Accounting Chapter 6 Homework Notes – Flashcards
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What is the Inventory costing method that determines the cost based on the actual cost of inventory sold?
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Specific Identification
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Some examples of security measures to safeguard inventory include what?
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-storing inventory in areas that are restricted to only authorized employees.
-locking high-priced inventory in cabinets.
-using two-way mirrors, cameras, security tags, and guards.
-All of these choices are correct
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With a perpetual inventory system, when should a physical count of inventory be taken?
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Near fiscal year-end, when inventory is at its lowest level
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Which cost flow assumption assumes that the last units purchased are the first units sold?
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LIFO
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Which cost flow assumption assumes that the first units purchased are the first units sold?
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FIFO
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When the weighted average cost method is used in a perpetual inventory system, a weighted average unit cost for each item is computed when?
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each time a purchase is made.
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Which inventory method results in the highest net income during periods of rising prices?
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FIFO
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Which inventory method results in the highest net income during periods of falling prices?
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LIFO
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The lower-of-cost-or-market method can be applied to what?
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- each item of inventory.
-each major class or category of inventory.
- total inventory as a whole.
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Merchandise inventory is classified as __________ on the balance sheet.
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Current Asset
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Inventory turnover is calculated as...?
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cost of merchandise sold divided by average inventory.
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The number of days' sales in inventory is calculated as...?
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the average inventory divided by the average daily cost of merchandise sold.
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number of days' sales in inventory
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The number of days' sales in inventory measures the length of time it takes to acquire, sell, and replace the inventory.
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Inventory turnover
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Inventory turnover measures the relationship between cost of merchandise sold and the amount of inventory carried during the period.
