Chapter 7 Study Guide (Inventories) Essay

question

A physical inventory should be taken at the end of every month.
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False
question

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

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