
When merchandise is shipped fob shipping point, who includes the inventory on their balance sheet when the goods are with the common carrier?
The purchaser.
Long-term assets can be classified as
Property plant equipment intangible
LIFO
Provides better matching of current revenues with current inventory costs
In a perpetual inventory system, a new weighted-average unit cost is calculated after each ___________.
Purchase
_____ _____ represent reductions in the amount to be paid if payment is made within a set time period.
Purchase Discounts
__________ __________ represent reductions in the amount to be paid by the buyer if payment is made within a set time period.
Purchase discounts
Wholesale and retail companies
Purchase goods that are primarily in completed form
Wholesale and retail companies
Purchase goods that are primarily in completed form.
Wholesale and retail companies _________? Manufacturing companies __________?
Purchase goods that are primarily in completed form; Purchase goods that are used to produce another product.
Manufacturing companies
Purchase goods that are used to produce another product
Manufacturing companies
Purchase goods that are used to produce another product.
Debit Inventory, credit Accounts Payable
Purchase of inventory on account
The cost of compliance purchase from another manufacturer that will become part of the finished product are recognized in the __________ ___________ account.
Raw materials
The cost of components purchased from outside companies that will become part of the finished product are referred to as what?
Raw materials
Which of the following accounts are typically reported on the balance sheet of a manufacturing company? Select all that apply.
Raw materials, work in process, & finished goods.
If prices have changed a company uses dollar-value LIFO, we need to determine whether an observed increase in inventory is a(n) ___________ increase in the quantity of inventory.
Real
Advantages of using LIFO inventory pools include which of the following?
Reduce the risk of LIFO layer liquidations, simplify recordkeeping
The dollar-value LIFO (DVL) method
Reduces the risk of liquidation of layers and simplifies recordkeeping.
Which of the following is an advantage of using LIFO in a period of rising costs?
Results in lower taxes
Debit Accounts Receivable, credit Sales Revenue
Sale of inventory on account
If goods are shipped F.O.B. destination, the _____ usually is responsible for shipping.
Seller
If goods are shipped fob destination, the ___ seller usually is responsible for shipping.
Seller
Periodic Inventory System
Shelly Company must first take a physical inventory to determine the cost of inventory still on hand
Periodic inventory system
Sherman Company recognizes cost of goods sold after completing a physical inventory.
Which of the following are disadvantages of unit LIFO? (Select all that apply.)
Significant recordkeeping costs, Possibility of LIFO liquidation
Which inventory costing method matches each unit sold with its actual cost?
Special identification method
Which inventory costing method matches each unit sold with its actual cost?
Specific indenification
The average cost method assumes that ending inventory consists of
a mixture of all the goods available for sale
The inventory amount on the balance sheet represents the cost of inventory __________ whereas the cost of goods sold on the income statement represents the cost of the inventory __________.
Still on hand; sold
the average cost method assume that cost of goods sold consists of
a mixture of all the goods available for sale
Which of the following is correct regarding financial statement note disclosures for merchandise inventory valuations for a company utilizing LIFO?
Supplemental notes may show amounts that would have been determined for a non-LIFO method
Daryl Corp. purchases 10,000 units of inventory on account for $50,000. Two days after receiving the inventory, Daryl discovers that 1,000 units are defective and returns the defective units to the vendor. The company utilizes a perpetual inventory system. As result of this return,
The accounts payable balances decreases. The inventory balance decreases.
Timothy Co purchases merchandise costing $100,000. The payment terms are 3/10, n/30. If Timothy Co. utilizes the gross method and pays the amount within the 10-day period.
The cost of inventory will be reduced by $3000
at what amount are accounts receivable initially recorded?
The exchange price agreed on by the buyer and seller.
What of the following could motivate a company that uses LIFO for external reporting to use another method for internal recordkeeping? (Select all that apply.)
The high recordkeeping cost of LIFO, Contractual agreements such as bonus contracts.
Which of the following is not a characteristic of an asset classified as inventory?
The item is currently used as part of a company's day-to-day operations
Which of following is not a characteristic of an asset classified as inventory?
The item is currently used as part of the company's day to day operations.
Which of the following is not a characteristic of an asset classified as inventory?
The item is currently used as part of the company's day-to-day operations
The LIFO inventory method assumes that the units that remain and ending inventory are
The oldest units in inventory.
On January 1, Gerhard Company has 100 units in beginning inventory. On January 3, the company purchases 500 units; on February 23, 800 units; and on March 19, 1000 units. If the company sells 100 units on January 4, which units would be assumed to have been sold in a periodic FIFO system
The units in beginning inventory
Which of the following is correct?
There is no requirement to choose a cost flow assumption that approximates actual physical flow of units.
the average cost method assumes that cost of goods sold consists of
a mixture of all the goods available for sale
A perpetual inventory system allows management to determine the amount of goods that should be on hand without having to take a physical count
True
A perpetual inventory system allows management to determine the amount of goods that should be on hand without having to take a physical count. T/F
True
Goods on consignment should be included in the inventory of the consignor even though not in their physical possession. T/F
True
LIFO, FIFO, and the weighted average inventory costing methods are all allowed under GAAP
True
True or false: The impact on reported income numbers is an important consideration when choosing an inventory cost flow method.
True
True or false: goods on consignment should be included in the inventory of the consignor even though not in their physical possession
True
Dollar-value LIFO allows a company to combine a large variety of goods into one pool
True DVL extends the concept of inventory pools and allows various goods to be combined into one pool.
True or false: Dollar-value LIFO allows a company to combine a large variety of goods into one pool.
True - DVL extends the concept of inventory pools and allows various goods to be combined into one pool.
True or false: Dollar-value LIFO allows a company to combine a large variety of goods into one pool.
True: DVL extends the concept of inventory pools and allows various goods to be combined into one pool
The average cost method assumes that ending inventory consists of
a mixture of all the goods available for sale.
LIFO, FIFO and average cost are acceptable inventory costing methods under which set of account standards?
U.S. GAAP
Which set of standards require more disaggregation of accounts receivable and notes receivable in the balance sheet or notes?
U.S. GAAP
correctly match the impairment indicator guidance with the accounting standards the pertain to
U.S.GAAP-provides an illistrative list of information to consider in evaluating receivable for impairment IFRS- provides an illustrative list of loss events
When a company determines the quantity of inventory items, it must consider
Units on consignment, units it currently possesses, & units in transit.
The average cost method assumes that the ending inventory consists of
a mixture of all the goods available for sale.
The weighted average cost method assumes that cost of goods sold consists of
a mixture of all the goods available for sale.
