question

the cost of goods sold is equal to:

answer

the cost of goods available for sale less ending inventory

question

the amount of inventory expensed during the year is reported on the income statement as:

answer

cost of goods sold

question

T/F a cost of goods sold account is updated after each sale of merchandise under the periodic inventory system.

answer

false

question

what effects occur on a retail store's accounting equation when it records purchase of merchandise on account, assuming the use of a perpetual inventory system?

answer

assets and liabilities increase

question

What effects on a retail store's accounting equation occur when the retail store pays a third-party carrier to transport inventory to its warehouse?

answer

no net effect

question

transportation-in is:

answer

part of the cost of net purchases

question

in recording the cost of merchandise sold for cash, based on data available from perpetual inventory records, the journal entry is:

answer

debit cost of merchandise sold; credit merchandise inventory

question

which inventory cost flow method assigns the cost of the most recent items purchased to ending inventory?

answer

FIFO

question

which inventory cost flow method assigns the cost of the most recent items purchased to cost of goods sold?

answer

LIFO

question

which inventory cost flow assigns the average unit cost to all units whether sold or left in ending inventory?

answer

weighted average

question

for which of merchandise would a company most likely use the specific identification method of inventory costing?

answer

fine jeweler

question

which method of inventory costing is not acceptable for financial accounting purposes?

answer

retail cost

question

which inventory costing method results in the highest inventory balance during a period of rising purchase prices?

answer

FIFO

question

during a period of increasing purchase prices, which inventory costing method will yield the lowest cost of goods sold?

answer

FIFO

question

pollet company started business at the beginning of 2012. pollet selected the FIFO method for its inventory costing. the profits will maximize for 2012 under this method, in a period of:

answer

rising prices

question

if the amount assigned to ending inventory is incorrect, then:

answer

both the balance sheet is affected, but cost of goods sold is not

question

if a company understates its inventory, what are the effects on cost of goods sold and net income for the current year?

answer

cost of goods sold will be overstated and net income will be understated

question

when the market value of inventory items has declined below their cost, which method would be the most appropriate in complying with GAAP?

answer

lower-of-cost-or-market

question

when inventories are written down due to the application of the lower-of-cost-or-market (LCM) rule, which of the following is usually increased?

answer

cost of goods sold

question

T/F the lower-of-cost-or-market is an exception to the historical cost principle

answer

true

question

the lower-of-cost-or-market rule applies to the write-down of inventory values when market value exceeds cost. why does this rule not allow for write-ups in inventory value?

answer

writing-up inventory to market value would be inconsistent with the conservatism principle

question

inventory turnover:

answer

measures the relationship between the volume of goods sold and amount of inventory carried

question

the days-in-inventory ratio:

answer

measures the length of time it takes to acquire, sell, and replace the inventory

question

how are purchase returns and purchase discounts recorded by a company using the periodic inventory system?

answer

in contra-accounts to the purchases account

question

under the _______ inventory system, the inventory account is updated after each purchase or sale.

answer

perpetual

question

cost of goods sold is equal to the beginning inventory plus the cost of net purchases minus ________.

answer

ending inventory

question

the _______ method calculated cost of goods sold based on the assumption that the first unit of inventory purchased is the first unit sold.

answer

FIFO

question

the _______ method calculates cost of goods sold based on the assumption that the last unit of inventory purchased is the first unit sold.

answer

LIFO

question

the difference between the inventory reported on the balance sheet by LIFO basis and what inventory would be if reported on a FIFO basis is called a(n) _________.

answer

LIFO reserve

question

the understatement of ending inventories in one period leads to a(n) _______ of cost of goods sold in the same period.

answer

overstatement

question

an overstatement error in the inventory account in the current period will result in an understatement of _______ in the next period.

answer

net income

question

a departure from the cost basis of accounting may be necessary when the ______ of the inventory is less than its cost to the company.

answer

market value

question

the ratio of a company's cost of goods sold to its average inventory is called its ______.

answer

inventory turnover ratio

question

a company can calculate its days-in-inventory ratio by dividing the 365 days per year by its _______.

answer

inventory turnover ratio

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