Intermediate Ch 8

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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

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

$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

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 - 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

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

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

3,090 - 950 units sold (3300/1000) = 330 X 800 = 2640 + 450 = 3090

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%

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 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

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

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

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