Which of the following cost flow assumptions are acceptable under International Financial Reporting Standards?
Weighted Average, First-in, First-out
Which of the following cost flow assumptions currently are acceptable under US GAAP?
Weighted-average FIFO LIFO
The LIFO reserve shows how ending inventory would have differed if the company had utilized _____ or _____, instead of LIFO.
Weighted-average and FIFO
At what point does a manufacturing company transfer costs to finished goods?
When the product is 100% complete
At what point does a manufacturing company transfer costs to finished goods?
When the product is 100% complete.
What is required at the end of a reporting period in a periodic inventory system?
a physical count of the period's ending inventory so an adjustment can be made
Using the perpetual inventory system, what is the effect of a sale of inventory on assets?
assets increase by the sales price of the inventory assets decrease by the cost of the inventory
In a manufacturing company, raw materials, direct labor, and overhead flow from one account to the next in the following order...
Work in Process Finished goods Cost of Goods Sold
The LIFO conformity rule requires that _____.
a company that uses LIFO for tax reporting to also use LIFO for financial reporting
we typically report inventory as
a current assert in the balance sheet
Under the DVL approach, cost indexes are used to determine whether
a real increase in inventory has occurred
Which of the following is a cost of offering a cash discount?
a reduction in the amount of cash collected from customers who take advantage of the discount
Periodic inventory
a separate freight-in account is used
when LIFO inventory pool is used and the quantity of ending inventory increases, ending inventory will consist of beginning inventory plus
a single layer at the average acquisition cost
When a LIFO inventory pool is used and the quantity of ending inventory increases, ending inventory will consist of beginning inventory plus
a single layer at the average cost of purchases during the period
When a LIFO inventory pool is used and the quantity of ending inventory increases, ending inventory will consist of beginning inventory plus.
a single layer at the average cost of purchases during the period
Joachim Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1,200 units, pretax income would have been a) $2,000 lower b) $2,000 higher
a) $2,000 lower
Determining the physical quantities of goods is the first step in measuring which of the following? a) Cost of goods sold b) Inventory c) Sales
a) Cost of goods sold b) Inventory
Which of the following inventory methods result in the same ending inventory and cost of goods sold? a) FIFO perpetual inventory system b) FIFO periodic inventory system c) LIFO perpetual inventory system d) LIFO periodic inventory system
a) FIFO perpetual inventory system b) FIFO periodic inventory system
A perpetual inventory system continuously records changes in what? a) Inventory quantity b) Inventory cost c) Inventory production d) Inventory completion
a) Inventory quantity b) Inventory cost
Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest pretax income? a) LIFO b) FIFO c) weighted-average
a) LIFO
A periodic inventory system a) does not track the cost of merchandise sold. b) tracks the cost of merchandise sold.
a) does not track the cost of merchandise sold.
Which of the following items should be classified as inventory for a company that manufactures accounting textbooks? a) textbooks ready to be shipped to bookstores b) delivery trucks used to ship books to bookstores c) paper used in the printing process d) office equipment used by administrative staff.
a) textbooks ready to be shipped to bookstores c) paper used in the printing process
in a perpetual inventory system, which buyer accounts are reduced at the time a purchase return occurs?
accounts payable, inventory
A(n) ____________________________ ______________________________ is the legal right to receive cash from a credit sale and represents an asset of the company
accounts receivable
calculate bad debt expense for the year
accounts receivable balance at the beginning of the year X percentage of credit sales
match each term with its definition
accounts receivable-informal credit agreement with trade customers note receivable- formal credit arrangement between borrower and lender
The average debt necessary to self-construct an assets is referred as the average
accumulated expenditures
What describes a cost that would be properly classified as overhead for a manufacturing company?
all costs necessary to manufacture a product other than those that can be directly linked to specific goods
net income equals
all revenues minus all expenses
Some companies refer to LIFO reserve as a LIFO ______
allowance
If a company believes its sales returns will be material, an adjusting entry for expected returns should be made to which account?
allowance for sales returns
determine the amount of accounts receivable written off during 2016
allowance for uncollectible accounts + bad debt expense - credit balance at the beginning of year 1
Inventory is
an asset
Which of the following ae included in inventory
assets a retail company acquires for resale goods that manufacturers produce for sale
Because it is difficult to estimate the future value of research and development, FASB requires that research and development costs be treated as
an expense on the income statement
Which of the following would be recognized as inventory?
an item that is manufactures and held for future resale
Greenland Company changed from FIFO to the LIFO method. Greenland should
apply LIFO from that point forward
When a company receives an asset from an unrelated party by a donation, the assets are valued at ____________ value.
appraisal
A company issues its equity securities to purchase land. The common stock is not publicly traded. The best indicator of fair value is the
appraised value of the land
FIFO most closely
approximates the actual physical flow of inventory
in a periodic inventory system, purchase returns
are recorded in a separate contra purchases account
In a periodic inventory system, purchase returns___
are recorded in a separate contra purchases account.
merchandising companies can
assemble, sort, repackage, redistribute, store, refrigerate, deliver, or install but they do not create the products.
Inventory expected to be returned is included in what type of account
asset
Manfred mining company is required to restore a piece of land to it original condition after it completes extraction of precious metals. From a financial reporting perspective, the related obligation is referred to as an asset.
asset retirement obligation (ARO)
Unsold inventory is classified as a(n) ____ on the _____ _____.
asset; balance sheet
Which of the following is correct with respect to perpetual and periodic LIFO? a) Amounts of cost of goods sold and amounts of ending inventory are always the same under the two systems. b) Amounts of cost of goods sold and amounts of ending inventory tend to be different under the two systems.
b) Amounts of cost of goods sold and amounts of ending inventory tend to be different under the two systems.
