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Accounting rules allow companies to choose, from a variety of methods, the inventory method that best fits their business environment.
true
 
Which of the following would be considered merchandise inventory?
Purchased finished goods
 
Acme Company's balance sheet shows three inventory accounts—raw materials, work in process,
and finished goods. Acme Company must be a ______.
manufacturer
 
The goals of inventory managers include ______.
keeping the costs of buying and storing inventory as low as possible making sure that inventory quality meets customer expectations having enough inventory on hand to meet customer demand
 
Which of the following statements concerning inventory is correct?
Inventory is reported as a current asset because it will be converted into cash within a year of the balance sheet date.
 
Who decides which of the many inventory accounting methods a company should use?
The company's management
 
Blog Inc., has net sales of $50,000, cost of goods sold of $30,000, and selling expenses of $5,000. Its gross profit is ______.
$20,000
 
_________- inventory consists of products acquired in a finished condition, ready for sale without further processing.
Merchandise
 
What inventory accounts would one expect to see in the accounting records of a company that makes furniture?
Finished goods inventory
Raw materials inventory
Work in process inventory
 
The costs of carrying inventory include the costs of ______.
obsolescence
theft
spoilage
storage
 
Inventory is reported as a(n) ______.
current asset on the balance sheet
 
Berkley Company had beginning inventory of $4,000 and purchases of $20,000. If half of its inventory is sold, Berkley's
total goods available for sale for the period will ______.
be split between cost of goods sold and ending inventory
 
Which statement are true?
The inventory methods apply to both perpetual and periodic inventory systems.
The inventory costing methods determine the amount of the debit to Cost of Goods Sold and credit to Inventory.
Specific identification, weighted average cost, LIFO and FIFO are generally accepted costing methods.
 
Gross Profit equals ______.
Net Sales minus Cost of Goods Sold
 
True or false:
Specific identification is an inventory method typically used when accounting for expensive and unique inventory items.
true
 
Which of the following is merchandise inventory?
Goods held for sale in the normal course of business
 
Delta Diamonds had 5 one-carat diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased
July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold one of the diamonds
that was purchased on July 9. Using a periodic specific identification, its Inventory after the December 24 sale is ______.
$2,250
 
______ inventory will enter the production process and become ______ inventory. Once complete,
the goods will become ______ inventory.
Raw materials; work in process; finished goods
 
Which inventory costing methods are based on assumptions that accountants make about the flow of inventory costs?
(Check all that apply.)
FIFO
LIFO
 
Which inventory costing method uses the oldest cost for Cost of Goods Sold on the income statement and the
newest cost for Inventory on the balance sheet?
FIFO
 
Which inventory method is typically used when accounting for expensive and unique inventory items?
Specific identification
 
LIFO uses the ______ unit costs for Cost of Goods Sold on the income statement and the ______ unit costs for
Inventory on the balance sheet.
newest; oldest
 
When using the specific identification inventory method, cost of goods sold equals the ______.
cost of the actual item sold
 
The weighted average cost method uses the ______ cost for Cost of Goods Sold on the income statement and
the ______ cost for Inventory on the balance sheet.
average; average
 
FIFO, LIFO, and weighted average inventory costing methods are based on ______.
assumptions that accountants make about the flow of inventory costs
 
Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each
and it sold 3 items. Using first-in, first-out, the 3 goods sold are assumed to be ______.
from the beginning inventory
 
Specific identification, weighted average cost, LIFO and FIFO are acceptable GAAP costing methods.
True
 
Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11
each and it sold 3 items. Using first-in, first-out, Cost of Goods Sold equals ______.
$30
 
If a company assumes that its inventory costs flow out in the opposite order from which the goods were purchased,
it uses _____ to value its inventory
LIFO
 
What is the inventory costing method that adds together the total cost of all goods available for sale during the period,
and then divides that by the number of units available for sale to get a value to assign to all goods sold and all goods
remaining in inventory?
Weighted average cost
 
King Costume started the month with 8 masks in its beginning inventory that cost $10 each. During the month, King
Costume purchased 40 additional masks for $12 each. At the end of the month, King counted its inventory and found
that 5 masks remained unsold. If King Costume uses LIFO periodic, its Cost of Goods Sold for the month is ______.
$510
 
