accounting 201 ch 6: inventory and cost of goods sold
The disclosure that shows the difference in the cost of inventory between LIFO and FIFO is referred to as the
LIFO reserve
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
The lower of cost and net realizable value method was developed to
avoid reporting inventory at an amount that exceeds the benefits it provides.
The definition of inventory includes which of the following items?
Items used currently in the production of goods to be sold Items currently in production for future sale Items held for resale
FOB destination means title to the goods passes
when they arrive at the destination.
Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?
Debit Inventory
For internal record keeping, most companies carry their inventory using the _____ basis.
FIFO
Which of the following methods are available for costing inventory? (Select all that apply.)
Weighted-average LIFO FIFO Specific identification
The shipping term FOB stands for
free on board
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 the LIFO inventory assumption typically will be ________ than cost of goods sold determined using the FIFO inventory assumption.
higher
Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are
included in Gerald's inventory.
Purchasing inventory on account:
increases liabilities increases assets
In a LIFO inventory system, inventory costs shown in the balance sheet may be distorted because they may represent costs
incurred several years earlier.
A major difference between companies that provide services and companies that manufacture or sell goods is that those that manufacture or sell goods must account for:
inventory
Items held for sale in the normal course of business are referred to as
inventory
Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.
inventory cost of goods sold
Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for (Select all that apply.)
inventory. cost of goods sold.
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
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
The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ______ income statement.
multiple-step
Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are
paid by the supplier.
FOB shipping point means title to the goods passes
when they are shipped.