The cost of goods sold equation assumes that all inventory on hand at the end of the period was sold and does not account for damaged or stolen merchandise. This is a disadvantage in which type of inventory system? a) Perpetual b) Periodic
b) Periodic
Consistent with International Financial Reporting Standards, which of the following cost flow assumptions are currently permitted? a) last in, first out b) first in, first out c) weighted-average
b) first in, first out c) weighted-average
The balance sheet approach estimates _________ ___________ expense by estimating the net realizable value of accounts receivable.
bad debt
The expense associated with the estimate of the amount of accounts receivable that may not be collected during the year is referred to as
bad debt expense
Cash and cash equilvalents are reported as a single account in the ______________________ _________________________________
balance sheet
steps necessary to estimate ending inventory under the gross profit method
beginning inventory (from records) + Net purchases (from records) = goods available for sale - cost of goods sold = net sales -estimated gross profit of 40% = estimated cost of goods sold goods available for sale - estimated cost of goods sold =estimated ending inventory REAL ANSWER 1. calculate cost of goods available for sale 2. apply the estimated gross profit ratio to sales 3. calculate an estimate of cost of goods sold 4. Calculate an estimate of ending inventory
Which of the following correctly reflect the determination of cost of goods sold in a periodic inventory system.
beginning inventory + net purchases - ending inventory
Using the LIFO retail method, a new layer at retail is determined by subtracting what from ending inventory at retail?
beginning inventory at retail
Which of the following items are readily available from an inventory account under the perpetual inventory system?
beginning inventory balance, ending inventory balance, cost of units sold, individual purchases
The measurement of inventory and cost of goods sold starts with determining the physical quantities of goods in which of the following systems?
both the periodic and perpetual inventory system
What could cause a difference between the quantities of inventory determined by physical count and the quantities tracked by a perpetual inventory system?
breakage spoilage thefts system errors
The dollar-value LIFO method extends the concept of inventory pools by allowing companies to
combine a large variety of goods in one pool
the dollar-value LIFO method extends the concept of inventory pools by allowing companies to
combine a large variety of goods in one pool
The dollar-value LIFO method extends the concept of inventory pools by allowing companies to?
combine a large variety of goods in one pool.
A nonmonetary exchange is considered to have ______ _____ if the future cash flows will change as a result of the exchange
commercial substance
The LIFO difference (sometimes called LIFO reserve) helps investors
compare the performance of companies that use different cost flow assumptions.
A cash restriction imposed by a bank wherein the debtor must leave a certain amount of funds such as 5% of the original loan in the low-interest or noninterest-bearing account is a
compensating balance
the cost of inventory includes expenditures to acquire the inventory and bring it to its desired __ and __ for sale or for use in the manufacturing process.
condition and location
The cost of inventory includes expenditures to acquire the inventory and bring it to its desired ______ and ______ for sale or for use in the manufacturing process.
condition; location
The cost of inventory includes expenditures to acquire the inventory and bring it to its desired __________ and __________ for sale or for use in the manufacturing process.
condition; location
Decreases in inventory value are recognized as they occur, but not increases. This is consistent with the ____________________ principle or concept
conservatism
The gain or loss on disposal of an asset is calculated as
consideration received less the book value of asset sold
Arranging for another company to sell a company' products is referred to as a _____
consignment
Arranging for another company to sell a company's products is referred to as a
consignment
Arranging for another company to sell a company's products is referred to as a _____.
consignment
arranging for another company to sell a company's products is reffered to as _
consignment.
A company applies the _____________________________concept when it applies the same accounting principles from period to period to allow for more comparability.
consistency
In a perpetual inventory system the inventory account is
continually adjusted
In a perpetual inventory system the inventory account is
continually adjusted.
The most critical element in determining if a company can account for the transfer of receivables as a sale is the surrender of ___________
control
Under the LIFO retail inventory method, a new layer is converted to cost by multiplying it by the_____________ period cost-to-retail percentage.
current
inventory is a ____ reported in the _____ and represents the cost of ____________
current asset, balance sheet, inventory not yet sold at the end of the period
Calculate goodwill
current assets + property, plant, and equipment+ other assets- current liabilities- long-term liabilities=amount cash-previous amount
When the DVL method is used, a LIFO layer is added when
current period ending inventory at base-year cost has increased
At the end of an accounting period, it is important to ensure proper inventory _____ to determine the ownership of goods in transit.
cutoff
At the end of an accounting period, it is important to ensure proper inventory __________ to determine the ownership of goods in transit.
cutoff
At the end of an accounting period,it is important to ensure proper inventory___to determine the ownership of goods in transit.
cutoff
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry to record the SALE of inventory during the year includes which of the following?
debit A/R 70k credit sales revenue 70k
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory of $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry to record the sale of inventory during the year includes which of the following?
debit accounts receivable $70,000 credit sales revenue $70,000
Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?
debit inventory
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory of $100,000 cash. Sales for the year, all on account, totaled $70,000 and the cost of the inventory sold was $40,000. Assuming Western uses a perpetual inventory system, the journal entry to record the purchase of inventory during the year includes what?
debit inventory $100,000 credit cash $100,000
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory of $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry at the end of the year once the physical count occurs includes which of the following?
debit inventory (end) $110,000 debit COGS $40,000 credit inventory (beg) $50,000 credit purchases $100,000
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000 and the cost of the inventory sold was $40,000. Assuming Western uses a perpetual inventory system, the journal entry to record the purchase of inventory during the year includes which of the following?
debit inventory 100k credit cash 100k
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. a physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry to at the end of the year once the physical count occurs includes which of the following?
debit inventory(ending) $110,000 credit purchases $100,000 debit cost of goods sold $40,000 credit inventory(beginning) $50,000
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory of $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry to record the purchase of inventory during the year includes what?
debit purchases $100,000 credit cash $100,000 *periodic system uses the purchase account
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry to record the purchase of inventory during the year includes which of the following?
debit purchases 100k credit cash 100k
Warner Corp. sells goods on account for 10,000 on april 2, the customer returns 3,000 of the merchandise and receives a refund. As of April 20, the customer has paid the account balance in full. What is the entry Warner will make on April 20 when the goods are returned
debit sales returns credit cash
On january 2, Allison Corp. changes from the LIFO to the FIFO method. Its prior-year financial statement notes show a LIFO reserve of $20,000 if it had utilized FIFO in prior years. Allison should make a journal entry that includes a
debit to inventory credit to retained earnings
if the company uses the direct write-off method, what would bad debt expense be for 2016
debit- bad debt expense credit accounts receivable
what is bad debt expense for 2016
debit- bad debt expense credit- allowance for uncollectable accounts
Cheng Corp exchanges equipment in a transaction that has commercial substance. The original cost of the asset surrendered was 90,000 and its accumulated depreciation at the date of exchange was 40,000. The asset received had a fair value of 40,000 and a book value of 35,000. What journal entry should be recorded?
debit- equipment 40,000 loss on exchange 10,000 credit equipment 90,000
determine the amount of accounts receivable written off during 2016
debit-allowance for uncollectible accounts credit-accounts receivable
A LIFO Liquidation occurs when inventory quantities _____________
decline
A LIFO liquidation occurs when inventory quantities
decline
A LIFO liquidation occurs when inventory quantities _____.
decline
A LIFO liquidation occurs when inventory quantities _______.
