Acctg 201: Chapter 6 Learnsmart Questions

Which 3 are reported in operating income?

1) Selling expenses 2) Revenue 3) Advertising expenses

What are the 3 costs that are recognized in work in process for a manufacturing company?

1) overhead 2) raw materials 3) direct labor

The average cost method assumes that the ending inventory consists of what?

A mixture of all the goods available for sale

What type of companies purchase inventory that is primarily in finished form and ready for resale to customers?

Merchandising companies

In a periodic inventory account, the inventory account is (blank)

Not adjusted as purchases and sales are made

Wholesale and retail companies

Purchase goods that are primarily in completed form

Net realizable value is referred to as what?

The estimated selling price of inventory less costs necessary to sell the inventory

Specific identification method definition

The inventory costing method that matches each unit of inventory with its actual cost

What are the 4 methods used for inventory costing?

1) FIFO 2) LIFO 3) Weighted average 4) Specific identification

The lower cost and net realizable value method represents an application of what principle?

Conservatism principle

The difference between the 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 what?

LIFO reserve

Which method of valuing inventory was developed to avoid reporting inventory at an amount that is smaller than the benefits it can provide?

Lower of cost and net realizable method

FOB destination means title to the goods passes when (blank)

Passes when they arrive at the destination

Manufacturing companies

Purchase goods that are used to produce another product

Which inventory account includes the cost of components that will become part of the finished product but have not yet been used in production?

Raw materials inventory

Freight-out

Recognized as operating expense

Perpetual inventory system

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

Gross profit equation

(Net sales revenue) - (cost of goods sold)

Which 3 are included in calculating operating income?

1) General and administrative expenses 2) Utility expense 3) Cost of goods sold

Freight-in

Added to cost of inventory

Where is inventory reported in the financial statements?

Balance sheet as a current asset

Manufacturing companies definition

Companies that produce the inventory they sell

Periodic inventory system

Company recognizes cost of goods sold after completing a physical inventory

For internal record keeping, most companies carry their inventory using which basis?

FIFO basis

The work in process inventory account typically includes which costs?

Indirect manufacturing costs (overhead), raw materials, and direct labor

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

Inventory

On a multistep income statement, the category of revenues and expenses reported immediately after operating income is referred to as what?

It's referred to as non-operating revenues and expenses

A company is most likely to utilize the specific identification method if its inventory consists of what types of products?

Unique products and very expensive products

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

Work in process, raw materials, finished goods