MGA 201 - CH 7

Which statement are true?

1. Specific identification, weighted average cost, LIFO and FIFO are generally accepted costing methods. 2. The inventory costing methods determine the amount of the debit to Cost of Goods Sold and credit to Inventory. 3. The inventory methods apply to both perpetual and periodic inventory systems.

_________ inventory consists of products acquired in a finished condition, ready for sale without further processing

Merchandise

Which of the following would be considered merchandise inventory?

Purchased finished goods

Which statement is true?

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

Applying the lower of cost or market rule results in inventory being reported at the ______.

Market value if lower than cost

Which of the following statements are true?

1. Managers can choose the method of accounting for inventory cost (i.e., FIFO, LIFO, etc.) that best fits their business. 2. Using a different inventory accounting method leads to reporting a different amount for the cost of goods sold

In a perpetual inventory system, Inventory is initially recorded at ______

Cost

Which of the following is merchandise inventory?

Goods held for sale in the normal course of business

As inventory quality increases, its cost usually _____.

Increase

Which of the following statements concerning inventory is correct?

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

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

LIFO

Which inventory costing method uses the newest cost for Cost of Goods Sold on the income statement and the oldest cost for Inventory on the balance sheet?

LIFO

Who decides which of the many inventory accounting methods a company should use?

The company's management