Goods in transit that were purchased under freight terms of FOB factory should be included in the ending inventory of the buyer.
True / False
True
When merchandise is left on consignment with a consignee, it should be included in the ending inventory of the consignee.
True / False
False
Merchandise received by a retailer to sell on consignment should be excluded from the ending merchandise inventory of the retailer.
True / False
True
The incidental costs of maintaining inventory (stocking, insuring, rotating, etc.) are generally treated as costs of the reporting period in which these costs are incurred.
True / False
True
Under the FIFO method of inventory valuation, the assignment of cost to merchandise sold is in the same order in which the merchandise was purchased.
True / False
True
Under the LIFO method of inventory valuation, the ending merchandise inventory would be valued at the purchase price of the most recent purchases.
True / False
False
In a periodic system, if a retailer purchased 500 units of merchandise inventory at $8 per unit, and 800 units of inventory at $10 per unit, the weighted average cost of the merchandise is $9 per unit.
True / False
False
During extended periods of rising prices, the FIFO method of inventory pricing will yield a higher cost of merchandise sold and a lower ending merchandise inventory, when compared to the LIFO method of inventory pricing.
True / False
False
During extended periods of rising prices, the use of LIFO will result in a greater amount of gross profit than would result if FIFO were used.
True / False
False
When the value of ending merchandise inventory is overstated, the net income of the subsequent year will be understated by the amount of the overstatement of the ending merchandise inventory.
True / False
True
Should an error that understates the ending merchandise inventory not be discovered, at the end of the subsequent year the capital account will be overstated.
True / False
False
FIFO, LIFO, weighted average, and specific invoice inventory pricing are terms used to describe inventory systems.
True / False
False
If one hundred units of merchandise were purchased at $15 per unit and the current market price of the merchandise is $8 per unit, the merchandise will be reported at $8 per unit.
True / False
True
Financial statements prepared between the first day and the last day of the fiscal period are called interim statements.
True / False
True
The ratio of goods available for sale at cost to the same goods available for sale at retail prices is called the retail method cost ratio.
True / False
True
Goods available for sale at cost total $65,000 and at retail total $100,000. Total net sales at retail total $85,000. The cost ratio is 65%.
True / False
True
Goods available for sale at cost total $55,000 and at retail total $100,000. The cost ratio is 55% and the net sales for the period total $80,000. The ending inventory at retail totals $20,000 and the ending inventory at cost totals $11,000.
True / False
True
Net Sales total $100,000. Beginning inventory totals $12,000 and the total cost of merchandise purchases is $48,000. Gross profit is 60% of net sales. The ending inventory using the gross profit method will be $30,000.
True / False
False
The formula for Merchandise Turnover is Average Merchandise Inventory / by Cost of Goods Sold.
True / False
False
The lowest ratio possible is the goal of the user of the merchandise turnover ratio.
True / False
False
If the ending inventory is overstated, the cost of goods sold is overstated and net income is understated.
True / False
False
If the ending inventory is overstated, the cost of goods sold is understated and net income is overstated.
True / False
True
If the beginning inventory is overstated, the cost of goods sold is overstated and net income is understated.
True / False
True
If the beginning inventory is understated, the cost of goods sold is overstated and net income is overstated.
True / False
False
If the business uses LIFO for tax purposes they may use any other method of inventory costing for their financial statements.
True / False
False
Using one inventory costing system over another has really very little effect on the amount of taxes that might be due in any given period.
True / False
False
Another name for weighted-average inventory pricing is _______________ cost method.
AVERAGE
The accounting principle that guides accountants to select the less optimistic estimate when two estimates of amounts to be received or paid are about equally likely is the _______________ principle.
CONSERVATISM
The one who receives and hold goods owned by another party for the purpose of selling the goods for the owner is a _______________ (CONSIGNEE or CONSIGNOR)
CONSIGNEE
The _______________ principle is the accounting requirement that a company use the same accounting methods period after period so that the financial statements of succeeding periods will be comparable.
CONSISTENCY
Dividing the ending inventory by cost of goods sold and multiplying the result by 365 results in a number that is called _______________ in inventory.
DAYS' SALES
The pricing of an inventory under the assumption that inventory items are sold in the order acquired is called _______________ (FIFO or LIFO) inventory pricing.
FIFO
The pricing of an inventory under the assumption that costs for the most recent items purchased are sold first and charged to cost of goods sold is called _______________ (FIFO or LIFO) inventory pricing.
LIFO
A procedure for estimating an ending inventory in which the past gross profit rate is used to estimate cost of goods sold, which is then subtracted from the cost of goods available for sale to determine the estimated ending inventory, is called the _______________ method of estimating ending an inventory.
GROSS PROFIT
For a company which has a fiscal year ending June 30, a balance sheet prepared on May 31 would be called an _______________ statement.
INTERIM
The required method of reporting merchandise inventory in the balance sheet where market value is reported when market is lower than cost is called the _______________ method.
LOWER-OF-COST-OR-MARKET
Dividing the cost of goods sold by the average merchandise inventory balance results in a number called merchandise _______________.
TURNOVER
An item that will sell for $45 and has a cost to sell of $32, has an expected _______________ value of $13.
NET REALIZABLE
A method for estimating an ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at marked selling prices is called the _______________ inventory method.
RETAIL
Another name for specific invoice inventory pricing is _______________ identification.
SPECIFIC
_______________ states that an amount may be ignored if its affect on the financial statements is not important to their users.
MATERIALITY
_______________ requires financial statements (including footnotes) to report all relevant information about the operations and financial position of the entity.
FULL DISCLOSURE
Another name for weighted-average inventory pricing.
Average cost method
The accounting principle that guides accountants to select the less optimistic estimate when two estimates of amounts to be received or paid are about equally likely.
Conservatism principle
One who receives and holds goods owned by another party for the purpose of selling the goods for owner.
Consignee
An owner of goods who ships them to another party who will then sell the goods for the owner.
Consignor
The accounting requirement that a company use the same accounting methods period after period so that the financial statements of succeeding periods will be comparable.
Consistency principle
An estimate of how many days it will take to convert the inventory on hand at the end of the period into accounts receivable or cash; calculated by dividing the ending inventory by cost of goods sold and multiplying the result by 365.
Days' sales in inventory
The GAAP that requires financial statements (including footnotes) to report all relevant information about the operations and financial position of the entity.
Full Disclosure
A procedure for estimating an ending inventory in which the past gross profit rate is used to estimate cost of goods sold, which is then subtracted from the cost of goods available for sale to determine the estimated ending inventory.
Gross profit method
Gross profit (net sales minus cost of goods sold) divided by net sales; also called gross margin ratio.
Gross profit ratio
The expected sales price of an item minus the cost of making the sale.
Net Realizable value
Current cost of purchasing an item.
Replacement Cost
A method for estimating an ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at marked selling prices.
Retail inventory method
Another name for specific invoice inventory pricing
Specific identification method
An inventory pricing system in which the unit prices of the beginning inventory and of each purchase are weighted by the number of units in the beginning inventory and each purchase. The total of these amounts is then divided by the total number of units available for sale to find the unit cost of the ending inventory and of the units that were sold.
Weighted-average inventory pricing
Preferred shares that have the cumulative feature are guaranteed their cash dividends.
True / False
False
