Chp 6 WILEYPLUS self test – Flashcards
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When the terms of a sale are FOB destination, legal title to the goods passes to the buyer when they reach the buyer's place of business.
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True
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Merchandising firms usually classify their inventory into raw materials, work in process and finished goods.
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False
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Under FIFO, cost of goods sold consists of the units with the oldest costs.
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True
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In a period of inflation, LIFO produces a higher net income than FIFO.
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False
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The days in inventory is calculated by dividing the inventory turnover ratio by 365.
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false
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LIFO reserve is necessary for companies using the FIFO inventory method.
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False
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If Inventory in 2006 is $30,000 and 2007 is $40,000 and Cost of Goods Sold is $276,000 and $290,000 respectively, the Inventory Turnover Ratio for 2007 is 8.3 times.
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True
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Which of the following is not an inventory account?
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Equipment.
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Which of the following is not a legitimate business reason for taking a physical inventory?
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To keep the employees busy during a slow time in the business.
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Ownership passes to the buyer when the goods are received from the public carrier if the goods are shipped:
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FOB destination
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Ownership passes to the buyer when the public carrier accepts the goods if the goods are shipped:
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FOB shipping point.
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Which of the following is an acceptable inventory costing method?
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Average cost. Last-in, first-out. First-in, first-out. All of the above.
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The FIFO inventory method assumes that the cost of the earliest units purchased are the
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first to be allocated to the cost of goods sold.
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Which of the following would most likely employ the specific identification method of inventory costing?
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Jewelry store.
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In a period of rising prices which inventory method will result in the greatest amount of income tax expense?
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FIFO.
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The following information came from the income statement of the Wilkens Company at December 31, 2010: sales $1,800,000; beginning inventory $160,000; ending inventory $240,000; and gross profit $600,000. Wilkens' inventory turnover ratio for 2010 is:
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6.0 times
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The following information came from the income statement of the Wilkens Company at December 31, 2010: sales $1,800,000; beginning inventory $160,000; ending inventory $240,000; and gross profit $600,000. Wilkens' days in inventory for 2010 is:
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60.8 days.
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From the choices below, select the one correct response.
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A manufacturing company would normally have raw materials, work in process, and finished goods as inventory account classifications.
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From the choices below, select the one correct response.
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Specific identification method inventory valuation requires physical flow of goods to be representative of the cost flow.
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From the choices below, select the one correct response.
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Company management selects the method - FIFO, LIFO, or specific identification method, of inventory valuation a company will use.
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With the assumption of costs and prices generally rising, select the correct statement from the following.
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LIFO provides the closest valuation of cost of goods sold to replacement cost of inventory sold
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If the ending inventory is overstated then:
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assets are overstated and stockholders' equity is overstated.
