Ch. 5 And H. 6

Question 1

Which document authorizes the purchase of the inventory from an approved vendor?

Answer 1

The purchase order

Question 2

What documents are used for inventory control?

Answer 2

1. A vendor’s invoice
2. A receiving report
3. A purchase order

Question 3

When should physical count of inventory be taken?

Answer 3

Near year-end

Question 4

What are physical counts of inventory used for

Answer 4

To adjust the inventory account balance to the actual inventory available

Question 5

What is specific identification?

Answer 5

Inventory method that is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items

Question 6

Ending inventory is made up of the oldest purchases when a company uses…

Answer 6

Last in, first out

Question 7

When merchandise sold is assumed to be in order in which the purchases were made, the company is using…

Answer 7

First in, first out

Question 8

What is weighted average?

Answer 8

The inventory costing method that smooths out erratic changes in costs

Question 9

What is the net realizable value concept?

Answer 9

Inventory should be reported at the lower of its cost or the amount at which it can be sold

Question 10

Internal control systems are…

Answer 10

Required by Sarbanes - Oxley ( S.O.X.) to be documented and verified if the company’s stock is traded on an exchange ( a public company)

Question 11

What are the objectives of internal control?

Answer 11

To provide reasonable assurance that assets are safeguarded and used for business purposes, business information is accurate and laws and regulations are complied with