GAAP requires that a business must use an inventory accounting method that is the same as the physical flow of
goods in and out of the business.
False
 
Which inventory costing method assumes that the inventory's cost flow out in the same order the goods are received?
FIFO
 
Alpha Company bought 75 units of inventory for $4 each and 25 units of inventory for $5 each.
Alpha's weighted average cost per unit is ______.
$4.25
 
Chicken Little started the month with 5 eggs in its inventory that cost $2 each. During the month, Chicken Little bought
30 more eggs that cost $2.50 each. At the end of the month, Chicken Little counted its inventory and found that 8 eggs
remained unsold. If Chicken Little uses FIFO periodic, its Cost of Goods Sold for the month is _____
$65
 
Risen, Inc. has beginning inventory of $16 which consists of 2 units at $8 each. It purchased 10 units at $10 each. It
sold 5 units for $20 each. Which would result in the higher Gross Profit, FIFO or LIFO and why?
FIFO because the older, less expensive units are assumed to be sold first making Cost of Goods Sold lower and Gross Profit higher than LIFO
 
Which of these might cause the value of inventory to fall below its original cost? (Check all that apply.)
Damage
 
Obsolescence from going out of style
Increased competition
 
Assuming sales remain unchanged, if Cost of Goods Sold increases then Gross Profit _____.
(Enter one word per blank.)
decreases
 
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for
$550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds.
Using periodic weighted average cost, its Cost of Goods Sold is ______.
$560
 
Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11
each and it sold 3 items. Using last-in, first-out, the 3 goods sold are ______.
from the purchases made during the month
 
Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11
each and it sold 3 items. Using last-in, first-out, Cost of Goods Sold equals ______.
$33
 
The inventory method selected by management does not have to correspond to the physical flow of goods to
be in accordance with GAAP.
True
 
Dumb Waiters, Inc. has 2 units in beginning inventory with a cost of $10 each. It purchased 3 more at $12 each.
What is the weighted average cost per unit?
$11.20
 
The assumption that a company makes about its inventory cost flow can affect cost of goods sold on its ______
and inventory on its ______.
income statement; balance sheet
 
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550
each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using periodic
weighted average cost, its inventory after the December 24 sale is ______.
$2,240
 
Which inventory costing method uses the newest cost for Cost of Goods Sold on the income statement and the oldest
cost for Inventory on the balance sheet?
LIFO
 
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500; 2 purchased July 9 for
$550 each; and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using LIFO
periodic, its Cost of Goods Sold is ______.
$600
 
Risen, Inc. has beginning inventory of $16 which consists of 2 units at $8 each. It purchased 10 units at $10 each.
It sold 5 units for $20 each. Which would result in the higher Gross Profit, FIFO or LIFO and why?
FIFO because the older, less expensive units are assumed to be sold first making Cost of Goods Sold lower
and Gross Profit higher than LIFO
 
Which inventory costing methods are based on assumptions that accountants make about the flow of inventory costs?
LIFO
FIFO
 
When costs to purchase inventory are rising, using LIFO leads to reporting ______ cost of goods sold
and ______ net income than FIFO.
higher; lower
 
The assumption that a company makes about its inventory cost flow has ______
an effect on the company's balance sheet
an effect on the company's income statement
 
If you had 1 unit that cost $3 in beginning inventory, purchased 1 more at $2 and then later another at $1,
which method would result in the higher Cost of Goods Sold and lower Gross Profit if you sold 2 of the units?
FIFO
 
In times of rising prices, why would a company choose LIFO over FIFO?
LIFO would result in a higher Cost of Goods Sold making the Income Tax Expense lower than FIFO.
 