decline
When inventory quantities _____ during a period, out-of-date inventory layers are liquidated and cost of goods sold will match noncurrent costs with current selling prices in a LIFO inventory costing system.
decline
When inventory quantities __________ during a period, out-of-date inventory layers are liquidated and cost of goods sold will match noncurrent costs with current selling prices in a LIFO inventory costing system
decline
When inventory quantities __________ during a period, out-of-date inventory layers are liquidated and cost of goods sold will match noncurrent costs with current selling prices in a LIFO inventory costing system.
decline
When a company returns inventory to the seller, net purchases
decreases
The allocation of the cost of natural resources to the periods extracted is referred to as ___________ expense
depletion
when adjusting the bank balance in a bank reconciliation, which item must be added to the bank balance
deposits it transit
Accounting for land improvements requires that the land improvements are capitalized and then ________over periods benefited by their use.
depreciated
_______________ cost are incurred after after a natural resource has been discovered but before production begins.
development
with respect to perpetual & periodic LIFO, amounts of cost of goods sold and amounts of ending inventory tend to be
different under the two systems
The ____________ on notes receivable account is a contra account
discount
The transfer of a note receivable to a financial institution for an amount less than the face amount of the note is referred to as
discounting a note receivable
An asset that is traded for another asset is treated as an exchange, whereas an asset that is sold or retired is treated as a(n) _________________.
disposition
A periodic inventory system
does not continuously track the cost of merchandise sold.
A periodic inventory system (Select all that apply.)
does not continuously track the quantity of merchandise; does not continuously track the cost of merchandise sold.
Finished goods are a type of inventory found on a __________ company's balance sheet.
manufacturing
In the effective interest method, interest is calculated by multiplying the outstanding balance of the receivable by the _________ ___________ rate.
effective interest
The inventory turnover ratio is a measure of a company's ___________ in managing its investment in inventory
effectiveness
Which of the following costs would be properly classified as manufacturing overhead?
electricity to operate facility, depreciation of equipment
markdown cancellation
elimination of markdown
Periodic LIFO applies the last-in, first-out concept to total sales and total purchases at the _________ of the reporting period, while perpetual LIFO applies the concept after every purchase is made.
end
Periodic LIFO applies the last-in, first-out concept to total sales and total purchases at the ________________ of the reporting period, while perpetual LIFO applies the concept after every purchase is made
end
Periodic LIFO applies the last-in, first-out concept to total sales and total purchases at the of the reporting period, while perpetual LIFO applies the concept after every purchase is made
end
Inventory cost flow assumptions can be used to assign dollar amount to
ending inventory and goods sold
The broad term that encompasses machinery used in manufacturing, computers and other office equipment, vehicles, furniture, and fixtures is _________.
equipment
An inventory _______ can occur due to the over- or understatement of purchases.
error
Net sales by cost formula
estimated ending inventory at retail * cost-to-retail ratio
The gross profit method is useful in situations where ________of inventory are desirable
estimates
what type of expenditures should be included in the cost of inventory of a merchandising company?
expenditures necessary to bring inventory to necessary condition and sales location, expenditures necessary to acquire inventory
The cost of inventory includes
expenditures to acquire the inventory the cost to bring inventory to its desired condition the cost to bring inventory to its desired location
The cost of inventory includes
expenditures to acquire the inventory, the cos to bring inventory to its desired location, the cost to bring inventory to its desired condition
When inventory is sold and reported as cost of goods sold, the cost of inventory is recognized as a(n) _______.
expense
When inventory is sold, the cost of inventory is recognized as a(n) _____
expense
Cost to develop computer software to be used internally should be treated as a(n) ______, whereas costs after the development stage is complete should be treated as a(n) _____.
expense asset
cost of goods sold is an
expense reported in the income statement and represents the cost of inventory sold
If equipment is purchased specifically for one research and development project, the cost of the equipment is
expensed immediately
Merchandising companies purchase inventory in __________ form, while manufacturing firms __________ the goods.
finished; produce
The FIFO method assumes that units are the _____ units acquired.
first
The FIFO method assumes that units sold are the __ units acquired.
first
The formula for calculating interest includes which one of the following?
face amount X annual rate X fraction of the annual period
In a _________ arrangement, the company sells its accounts receivable to a financial institution and the financial institution handles the billing and collections.
factoring
The two most common types of selling arrangements for accounts receivable are
factoring securitization
An asset retirement obligation is measured at _____ value
fair
Consistent with U.S. GAAP and IFRS, donated assets generally are valued at __________ value.
fair
An exchange of assets that has commercial substance is valued at the_____ value of the assets given or received, whichever is more clearly evident, but an exchange that lacks commercial substance is valued at the_____ value of the assets given
fair book
The basic principle far valuing assets in a nonmonetary exchange is to value the asset received at
fair value
The amount of cost of goods sold determined under the average cost method typically
falls between the amounts determined using LIFO and FIFO
The amount of cost of goods sold determined under the average cost method typically
falls between the amounts determined using LIFO and FIFO.
From the seller's perspective, the discount is viewed as compensation for providing __________ to the buyer.
financing
Once products are completely manufactured, the related cost are transferred to __________ ____________
finished goods
Once products are completely manufactured, the related costs are transferred to _______>
finished goods
Once products are completely manufactured, the related costs are transferred to _________ _________.
finished goods
Once products are completely manufactured, the related costs are transferred to ___________________ ________________.
finished goods
One products are completely manufactured, the related costs are transferred to _______ _______.
finished goods
Perpetual inventory
freight is added directly to the inventory account
added to the cost of inventory
freight-in
recognized as operating expense
freight-out
journal entries
from here on
In an exchange of nonmonetary assets, if the transaction lacks commercial substance, any _____ is deferred but a(n) _____ is recognized immediately.
gain loss
ownership of inventory at the end of the accounting period is determined for
goods shipped to customers goods shipped by suppliers
Inventory cost flow assumptions can be used to assign dollar amounts to.
goods sold, ending inventory
An asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized is ________________.
goodwill
The ___________ method of recording purchase discounts, subtracts the discount from total purchases to determine net purchases
gross
The two methods used for recording sales discounts are the __________ method and the _________ method.
gross net
The _____ _____ ratio indicates the percentage of each sales dollar available to cover expenses other than cost of goods sold and then to provide a profit.
gross profit
The __________ ratio indicated the percentage of each sales dollar available to cover expenses other than cost of goods sold and then to provide a profit.
gross profit
The gross profit ratio is computed as _____ divided by net sales.
gross profit
The gross profit ratio is computed as __________ divided by net sales
gross profit
The gross profit ratio is calculated as
gross profit divided by net sales.
