ch 6 conceptual questions
What effects on a retail stores accounting equation occur when merchandise returned by customers is recorded?
Assets and stockholders' equity decrease.
T/F: A loss in inventory value caused by application of the lower of cost or market (LCM) rule is recorded in a "Loss Impairment" account.
False
T/F: Sales discounts decrease the cost of inventory acquired.
False
The following journal entry was included in the accounting records of Jumani Company: Feb 11. Merchandise Inventory 7000 Cost of Goods Sold. 7000 This entry is need to record the:
cost of merchandise returned by a customer
The cost of goods sold is equal to
the cost of goods available for sale less ending inventory
T/F: Under a periodic inventory system, the Purchases account accumulates the cost of the inventory acquired during the period.
True
T/F: During periods of declining prices, LIFO produces the lowest amount of ending inventory relative to the other inventory costing methods.
False
T/F: If cost of goods sold does not equal the cost of merchandise purchased during the period, an adjustment must be made to correct the error.
False
T/F: Under the LIFO method of inventory costing, the units in the ending inventory represent the most recent purchase(s).
False
T/F: Cost of goods sold is the difference between cost of goods available for sale and ending inventory.
True
T/F: The difference between FIFO, LIFO, and average cost methods is that each of these methods of inventory costing makes a specific assumption about the flow of costs.
True
T/F: The inventory turnover ratio is defined as cost of goods sold divided by average inventory.
True
T/F: The weighted average cost per unit must be continually updated under the perpetual inventory system.
True
Coffski, Inc. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10th; credit terms were 1/10, n/30. Which of the following statements is true? a. The customer must pay $1010 if payment is made after June 20th b. The customer should pay $1000 if the invoice is paid on July 9th c. The customer can take a 10% discount if the invoice is paid by June 30th d. The customer must pay a $10 penalty if payment is made after July 9th
b. The customer should pay $1000 if the invoice is paid on July 9th.
Harris Corp. sold merchandise to Ichay Company on December 28, 2019, with shipping terms of FOB destination. The buyer received the merchandise on January 3, 2020. Which of the following is true? a. The buyer should pay the transportation costs b. The buyer should include the mech. in its inventory at Dec 31, 2019 c. The seller should record the sales revenue on Dec 28, 2019 d. The buyer should record a liability for the purchase on Jan 3, 2020
d. The buyer should record a liability for the purchase on Jan 3, 2020