Assuming sales remain unchanged, if Cost of Goods Sold increases then Gross Profit _______
decreases
 
A company had beginning inventory of 3 units that cost $5 each. During the month, 17 units were purchased for $6 each.
The company sold 15 units during the month and had 5 remaining in ending inventory. If the company uses FIFO instead
of LIFO to calculate cost of goods sold, then cost of goods sold will be ______.
lower using FIFO, leading to higher gross profit and higher income taxes
 
When costs to purchase inventory are falling over time, using LIFO leads to reporting ______ cost of goods sold
and ______ net income than FIFO.
lower; higher
 
Applying the lower of cost or market rule results in inventory being reported at the ______.
market value if lower than cost
 
If a company's inventory costs are rising, ______ inventory costing method(s) typically results in a higher income tax expense.
the FIFO
 
Companies generally report their accounting method for inventory in the ______.
notes to the financial statements
 
Mountain Made started the month with 3 quilts in its beginning inventory that cost $200 each. During the month, Mountain Made purchased 20 additional quilts for $210 each. At the end of the month, Mountain Made counted its inventory and found that 5 quilts remained unsold. If Mountain Made uses LIFO periodic, its Cost of Goods Sold for the month is ______.
$3,780
 
Alpha Company bought 75 units of inventory for $4 each and 25 units of inventory for $5 each.
Alpha's weighted average cost per unit is ______.
$4.25
 
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each.   On December 24, it sold 1 of the diamonds. Using periodic weighted average cost, its inventory after the December 24 sale is ______.
$2,240
 
FIFO, an inventory costing method, actually describes how to calculate the cost of ______.
goods sold
 
Which of the following income statement line items are affected by the inventory method chosen? (Select all that apply.)
Income before Income Tax Expense
Gross Profit
Income from Operations
Income Tax Expense
Net Income
 
LIFO uses the ______ unit costs for Cost of Goods Sold on the income statement and the ______ unit costs for
Inventory on the balance sheet.
newest; oldest
 
Applying the lower of cost or market rule results in inventory being reported at the ______.
market value if lower than cost
 
Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each
and it sold 3 items. Using last-in, first-out, Cost of Goods Sold equals ______.
$33
 
Beta Company bought 80 units of inventory for $12 each and 20 units of inventory for $12.50 each. It sold 90 units for $25 each.
Beta's weighted average cost is ______.
$12.10
 
The assumption that a company makes about its inventory cost flow has ______. (Check all that apply.)
an effect on the company's income statement
an effect on the company's balance sheet
 
How does the inventory costing methods affect the income statement when costs tend to rise over time?
Cost of Goods Sold on the income statement differs between the methods causing Income Tax Expense to differ.
 
A company had beginning inventory of 5 units that cost $10 each. During the month, 15 units were purchased for $11 each.
The company sold 12 units during the month and had 8 remaining in ending inventory. If the company uses FIFO to calculate
cost of goods sold, then its gross profit will be $5 ____ than if it had used LIFO.
higher
 
If you had 1 unit that cost $3 in beginning inventory, purchased 1 more at $2 and then later another at $1,
which method would result in the higher Cost of Goods Sold and lower Gross Profit if you sold 2 of the units?
FIFO
 
Which of these might cause the value of inventory to fall below its original cost?
Damage
 
Obsolescence from going out of style
Increased competition
 
If a company were to ignore the fact that the market value of its inventory is lower than its cost, then ______.
its assets and stockholders' equity would be overstated
 
To find a description of the inventory accounting method used by a company, you need to look at the ______.
notes to the financial statements
 
How is the lower-of-cost-or-market rule applied when there are more than 2 types of inventory?
Only the items that have market values lower than the costs will be written down.
 
Which of the following statements are true?
An increased inventory balance is undesirable if it is a result of an accumulation of unsaleable inventory.
An increased inventory balance is desirable if management is building up stock in anticipation of higher sales.
 
When costs to purchase inventory are falling over time, using LIFO leads to reporting ______ than FIFO.
higher Inventory on the balance sheet
 
A ______ inventory turnover ratio may result in a reduction in storage and obsolescence costs as well as reduced borrowing.
higher
 
Probes, Inc. wrote down its inventory to the lower replacement value. The effect on Probes' accounting equation
includes a(n) _______.
decrease in stockholders' equity
decrease in assets
 
Days to sell measures the average number of ______.
days from the time inventory is purchased to the time it is sold
 
The inventory turnover ratio directly measures ______.
the times per period the average inventory balance is sold
 
An increase in a company's inventory balance from a prior year is ______.
good if the inventory turnover ratio is higher
 
Barrry Bees, Inc.'s Cost of Goods Sold equals $10,000. Its beginning inventory was $800, and its ending inventory was $1,200.
Barry Bee's days to sell equals _____ days (assume 365 days per year).
36.5 or 37
 
