ACC 201 Chp 7 LS

If Barry Bees, Inc.'s days to sell equals 73 days based on a 365-day year, then its inventory turnover ratio equals _____ times

5

Iris, Inc. uses FIFO for financial reporting purposes and LIFO for its income tax return. Iris' accounting treatment of its inventory is ______

Not in accordance with the LIFO conformity rule

Goods in transit that have terms OFB destination should be included in the ______ inventory

Seller's

Which inventory method is typically used when accounting for expensive and unique inventory items?

Specific identification

Which statement is true?

Specific identification, weighted average cost, LIFO and FIFO are acceptable GAAP costing methods

Using a perpetual inventory system, when a company records a sale of merchandise, it must also record _____

1. A decrease in tis inventory 2. Cost of goods sold, which will be reported on the income statement

The assumption that a company makes about its inventory cost flow has _____

1. An effect on the company's balance sheet 2. An effect on the company's income statement

Which of these would explain an increase in a company's inventory turnover ratio?

1. An increase in the demand for the company's products 2. A decrease in total inventory

Which financial statements are needed to calculate the inventory turnover ratio?

1. Balance sheet 2. Income statement

To ensure the accuracy of inventory accounted for using a perpetual system, physical counts ______

1. Detect bookkeeping errors 2. Detect theft 3. Detect shrinkage

Gross profit is _____

1. Equal to net sales minus cost of goods sold 2. A subtotal on the income statement

Gross profit is ______

1. Equal to net sales minus cost of goods sold 2. A subtotal on the income statement

Assuming rising inventory prices, rank which inventory method results in the higher ending inventory values. List from top to bottom, in order of highest ending inventory to lowest ending inventory value

1. FIFO 2. Weighted average 3. LIFO

Which of the following income statement line items are affected by the inventory method chosen?

1. Income tax expense 2. Net income 3. Gross profit 4. Income from operations 5. Income before income tax expense

If cost of acquiring inventory is rising, LIFO will result in which of the following compared to FIFO?

1. Income tax expenses will be lower 2. Cost of goods sold will be higher 3. Gross profit will be lower

Which inventory costing methods are based on assumptions that accountants make about the flow fo inventory costs?

1. LIFO 2. FIFO

What inventory accounts would one expect to see in the accounting records of a company that makes furniture?

1. Raw materials inventory 2. Finished goods inventory 3. Works in process inventory

What may cause inventory turnover ratios to vary significantly between companies in the same industry?

1. Some companies may sell fewer higher-cost goods 2. Some companies may sell more lower-cost goods

Rank in order, from highest to lowest, the anticipated inventory turnover ratios for the following companies

1. Walmart 2. Tiffany & Co 3. Bath Iron Works

Which of these will require a credit to the inventory account in a perpetual inventory system>

1.Selling inventory on account 2. Selling inventory for cash

On May 1, beginning inventory consists of 10 items at a cost of $10 each. On May 3, 10 items are purchased at $12 each. On May 8, 12 items are sold. On May 15, 10 items are purchases at $14 each. Using perpetual FIFO, the cost of Goods sold for the month ended May 31 equals _____

$124

Alpha company bought 75 units of inventory for $4 each and 25 units of inventory for $5 each. Alpha's weighted average cost per unit is ______

$4.25

Acme, Inc. had cost of goods sold of $2,000. If beginning inventory was $2,100 and ending inventory was $500, Acme's purchases must have been $______.

$400

______ Inventory refers to goods a company is holding on behalf of the actual owner of the goods. The company is willing to try to sell the goods for the owner for a fee

Consignment

In a perpetual inventory system, inventory is initially recorded at _____

Cost

Days to sell measures the average number of ______

Days from the time inventory is purchases to the time it is sold

An increase in a company's inventory balance from a prior year is ______

Good if the inventory turnover ratio is higher

As inventory quality increases, its cost usually _____

Increases

FIFO uses the _____ cost for Cost of Goods Sold on the income statement and the _____ cost for inventory on the balance sheet

oldest;newest

On May 1, beginning inventory consists of 10 items at a cost of $10 each. On May 3, 10 items are purchased at $12 each. On May 8, 12 items are sold. On May 15, 10 items are purchases at $14 each. Using perpetual LIFO, ending inventory at May 31 equals ______

$220

Of the 4 companies listed below, which company is more likely to use specific identification to value its inventory and cost of goods sold?

Custom home builder

Assuming sales remain unchanged, if cost of goods sold increases then gross profit ______

Decreases

A ______ inventory turnover ratio may result in a reduction in storage and obsolescence costs as well as reduced borrowing

Higher

Which of the following statements concerning inventory is correct?

Inventory is reported as a current asset because it will be converted into cash within a year of the balance sheet data

If a company assumes that its inventory costs flow out in the opposite order from which the goods were purchased, it uses _____ to value its inventory

LIFO

Acme Company's balance sheet shows three inventory accounts—raw materials, work in process, and finished goods. Acme Company must be a ______

Manufacturer

Cost of goods sold is debited and inventory credited, when the sale occurs using the ______ inventory system

Perpetual

Which of the following would be considered merchandise inventory?

Purchased finished goods

______ inventory will enter the production process and become ______ inventory. Once complete, the goods will become ______ inventory

Raw materials; work in process; finished goods