Ch 6 smartbook

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

Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are

paid by the supplier.

FOB destination means title to the goods passes

when they arrive at the destination.

Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.

- Cost of Goods Sold - Inventory

Which of the following methods are available for costing inventory?

- FIFO - LIFO - weighted average cost - specific identification

Which of the following methods are not used for inventory costing?

- NIFO - Simple-average

Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?

Debit Inventory

Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption?

FIFO

Meller purchases inventory on account. As a results, Meller's

assets will increase.

Purchasing inventory on account:

- increases assets - increases liabilities

The shipping term FOB stands for

free on board.

A multiple-step income statement reports multiple levels of ________

income (or profit)

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

Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are

included in Gerald's inventory.

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 definition of inventory includes which of the following items?

- Items used currently in the production of goods to be sold - Items held for resale - Items currently in production for future sale

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for

- inventory - cost of goods sold

The ______ method of valuing inventory was developed to avoid reporting inventory at an amount that is ______ than the benefits it can provide.

1) lower of cost and net realizable value 2) greater

For internal record keeping, most companies carry their inventory using the _____ basis.

FIFO

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 disclosure that shows the difference in the cost of inventory between LIFO and FIFO is referred to as the

LIFO reserve

Perpetual inventory system

Neumann Company can determine the cost of inventory still on hand by referring to the inventory account.

Which inventory system recognizes cost of goods sold and decreases inventory each time a sale occurs?

Perpetual inventory system

periodic inventory system

Shelly Company must first take a physical inventory to determine the cost of inventory still on hand.

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 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 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 is referred to as

inventory

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