Which of the following may occur with a higher inventory turnover ratio?
Reduction in obsolescence
Reduction in inventory storage costs
 
It is more useful to compare a company's inventory turnover with its own results from prior periods than with other
companies' ratios ______.
because companies may use different accounting methods which may cause the turnovers to vary significantly
 
Which financial statements are needed to calculate the inventory turnover ratio?
Income statement
Balance sheet
 
At year end, CurlZ, Inc.'s inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box.
Market values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. CurlZ should report its inventory at ______.
$1,000
 
If Barry Bees, Inc.'s days to sell equals 73 days based on a 365-day year, then its inventory turnover ratio equals _____ times.
5
 
What may cause inventory turnover ratios to vary significantly between companies in the same industry?
Some companies may sell more lower-cost goods.
Some companies may sell fewer higher-cost goods.
 
Which of these would explain an increase in a company's inventory turnover ratio?
A decrease in total inventory
An increase in the demand for the company's products
 
Which company is most likely to have a higher inventory turnover than its competitors within the same industry?
A company with lower-priced goods and lower gross profit
 
Service Company
A company that sells services rather than physical goods.
Will typically not have Inventory on its balance sheet or Cost of Goods Sold on its income statement.
Retailers
 
When they sell directly to individual consumers.
Buys goods and sells them directly to individuals.
 
Wholesaler
When they sell their inventory to retail businesses for resale to consumers.
Buys goods and sells them to other companies that will then sell them to individuals.
 
Manufacturing Company
A company that sells goods that have been obtained from a supplier.
Makes the finished goods.
 
Which of the following are reported on the income statement?
Sales Revenue
Gross Profit
Cost of Goods Sold
 
Goods Available for Sale will ___ when sold.
become Cost of Goods Sold on the income statement
 
Bijoux Company has sales of $40,000, beginning inventory of $5,000, purchases of $25,000, and ending inventory of $7,000.
The goods available for sale for the period equals ______.
$23,000
 
Dumb Waiters, Inc. has 2 units in beginning inventory with a cost of $10 each. It purchased 3 more at $12 each.
What is the weighted average cost per unit?
$11.20
 
Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each
and it sold 3 items. Using first-in, first-out, the 3 goods sold are assumed to be ______.
from the beginning inventory
 
Mountain Made started the month with 3 quilts in its beginning inventory that cost $200 each. During the month, Mountain Made purchased 7 additional quilts for $210 each. At the end of the month, Mountain Made counted its inventory and found that 2 quilts remained unsold. If Mountain Made uses periodic weighted average cost, its Cost of Goods Sold for the month is ______.
$1,656
 
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for
$550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using FIFO,
its Inventory at December 31 is ______.
$2,300
 
Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for
$11 each and it sold 3 items. Using last-in, first-out, the 3 goods sold are ______.
from the purchases made during the month
 
In a perpetual system, the entry to record a purchase of merchandise on account includes a ____.
Credit to Accounts Payable
Debit to Inventory
 
Surfshack Corp. buys surfboards, wetsuits, and surf wax from Rip to Shreds, Inc. for sale to consumers.
What type of company is Surfshack Corp?
Retail merchandiser
 
The journal entry to record the payment for merchandise previously purchased on account includes a _____.
Credit to Cash
Debit to Accounts Payable
 
Inventory
Current asset on the balance sheet available for sale
 
Sales Revenue
Selling price times the quantity sold
 
Cost of Goods Sold
Cost times the quantity sold
 
Gross Profit
A subtotal on the income statement and is the amount earned from adding value to the inventory sold.
 
