ACC 210 Chapter 6 smartbook assign

For internal record keeping, most companies carry their inventory using the _____ basis.

FIFO

Inventory cost flow assumption: FIFO

most clearly approximates the actual physical flow of the inventory

FOB shipping point means title to the goods passes

when they are shipped

Peter Company recognizes cost of goods sold each time it recognizes a sale.

perpetual inventory system

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

FIFO

assuming prices rise overtime, which inventory cost flow assumption will result in the lowest cost of goods sold?

FIFO

Mueller Inc. utilizes a periodic inventory system. When Mueller incurs shipping costs for purchased goods, the account debited should be

a separate freight in account

In a perpetual inventory system, freight costs on purchases are

added to the inventory account

in a periodic inventory system, purchase returns

are recorded in a separate contra purchases account.

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

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

Meller purchases inventory on account.

assets will increase

The lower of cost and net realizable value method was developed to

avoid reporting inventory at an amount that exceeds the benefits it provides.

Under the periodic inventory system, purchase returns and purchase discounts accounts represent

contra purchase accounts

the periodic inventory system measures cost of goods sold by

counting inventory at the end of the period

clover corporation uses the perpetual inventory system. When clover purchases inventory on account, the entry will include

debit to inventory

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

decrease an asset and increase an expense; increase an asset and increase revenue

In a perpetual inventory system, purchase discounts and purchase returns

directly reduce the inventory account balance

the shipping term FOB stands for

free on board

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

higher

Robert Skinner, an accountant, discovers an error in accounting for an inventory purchase. He should correct the error

immediately

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

including in Geralds inventory

purchase inventory on account

increases liabilities and assets

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

In a perpetual inventory system, when inventory is purchased, the . account is debited, whereas in a periodic system, the . account is debited

inventory, purchases

the type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a . income statement

multiple step

If a company uses the periodic inventory system, how many entries are made when a sale occurs?

one

When a sale occurs under the periodic inventory system, we record:

only the sale, but not the related cost of goods sold

Managers typically monitor inventory very closely to ensure that sufficient units are available for sale and to prevent inventory from becoming

outdated; obsolete

Ronald Corporation purchases inventory with terms FOB (Free on Board) destination. The shipping costs are $300. The shipping costs are:

paid by supplier

-> close purchase-related temporary accounts -> record cost of goods sold for the period -> adjust the inventory balance to its proper ending balance

periodic inventory period end adjustments

Sherman Company recognizes cost of goods sold after completing a physical inventory.

periodic inventory system

Which of the following inventory systems requires a physical count in order to determine cost of goods sold?

periodic inventory system

Purchase discounts and purchase returns are recorded as a reduction in inventory cost in a Inventory system.

perpetual

Freight-in costs are debited to Inventory in this inventory system:

perpetual only

Inventory cost flow assumption: LIFO

provides better matching of current revenues with current inventory cost

Match the inventory system with the account utilized to record a purchase of inventory: periodic

purchases

To minimize costs of inventory write-downs due to obsolete inventory. To ensure that sufficient units are available.

reasons why managers closely monitor inventory levels

In a periodic inventory system, freight-in costs are

recognized in a temporary freight-in account.

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

Not used for inventory costing

simple average, NIFO

The ______ method of valuing inventory was developed to avoid reporting inventory at an amount that is ______ than the benefits it can provide.

the lower cost and net realizable value; greater

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

two

what methods are available for closing inventory?

weighted average, specific identificaiton, FIFO, LIFO

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.

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

FIFO

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

FIFO

FOB destination

Freight terms indicating that ownership of goods remains with the seller until the goods reach the buyer.

a multiple step income statement that reports multiple levels of

Income

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

Increase in stock holder equity, total assets, net income

Match the inventory system with the account utilized to record a purchase of inventory: perpetual

Inventory

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

LIFO

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

LIFO

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

LIFO

the disclosure that shows the difference in the sot of inventory between LIFO and FIFO is referred to as the

LIFO Reserve

in times of rising prices, ending inventory determined using the LIFO inventory assumption will be . then ending inventory determined using the FIFO

Lower