Dollar amounts are assigned to goods sold and goods remaining in ending inventory by making an assumption regarding what?
how units of goods and their associated costs flow through the system
Robert Skinner, an accountant, discovers an error in accounting for an inventory purchase. He should correct the error....
immediately
when a lender believes it is probable that not all principal and interest will be collected on a long-term note receivable, what is recognized
impairment loss
Where must a company indicate the inventory costing method(s) used?
in a disclosure note
Accounts receivable are normally classified
in the balance sheet as current assets
At the end of the fiscal period, Schmidt Company estimates that inventory costing $4,000 that was sold for $10,000 will be returned at the beginning of the following year. Schmidt Company should
include $4000 in ending inventory, reduce cost of goods sold by $4000
Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are
included in Gerald's inventory.
Estimated future sales returns must be
included in ending inventory deducted from cost of goods sold
estimated future sales returns must be
included in ending inventory, deducted from cost of goods sold
Which of the following is an example of a nonoperating expense for a merchandising company?
interest expense
Asset is classified as___
inventory
Items held for sale in the normal course of business are referred to as
inventory
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
The Cost of Freight-in paid by the purchaser is most commonly included in the cost of
inventory
The cost of freight-in paid by the purchaser is most commonly included in the cost of
inventory
The cost of freight-in paid by the purchaser is most commonly included in the cost of ______.
inventory
balance sheet
inventory
the cost of freight-in paid by the purchaser is most commonly included in the cost of
inventory
What is a periodic inventory system?
inventory is not continually recorded, instead it is calculated once a year at the end.
The dollar-value LIFO methods extends the concept of _____ _____ by allowing a company to combine a large variety of goods into one pool.
inventory pools
the dollar-value LIFO method extends the concept of _______ ________ by allowing a company to combine a large variety of goods into one pool
inventory pools
Which of the following can affect earning quality for a company?
inventory write-downs, change in inventory method, choice of inventory method
Finished goods is a type of inventory found on a _____ company's balance sheet.
manufacturing
Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.
inventory, cost of goods sold
Freight-in is recorded as part of ______, whereas freight out is often recorded as ______.
inventory, selling expense
Items held for sale in the normal course of business are referred to as
inventory.
the cost of freight-in paid by the purchases is most commonly included in the cost of __
inventory.
A physical count of inventoy
is required in a periodic inventory system as cost of goods sold is not determined continuously.
Steiner Company's average days in inventory as decreased during 2012 as compared to the prior year. From this information, we can conclude that Steiner___
is selling its inventory faster and has a higher inventory turnover ratio.
Over the total life of a company, total cost of goods sold
is the same under each cost flow assumption
what kind of focus does FIFO have?
it has a balance sheet focus
What focus does LIFO have?
it has a income statement focus
The FASB requires research and development costs to be expensed because
it is difficult to objectively determine the future benefits
Inventory for a ______ company consists of raw materials, work in process, and finished goods.
manufacturing
if goods are shipped f.o.b shipping point, at the time of shipment
legal title passes to the buyer
copyright
life of creator plus 70 years -exclusive right of protection given to a creator of a published work
Inventory costs in the balance sheet with LIFO generally are out of date because they reflect old purchase transactions. It is not uncommon for a company's LIFO inventory balance to be based on unit costs actually incurred several years earlier. This distortion sometimes carries over to the income statement as well. When inventory quantities decline during a period, then these out-of-date inventory layers are liquidated and cost of goods sold will partially match noncurrent costs with current selling prices. If costs have been increasing (decreasing), LIFO liquidations produce higher (lower) net income than would have resulted if the _____ inventory were included in cost of goods sold at current costs.
liquidated
Use of LIFO inventory pools reduces the chance of unintentional LIFO layer
liquidation
Use of LIFO inventory pools reduces the chance of unintentional LIFO layer ___________.
liquidation
Use the LIFO inventory pools reduces the chance of unintentional LIFO layer______.
liquidation
write-downs are common.
loss is included as part of cost of goods sold
write-downs are rare
loss is recognized as a separate item in operating expense
a petty cash fund is an efficient way to handle what type of payments
low cost office supply purchases
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
in times of rising prices, ending inventory determined using LIFO inventory assumption will be ________ than ending inventory determined using the FIFO inventory assumption
lower
The ______ method of valuing inventory was developed to avoid reporting inventory at an amount that is ______ than the benefits it can provide.
lower of cost and net realizable value; greater
Which of the following would be an important consideration for management in choosing the perpetual or periodic inventory system?
management control, cost of implementation
Under the conventional retail method, ___________ are excluded from the calculation of the cost-to-retail percentage.
markdowns
The specific identification method___
matches each unit of inventory with its actual cost and would be beneficial to a company that makes fine jewelry.
The specific identification method:
matches each unit of inventory with its actual cost. would be beneficial to a company that makes fine jewelry.
LIFO provides better
matching of current revenues with current inventory cost
Ruy Company typically tries to sell its oldest inventory items first. Ruy Company
may choose any of the three accepted inventory methods
Ruy Company typically tries to sell its oldest inventory items first. Ruy Company
may choose any of the three accepted inventory methods.
The inventory a wholesale company purchases to resell is referred to as __________ inventory
merchandise
The inventory a wholesale company purchases to resell is referred to as __________ inventory.
merchandise
the inventory a wholesale company purchases to resell is referred to as ___ inventory.
merchandise
these purchase inventories that are primarily in finished form for resale to customers
merchandising companies
A _____ company resells goods while a _____ company produces goods.
merchandising; manufacturing
cash equivalents include which of the following
money market funds, treasury bills, and commercial paper (must have a maturity date no longer than 3 months from the date of purchase)
The lower of cost and net realizable value methods avoids reporting inventory at an amount _________________future benefits.
more than
A company can apply
more than one inventory cost flow assumption
FIFO
most closely approximates the actual physical flow of inventory
In a perpetual inventory system, weighted average cost becomes an average cost
moving
In a perpetual inventory system, weighted-average cost becomes a __________ average cost
moving
In a perpetual inventory system, weighted-average cost becomes a ___________-average cost.
moving
In a perpetual inventory system, weighted-average cost becomes a(n) __________-average cost.
moving
in a perpetual inventory system, weighted-average cost becomes a(n) ______ average cost
moving
a multi step income statement reports _____ levels of profitability.
multiple
Discounts not taken are reported as interest expense under the _____________ method of accounting for discounts
net
GAAP requires disclosure of significant LIFO liquidations with respect to the effect on
net income
If the retail inventory method is used, which of the following are included in the calculation of goods available for sale at retail to approximate average costs?