Which of these will require a credit to the inventory account in a perpetual inventory system?
Selling inventory for cash
Selling inventory on account
 
Alpha Company bought inventory from Omega Company, FOB shipping point. On December 31, the last day of the
accounting year, the goods were on a truck owned by Theta, Inc., exactly half-way between Alpha and Omega.
Which company should include these goods in its December 31 inventory?
Alpha
 
Boron Company has Net Sales of $60,000; Beginning Inventory of $7,000; Purchases of $35,000 and Ending Inventory of
$5,000. The Cost of Goods Sold is _____.
$37,000
 
The entry to record the purchase of inventory on account causes _____.
an increase in assets and liabilities
 
If Accounts Payable is debited and Cash is credited, then the company is recording a ____.
payment of amounts owed for purchases made on account
 
Which of the following costs should be added to the buyer's Inventory account?
Freight-in with terms FOB shipping point
 
Sales Revenue reports the _____.
sales price times the quantity of goods sold
 
FOB ___ is the term used when ownership of the goods transfers to a buyer as soon as the goods leave the seller's place of business.
shipping point
 
Ace Electronics had Cost of Goods Sold of $20,000. If purchases of inventory were $23,000 and Ending Inventory was
$6,000, Ace's Beginning Inventory must have been ____.
$3,000
 
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550
each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using FIFO, its
Cost of Goods Sold for the year ended is ______.
$500
 
Which inventory costing method uses the newest cost for Cost of Goods Sold on the income statement and the oldest cost
for Inventory on the balance sheet?
LIFO
 
Delta Diamonds had 5 one-carat diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for
$550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds that was purchased
on July 9. Using periodic specific identification, its Cost of Goods Sold is ______.
$550
 
What does the sales discount 2/10, n/30 mean?
You can take a 2% discount if you pay within 10 days, or the full amount is due within 30 days.
 
If Inventory is debited and Accounts Payable is credited, then the company uses the ____.
perpetual inventory system and is recording a purchase on account
 
The seller of inventory pays for shipping if the shipping terms are FOB _________.
destination
 
King Costume started the month with 8 masks in its beginning inventory that cost $10 each. During the month, King Costume
purchased 40 additional masks for $12 each. At the end of the month, King counted its inventory and found that 5 masks
remained unsold. If King Costume uses LIFO periodic, its Cost of Goods Sold for the month is ______.
$510
 
What is the inventory costing method that adds together the total cost of all goods available for sale during the period, and then
divides that by the number of units available for sale to get a value to assign to all goods sold and all goods remaining in inventory?
Weighted average cost
 
The Inventory balance on the balance sheet reports the _____.
cost of goods available for sale
 
FOB destination means that goods are owned by the buyer as soon as ____.
they arrive at the buyer's place of business
 
FOB ______ is the term used when ownership of the goods transfers to a buyer when the goods arrive at the buyer's place of business.
destination
 
On May 1, Doormat received an order from a customer. The goods were shipped FOB shipping point on May 3,
The customer received the goods on May 5 and paid for the merchandise on June 1.
When should Doormat record the sale?
May 3
 
Which statement are true? (Select all that apply.)
The inventory methods apply to both perpetual and periodic inventory systems.
Specific identification, weighted average cost, LIFO and FIFO are generally accepted costing methods.
The inventory costing methods determine the amount of the debit to Cost of Goods Sold and credit to Inventory.
 
Which inventory costing method assumes that the inventory's cost flow out in the same order the goods are received?
FIFO
 
Specific identification is ______.
an inventory method that tracks which item is actually sold and debits Cost of Goods Sold for the actual cost of the item
 
Which of the following would be considered merchandise inventory?
Purchased finished goods
 
If a company assumes that its inventory costs flow out in the opposite order from which the goods were purchased,
it uses _______to value its inventory. (Please respond using the acronym.)
LIFO
 
On May 1, there were 4 inventory items that cost $30 each. On May 5, 2 items were purchased for $35 each.
Given one item from the beginning inventory and one from the May 5 inventory were sold, under the __________
_________inventory method, cost of goods sold would equal $65.
Specific
Identification
 
Which statements are true? (Select all that apply.)
A grocery store may use the Last-in, First-out inventory method.
The inventory method is an assumed cost flow and does not have to correspond with the actual physical flow of goods.
 
