Chapter 7 Study Guide (Inventories) – Flashcards
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A physical inventory should be taken at the end of every month.
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False
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During periods of increasing costs, the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet that is higher than LIFO would produce.
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True
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A perptual inventory system is an effective means of control over inventory.
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True
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A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.
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True
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The average cost inventory method is rarely used with a perpetual inventory system.
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True
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When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods sold.
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False
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If the perpetual inventory system is used, the account entitled "Merchandise Inventory" is debited for purchases of merchandise.
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True
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The average cost method will always yield results between FIFO and LIFO.
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True
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Of the three widely used inventory costing methods (FIFO, LIFO, and average cost), the LIFO method of costing inventory assumes costs are charged based on the most recent purchases first.
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True
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The most widely used methods for determining the cost of inventory are...
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FIFO and LIFO
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The inventory method that assigns the most recent costs to cost of goods sold is...
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LIFO
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When using a perptual inventory system, the journal entry to record the cost of merchandise sold is...
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debit Cost of Merchandise Sold; credit Merchandise Inventory
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Under which inventory method does accounting records maintain a countiuously updated inventory value
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Perpetual inventory
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Ending inventory is made up of the oldest purchases when a company uses...
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last-in, first-out
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The inventory costing method that reports the most current prices in ending inventory is...
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FIFO
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Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the...
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inventory ledger
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Storing inventory in restricted areas; physical devices such as two-way mirrors, cameras, and alarms; and matching receiving documents, purchase orders, and vendors invoice are...
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examples of safeguarding inventory
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Taking a physical count of inventory should be done near
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year-end
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Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high cost items?
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specific identification