net markups net markdowns
Which of the following methods are acceptable in accounting for purchase accounts
net method and gross method
Purchase returns by the buyer represent reductions in
net purchases
The estimated selling price of inventory less any costs of completion, disposal, and transportation is referred to as:
net realizable value
The estimated selling price of inventory less costs necessary to sell the inventory is referred to as net
net realizable value
gross profit equals
net revenues (or net sales) minus cost of goods sold
The fixed-asset turnover ratio is calculated as ________________ divided by average fixed assets.
net sales
The gross profit ratio is computes as gross profit divided by __________.
net sales
The gross profit ration is computed as gross profit divided by _______.
net sales
which of the following methods are acceptable in accounting for purchase discounts/
net, gross methods
In a(n) ________-bearing note, interest is deducted from the face amount of the loan to determine the cash proceeds available to the borrower at the time of loan.
noninterest
Income tax receive is a __________ receivable.
nontrade
In a periodic inventory system, the inventory account is _____ and cost of goods sold is recorded _____.
not adjusted as purchases and sales are made; at the end of the reporting period
In a periodic inventory system, items that were stolen can
not be identified by reviewing the inventory account.
if a layer or portion of a layer has been used, it can
not be replaced
Work in process contains costs of inventory items that are
not yet complete
Work-in-process contains costs of inventory items that are
not yet complete
Work-in-process contains of inventory items that are
not yet complete
Work-in-progress contains costs of inventory items that are
not yet complete
The lender in a secured borrowing recognizes a(n) ____________ ____________ on their balance sheet
note receivable
The transfer of a(n) ___________ __________________________________ to a financial institution is called discounting.
note receivable
A disadvantage to the ______ inventory system is that all inventory quantities not on hand at the end of the period are assumed to have been sold, and damaged or stolen items are not identified.
periodic
A disadvantage to the __________ inventory system is that all inventory quantities not on hand at the end of the period are assumed to have been sold, and damaged or stolen items are not identified.
periodic
A disadvantage to the __________ inventory system is that all inventory quantities not on hand at the end of the period assumed to have been sold, and damaged or stolen items are not identified.
periodic
A disadvantage to the ________________ inventory system is that all inventory quantities not on hand at the end of the period are assumed to have been sold, and damaged or stolen items are not identified.
periodic
A physical count of inventory is necessary in a _____ inventory system to determine costs of goods sold.
periodic
A physical count of inventory is necessary in a ____________ inventory system to determine cost of goods sold
periodic
A physical count of inventory is necessary in a(n) _____ inventory system to determine cost of goods sold.
periodic
A physical count of inventory is necessary in a(n) __________ inventory system to determine cost of goods sold.
periodic
A physical count of inventory is necessary in a(n) inventory system to determine cost of goods sold
periodic
A(n) _________________ inventory system adjusts inventory at the end of each reporting period.
periodic
In a ______ inventory system, costs of goods sold is recorded at the end of the accounting period.
periodic
In a(n) _________________________inventory system, cost of goods sold is recorded at the end of the accounting period.
periodic
In a(n) inventory system, cost of goods sold is recorded at the end of the accounting period
periodic
Purchase returns are recorded in a separate contra purchase account in a ______ inventory system.
periodic
Purchase returns are recorded in a separate contra purchase account in a __________ inventory system.
periodic
a(n) inventory system adjusts inventory at the end of the each reporting period
periodic
in a ___________ inventory system, cost of goods sold is recorded at the end of the accounting period
periodic
purchase returns are recorded in a separate contra purchase account in a _________ inventory system
periodic
Which inventory system allocates cost of goods available for sale only at the end of each reporting period?
periodic inventory system
A ______ inventory system adjusts each change caused by a purchase, a sale, or a return of merchandise.
perpetual
A _______ inventory system tracks units from purchase to sale.
perpetual
A ____________ inventory system tracks units from purchase to sale
perpetual
A _____________ inventory system is one that is continually updated to reflect inventory purchases and sales.
perpetual
A ________________ inventory system allows management to determine the amount of goods on hand on any date without having to take a physical count
perpetual
A(n) _________ inventory system adjusts for each change caused by a purchase, a sale, or a return of merchandise.
perpetual
A(n) __________ inventory system adjusts for each change caused by a purchase, a sale, or a return of merchandise.
perpetual
A(n) __________ inventory system allows management to determine the amount of goods on hand on any date without having to take a physical count.
perpetual
A(n) inventory system adjusts for each change causes by a purchase, a sale, or a return of merchandise
perpetual
In a ________________ inventory system, the average cost method is applied by computing a moving average unit cost each time inventory is purchased.
perpetual
In a(n) __________ inventory system, the average cost method is applied by computing a moving average unit cost each time inventory is purchased.
perpetual
In a(n) _________________ inventory system, the average cost method is applied by computing a moving average unit cost each time inventory is purchased.
perpetual
manufacturing companies:
produce the goods they sell
Those costs that are included in inventory are referred to as *** costs
product
Those costs that are included in inventory are referred to as ___________ costs
product
_____ costs are those costs that are included in inventory
product
________ costs are those costs that are included in inventory
product
LIFO
provides better matching of current revenues with current inventory cost
LIFO
provides better matching of current revenues with current inventory costs
In a perpetual inventory system, a new weighted-average unit cost id calculated after each ______.
purchase
In a perpetual inventory system, a new weighted-average unit cost is calculated after each __________
purchase
In a perpetual inventory system, a new weighted-average unit cost is calculated after each __________.
purchase
In a perpetual inventory system, a new weighted-average unit is calculated after each
purchase
in a perpetual inventory system, a new weighted-average unit cost is calculated after each
purchase
Neumann Corporation has entered into a contract with its vendor to purchase 1,000 units of merchandise at $520 per unit. This is an example of a ___________ _____________________
purchase commitment
deducted in the cost column
purchase dicounts taken (if gross method used to record purchases)
Terms like 2/10, n/30 represent what?
purchase discount
Wholesale and retail companies
purchase goods that are primarily in completed form
Manufacturing companies
purchase goods that are used to produce another product
manufacturing companies
purchase goods that are used to produce another product
wholesalers
purchase inventory from Manufacturers and resell them to professional users or retail companies
retailers
purchase inventory from manufacturers or wholesalers and then sell inventory to end users
in a perpetual inventory system, a new weighted-average unit cost is calculated after each
purchase of goods
When a buyer returns goods to the seller, the buyer records a __________ __________.