The weighted average cost method uses the weighted average cost to calculate the value of ______.
(Check all that apply.)
Cost of Goods Sold
Inventory
 
Which inventory costing method uses the oldest cost for Cost of Goods Sold on the income statement and the
newest cost for Inventory on the balance sheet?
FIFO
 
True or false: Specific identification is an inventory method typically used when accounting for expensive and unique inventory items.
True
 
Sales discounts should appear in the financial statements as a(n) ____
deduction from sales
 
Bijoux Company uses a perpetual inventory system. Its bookkeeper properly recorded a $5,000 sale on account,
but forgot to record the related cost of the sale of $3,000. As a result of this error, ______.
Total assets will be too high
Net Income will be too high
 
In a perpetual inventory system, the buyer of merchandise with the shipping terms FOB shipping point will ___.
add the transportation costs to its inventory account
 
If a seller sells its merchandise with the shipping terms FOB destination, it credits Revenue when the merchandise is _____.
received by the customer
 
When a company sells different types of products, the income statement will report the Cost of Goods Sold for all
of the products in one line item.
True
 
Merchandisers record revenue when they ____.
fulfill their performance obligations by transferring control of the goods to customers.
 
Put the income statement line items in the proper order from the top to bottom.
Sales Revenue, gross
Sales Returns, Allowances and Discounts
Sales Revenue, net
Cost of Goods Sold
Gross Profit
 
ABC Corp. sells a product for $1,000 cash that cost $600. The journal entry(ies) for this transaction using a perpetual
inventory system include a debit to ______.
Cash of $1,000 and a credit to Sales Revenue of $1,000; a debit to Cost of Goods Sold of $600 and a
credit to Inventory of $600
 
Net Sales on an income statement equals Sales Revenue ______.
minus Sales Returns, Allowances and Discounts
 
The purchase of merchandise on account is recorded with a debit to ____ and a credit to _____.
Inventory
Accounts Payable
 
In a perpetual inventory system, which statements are true?
The seller should record freight-out as a selling expense.
The purchaser should record freight-in as an asset, Inventory.
 
A multistep income statement is useful to financial statement users because it ____.
Separates income statement items into meaningful components.
Separates cost of goods sold from other operating expenses, which allows the calculation of gross profit.
 
In which company would you rather invest?
A company with high gross profit percentage and high sales volume
 
If sales returns and allowances are a large dollar amount relative to initial sales revenue, it may mean ______.
There are product quality issues
 
___ Sales on an income statement equals Sales Revenue (gross) minus Sales Returns and Allowances minus Sales ____.
Net Discount
 
Inventory is reported as a(n) ______.
Current Asset, Balance Sheet
 
True or false: The inventory method selected by management does not have to correspond to the physical flow of goods to be in accordance with GAAP.
true
 
Using a perpetual inventory system, the effect on the accounting equation of purchasing merchandise on account includes a(n) ____.
Increase in assets
Increase in liabilities
 
A ____ income statement shows how much profit is earned from product sales without being clouded by other
operating expenses and separates other items that are not core to the operations of the company.
Multistep
 
Inventory began was $30,000. During the period the company purchased $61,000 of merchandise.
At the end of the period, inventory was $22,000. If the gross profit percentage was 40%, what was sales revenue?
$115,000
 
What items are netted against Sales Revenue to arrive at Net Sales (Sales Revenue to net sales)?
Sales Discounts
Sales Allowances
Sales Returns
 
Merchandise inventory ______. (Select all that apply.)
consists of products acquired in a finished condition that are available for sale
is reported as a current asset on the balance sheet
 
As inventory quality increases, its cost usually___ . (Enter one word per blank.)
increases
 
Inventory is reported on the ______. Later, when the inventory is sold, it becomes ______.
balance sheet as a current asset; Cost of Goods Sold on the income statement
 
Which of these inventory accounting methods are acceptable under US GAAP? (Check all that apply.)
Weighted average
LIFO
FIFO
Specific identification
 
Which of the following statements are true? (Check all that apply.)
Using a different inventory accounting method leads to reporting a different amount for cost of goods sold.
Managers can choose the method of accounting for inventory cost (i.e., FIFO, LIFO, etc.) that best fits their business.
 
Which inventory method is typically used when accounting for expensive and unique inventory items?
Specific identification
 
Which of the following is merchandise inventory?
Goods held for sale in the normal course of business
 
The goals of inventory managers include ______. (Check all that apply.)
making sure that inventory quality meets customer expectations
keeping the costs of buying and storing inventory as low as possible
having enough inventory on hand to meet customer demand
 
When using the specific identification inventory method, cost of goods sold equals the ______.
cost of the actual item sold

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