Bookkeeping 30

Question 1

1. INVENTORY means:

Answer 1

the stock goods ON HAND FOR SALE.

Question 2

2. In order to determine the value of INVENTORY AT THE END of an accounting period, you need to know:

Answer 2

1. The amount on hand at the beginning
2. The value of goods purchased during the accounting period must be added.
3. The value of GOODS SOLD or SHIPPED BACK must be subtracted.

Question 3

3. What is the FORMAT for calculating the COST OF GOODS SOLD?

Answer 3

Beginning Inv…………40k
Purchases………..21k
Less Purch Ret…..1k
NET PURCHASES……20k

Msde avail for sale………..60k
Less: Ending Inv…………..15k

COGS…….……………………45k

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Question 4

4. Inventory values can be APPROXIMATED from records of purchase and sale. Why would a PHYSICAL INVENTORY COUNT be done?

Answer 4

to help determine how much is being lost through shoplifting or employee pilferage, and to provide a check of the accuracy of the accounting records.

Question 5

5. When taking inventory, what price is used to value the merchandise?

Answer 5

Goods may be valued at WHOLESALE or at the RETAIL PRICE.

Question 6

6. The cost of an item in INVENTORY can vary over an accounting period and:

Answer 6

with the size of an order.

Question 7

7. If 10 units were purchased in January at 100 usd each and 5 units on Feb at 125 usd ea, what was the cost of one unit sold in March?

Answer 7

There are two principal method used to determine the cost of an item sold: LIFO and FIFO.

Question 8

8. What is FIFO?

Answer 8

FIRST IN FIRST OUT. It assumes that the oldest item was sold first and thus the item sold is priced at 100 usd.

Question 9

9. What is LIFO?

Answer 9

LAST IN FIRST OUT. It assumes that the most recently purchased item was sold and thus priced at 125 usd.