purchase return
When a buyer returns goods to the seller, the buyer records a(n)____
purchase return
when a buyer returns goods to the seller, the buyer records an
purchase return
Which of the following steps in the flow of inventory costs for a manufacturing company occurs first?
purchasing raw materials
The cost components purchases from outside companies that will become part of the finished product are referred to as what?
raw materials
The cost of components purchased from another manufacturer that will become part of the finished product are recognized in the _____ _____ account.
raw materials
The cost of components purchased from another manufacturer that will become part of the finished product are recognized in the _________ _________ account.
raw materials
The cost of components purchased from another manufacturer that will become part of the finished product are recognized in the __________ __________ account.
raw materials
cost of components purchased from outside companies that will become part of the finished product are referred to as
raw materials
the cost of components purchased from another manufacturer that will become part of the finished product recognized in the __ account
raw materials
Which accounts are typically reported on the balance sheet of a manufacturing company?
raw materials work in progress finished goods
Which of the following accounts are typically reported on the balance sheet of a manufacturing company? (Select all that apply.)
raw materials; Finished goods; work in progress
Finished goods inventory contains costs of inventory items that are
ready for sale
If prices have changed and a company uses dollar-value LIFO, we need to determine whether an observed increase in inventory is a _______ increase in the quantity of inventory.
real
gross accounts receivable less allowance for doubtful accounts is the net _________value of accounts receivable
realizable
a company's claims to the future collection of cash, other assets, or services is called a _____________.
receivable
markdown
reduction in selling price below the original selling price
The cost to return land or other property to its original condition after extracting natural resources are referred to as
restoration
The _________ _______ method uses the cost-to-retail percentage based on a current relationship between cost and selling price.
retail inventory
Emily Retail Company wants to estimate its ending inventory for annual financial reporting purposes. Which of the following methods can the company utilize?
retail inventory method
walmart is an example of a
retailer
When a company applies a retrospective change in inventory method, they must revise beginning _____________ ______________ to reflect the cumulative income effect of the difference in inventory methods for all prior years
retained earnings
Changes in inventory method generally are accounted for __________.
retrospectively
Errors that are discovered during periods subsequent to the period when the errors occurred require that the financial statements are _____________restated.
retrospectively
Generally, voluntary changes in accounting principles are accounted for
retrospectively
Obsolescence may impair the _______ of inventory.
salability
The seller views returns as a reduction of net ______, whereas the buyer views returns as a reduction of net ______.
sales purchases
Consistent with the lower of cost and net realizable value approach, this inventory item should be value at? Jones company's inventory cost is $100. The expected sales price is $110. The company estimates sales cost as 10% of the sales price.
sales price*%=answer sales price -previous answer= inventory item value
A(n) ________________________________ __________________________________occurs when a customer returns merchandise for a refund.
sales return
the sellers reviews returns as a reduction of net _________; the buyer views returns as net _______
sales, purchases
When a company decides to build its own asset rather than purchase it outright, this is referred to as a(n) ____________________ asset.
self-constructed
Which of the following are disadvantages of unit LIFO?
significant recordkeeping costs, possibility of LIFO liquidation
Which of the following methods are not used for inventory costing? (Select all that apply.)
simple average, NIFO
The dollar-value LIFO inventory method _________ recordkeeping
simplifies
LIFO inventory pools
simplifies recordkeeping and reduces the risk of LIFO liquidation by grouping inventory units into pools based on physical similarities of the individual units.
The dollar-value LIFO (DVL) method
simplifies recordkeeping, reduces risk of liquidation of layers
LIFO inventory pools
simplify record keeping
A significant disadvantage of the periodic inventory system is that is assumes that quantities not on hand at the end of the period were __________.
sold
A significant disadvantage of the periodic inventory system is that it assumes that quantities not on hand at the end of the period were ____________________.
sold
A significant disadvantage of the periodic inventory system is that it assumes not on hand at the end of the period were _________.
sold.
The _________ interest method uses the interest rate from the actual construction loan on a self-constructed asset, whereas the weighted-average method uses a weighted-average rate on all construction loans outstanding.
specific
What method of inventory valuation matches each unit on hand at the end of the period with its actual cost?
specific i
Which inventory costing method matches each unit sold with its actual cost
specific identification
Which inventory costing method matches each unit sold with its actual cost?
specific identification
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)
stockholders' equity increases net income increases total assets increase
In a period of rising costs, LIFO produces a higher cost of goods sold, lower net income and therefore, low ______ liability.
tax
In a period of rising prices, LIFO produces a higher cost of goods sold, lower net income and therefore, lower _____________ liability
tax
Which factors may influence a company's choice of inventory cost flow assumption? (Select all that apply.)
tax implications of choice, actual physical flow of inventory, financial statement effect
Which factors may influence a company's choice of inventory cost flow assumption
tax implications of choice, financial statement effect, actual physical flow of inventory
The primary benefit of LIFO is:
tax savings
An intangible asset with a finite life is recorded at cost and subsequently
tested for impairment
A DVL pool is made up of items
that are likely to have similar cost change pressures
A DVL pool is made up of items
that are likely to have similar cost change pressures.
Accountants often call FIFO the balance-sheet approach because _____.
the amount it reports for ending inventory better approximates the current cost of inventory
Errors that affect prior-year income statement accounts are corrected by adjusting
the balance of retained earnings
The weighted-average method assumes that:
the cost of goods sold consists of a random mixture of all goods available for sale.
Timothy Company purchases merchandise costing 100,000. The payment terms are 3/10, n/30. if Timothy Company utilizes the gross method and pays the amount within the 10-day period
the cost of inventory will be reduced by 3,000.
The cost of inventory includes (Select all that apply.)
the cost to bring inventory to its desired location; expenditures to acquire the inventory; the cost to bring inventory to its desired condition
a troubled debt restructuring occurs when
the creditor changes the terms of the agreement to make it easier for the debtor to pay
Companies that report inventory using the LIFO method must report the difference between the LIFO cost and FIFO cost of its inventory. This difference is commonly called the LIFO reserve.
true
Due to technological advances in recent years, most companies use a perpetual inventory system to track inventory purchases and sales.
true
The FIFO method assumes that:
the first units purchased are the first ones sold.
Kerry acquires equipment valued at $81,630 by signing a 3-year noninterest-bearing note payable for $100,000. The difference between the $100,000 repayment and the value of the equipment represents
the implicit interest on the note
Daryl Corp. purchases 10,000 units of inventory on account for $50,000. Two days after receiving the inventory, Daryl discovers that 1000 units are defective and returns the defective units to the vendor. The company utilizes a perpetual inventory system. As a result of this return, ____
the inventory balance decreases and the accounts payable balance decreases.
