Accounting 1 Final

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Use LIFO to determine ending inventory: 2 @$25 3@ $30 2@ $27

2 @ $25

Calculate ending merchandise inventory at 12/31/18 using the lower of cost or market rule

2975

Inventory costing methods include

All the above

In a periodic inventory system, How is cost of good's sold calculated?

Opening Inventory+Cost of Purchases-closing inventory

This is an inventory where you count all of the product you have on hand

Physical Inventory

Unearned revenue is revenue that

The business has collected in cash, but not yet earned

A widely used method of allocating merchandise cost that assumes the first merchandise bought is the first merchandise sold is called the first-in, first-out method.

True

After adjustments are made to the merchandise inventory account and posting is completed, the income summary account will reflect both the amount of beginning and ending inventory.

True

Both the debit and credit amounts in the merchandise inventory account at the end of an accounting period are used to calculate the cost of goods sold.

True

Cash received in advance for performing a service or delivering a product is called unearned revenue.

True

Errors in the ending inventory have a direct effect on net income for the period.

True

First-in, first-out costing assigns the most recent purchase cost to the ending inventory shown on the balance sheet.

True

If the ending inventory is overstated for any reason, net income will also be overstated.

True

Last-in, first-out costing matches the most current cost of items purchased against the current sales revenue.

True

Merchandise Inventory has a normal debit balance.

True

The amount of inventory on hand is determined by physically counting the goods on hand and determining the cost of those goods.

True

The credit to the merchandise inventory account when making adjustments at the end of the accounting period will be the same amount as was debited at the end of the previous accounting period.

True

The loss due to write-down of inventory should be reported on the income statement as an expense.

True

The merchandise inventory account is never debited or credited during the year using the periodic method.

True

Under the accrual basis of accounting, revenue is recorded when earned regardless of when cash is received.

True

Understating the ending inventory causes the cost of goods sold to be overstated and net income to be understated.

True

Unearned Revenue is a liability account.

True

Revenue is said to be earned when the business has

Delivered a good or service to the customer

In a periodic inventory system, inventory is....

Determined at the end of each fiscal period

When unearned revenue is earned, do you

Dr. Unearned revenue Cr Revenue

In the Gross Profit Method of estimating inventory, Net Sales minus the estimated gross profits gives you

Estimated cost of goods sold

A method of allocating merchandise costs that assumes the sales in the period were made from the most recently purchased merchandise and the earliest merchandise bought remain in inventory is called the first-in, first-out method.

False

A method of assigning merchandise cost that requires that each item sold and each item remaining in inventory be separately identified with respect to its purchase cost is called last-in, first-out.

False

The term "LIFO" relates to the merchandise in inventory at the end of the accounting period, not to the merchandise sold during the period

False

Unearned Revenue has a normal debit balance

False

When prices are rising, net income calculated by using the first-in, first-out method is smaller than the amount determined from using either the last-in, first-out or the weighted-average method.

False

Perpetual inventory system

Is updated on an on-going basis

The main important difference between FIFO and LIFO are

LIFO sells new purchases first and FIFO sells them last

Unearned revenue is an example of an

Liability

The accounts affected by inventory adjustments

Merchandise Inventory and Income Summary


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