The LIFO method assumes that:
the last units purchased are the first ones sold.
Inventory is reported on the balance sheet at:
the lower of original cost and net realizable value
per unit inventory value
the lowest amount between the cost and NRV
The LIFO inventory method assumes that the units sold are
the most recent units purchased
The LIFO inventory method that the units sold are
the most recent units purchased
The LIFO inventory method assumes that the units that remain in ending inventory are
the oldest units in inventory
The LIFO inventory method assumes that units that remain in ending inventory are
the oldest units in inventory
The LIFO inventory method assumes that the units that remain in ending inventory are
the oldest units in inventory.
The costs of beginning inventory plus additional purchases during the year make up the cost of inventory available for sale.
true
There is no requirement to choose a cost flow assumption that approximates actual physical flow of units
true
When merchandise is shipped f.0.b. shipping point, who includes the inventory on their balance sheet when goods are with the common carrier?
the purchaser
If the company uses the direct write-off method, what would bad debt expense be for 2016
the same amount as the accounts receivable written off
If goods are shipped f.o.b. destination, at time of shipment
the seller still had legal title of the goods
On January 1, Gerhard Company has 100 units in beginning inventory. On January 3, the company purchases 500 units; on February 23, 800 units; and on March 19, 1000 units. If the company sells 100 units on January 4, which units would be assumed to have been sold in the periodic FIFO system?
the units in beginning inventory
The lower of cost and net realizable value method causes losses in the value of inventory to be recognized in the period when
the value declines below cost
Which of the following could cause a difference between the quantities of inventory determined by physical count and the quantities tracked by a perpetual inventory system?
thefts, system errors, spoilage, breakage
Within LIFO inventory pools, all purchases during the period are considered to be made at the same _________________ and the same __________________
time, cost
which of the following represent a reason why managers closely monitor inventory levels?
to ensure that sufficient units are available, to minimize costs of ordering and carrying inventory
The LIFO adjustment is used internally to convert the inventory
to the LIFO basis
weighted-average unit cost is determined by dividing cost of goods available for sale by
total quantity available for sale
Weighted-average unit cost is determined by dividing cost of goods available for sale by
total quantity available for sale.
A perpetual inventory system is designed to
track inventory quantities from purchase to sale
A(n) _________________ is an exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service
trademark
In a sale of receivables, the __________ includes the receivables as assets in its balance sheet
transferee
Cost of goods sold determined under the FIFO perpetual system method is the same as under the FIFO periodic inventory system
under all circumstance.
COGS determined under the FIFO perpetual system method is the same as under the FIFO periodic inventory system
under all circumstances
Costs of goods sold determined under the FIFO perpetual system method is the same as under the FIFO periodic inventory system
under all circumstances
Ending inventory determinded under the FIFO perpetual system method is the same as under FIFO periodic inventory
under all circumstances
Ending inventory determined under the FIFO perpetual system method is the same as under the FIFO periodic inventory system
under all circumstances
Kilian Company's inventory balance at the end of the year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered until the following year, the financial statement effect in the current year will be:
understated assets, retained earnings and net income
High record keeping costs and possible LIFO liquidation are disadvantages of
unit LIFO
High recordkeeping costs and possible LIFO liquidation are disadvantages of
unit LIFO
High recordkeeping costs and possible LIFO liquidation are disadvantages of
unit LIFO.
When a company determines the quantity of inventory items, it must consider (Select all that apply.)
units it currently possesses, units on consignment, units in transit
When a company determines the quantity of inventory items, it must consider...
units on consignment, units in transit, and units it currently possesses.
When a company determines the quantity of inventory items, it must consider
units on consignment, units it currently possesses, units in transit
Ending inventory represents inventory that is _______.
unsold
Ending inventory represents inventory that is __________.
unsold
ending inventory represents inventory that is
unsold
Under the dollar-value LIFO method, inventory is viewed as a quantity of _________, rather than a quantity of _________
value units
Under the dollar-value LIFO method, inventory is viewed as a quantity of ______, rather than a quantity of _____.
value units
Berta Company's inventory value has declined during the current period. Berta does not expect to sell its inventory during the current year. Berta should recognize the loss in the period when the inventory
value declines
Under the dollar-value LIFO method, inventory is viewed as a quantity of _____, rather than a quantity of _______.
value; goods
A company is most likely to utilize the specific identification method if its inventory consists of
very expensive products Unique products
A company is most likely to utilize the specific identification method if its inventory consists of
very expensive products and unique products
A company is most likely to utilize the specific identification method if its inventory consists of
very expensive products, unique products
which of the following is not a receivable
wages earned by the employees but not yet paid by the company
Which of the following cost flow assumptions currently are acceptable under U.S GAAP?
weighted average first-in, first-out last-in, first-out
What cost flow assumptions are currently acceptable under U.S. GAAP?
weighted average first-in, first-out (FIFO) last-in, first-out (LIFO)
Consistent with the IFRS, which of the following cost flow assumptions are currently permitted.
weighted average, FIFO
The LIFO reserve shows how ending inventory would have differed if the company had utitlized _________ or __________ instead of LIFO
weighted average, FIFO
For capitalization of interest on self-constructed assets, the average accumulated expenditures is the
weighted-average expenditures during the construction period
The LIFO reserve shows how ending inventory would have differed if the company had utilized __________ or __________, instead of LIFO.
weighted-average or FIFO
In a perpetual inventory system the inventory account is adjusted
when inventory is sold and when inventory is purchased.
when does the actual write-off of a receivable occur?
when it is determined that all or a portion of the receivable will not be collected
when do service companies record revenues
when providing services to customers
when do Merchandising and manufacturing companies record revenues
when selling inventory to customers
FOB shipping point means title to the goods passes
when they are shipped
FOB destination means title to the goods passes
when they arrive at the destination.
What type of company purchases goods that are primarily in completed form?
wholesale and retail companies
Raw Materials inventory consists of the cost of units that
will be used as components of a manufactured product
Which of the following accounts would be found on the balance sheet of a manufacturing company?
work in process
Which of the following accounts would be found on the balance sheet of a manufacturing company?
work in progress
Products that have been started in the production process but are not yet complete at the end of the period are known as:
work in progress inventory
Inventory costs that relate to products that are not yet complete are shown in:
work-in-process inventory
The specific identification method
would be beneficial to a company that makes fine jewelry matches each unit of inventory with its actual cost
The specific identification method
would be beneficial to a company that makes fine jewelry, matches each unit of inventory with its actual cost
Inventory ______ are often used to shift income between periods.
write-downs