Chapter 10: Inventories

Question 1

Are assets held for sale in the ordinary course of business

Answer 1

Inventories

Question 2

Classes of inventories

Answer 2

1. Inventories of trading Concern
2. Inventories of manufacturing concern

Question 3

Encompasses goods purchased and held for resale

Answer 3

Inventories

Question 4

Is one that buys and sells goods in the same form purchased.

Answer 4

Trading concern

Question 5

Is one that buys goods which are altered or converted into another form before they are made available for sale.

Answer 5

Manufacturing concern

Question 6

Are completed products which are ready for sale.

Answer 6

Finished Goods

Question 7

Are partially completed products which are require further process or work before they can be sold

Answer 7

Goods in process or work in process

Question 8

Are goods that are to be used in the production process.

Answer 8

Raw Materials

Question 9

Are similar to raw materials but their relationship to the end product is indirect. May be referred to as “Indirect Materials”.

Answer 9

Factory or manufacturing supplies

Question 10

Freight charge that is paid already

Answer 10

Freight Prepaid

Question 11

Freight charge that is not yet paid

Answer 11

Freight collect

Question 12

T/F

A seller who ships FAS (free alongside) must bear the expenses in delivering the Goods to the dock

Answer 12

True

Question 13

Receipt of the goods. The Seller shall be responsible for freight charges.

Answer 13

FOB destination

Question 14

Upon shipment of the goods. The Buyer shall be responsible for freight charges.

Answer 14

FOB shipping point

Question 15

Calls for the physical counting of goods on hand at the end of the accounting period to determine quantities.

Answer 15

Periodic System

Question 16

3 Maritime Shipping Terms

Answer 16

1. Free Alongside
2. Cost, insurance and freight
3. Ex-ship

Question 17

(For #’s 16 - 21) - Journal Entries_Periaodic System

Question 18

Purchase of Merchandise on Account

Answer 18

Purchases
Accounts Payable

Question 19

Payment of freight on the purchase

Answer 19

Freight in
Cash

Question 20

Return of merchandise purchased to supplier

Answer 20

Accounts Payable
Purchase Returns

Question 21

Sale of merchandise on account

Answer 21

Accounts Receivable
Sales

Question 22

Return of merchandise sold from customer

Answer 22

Sales return
Accounts receivable

Question 23

Adjustment on ending inventory

Answer 23

Merchandise inventory-end
Income Summary

Question 24

Requires the maintenance of records called stock cards that usually offer a running summary of the inventory inflow and outflow.

Answer 24

Perpetual System

Question 25

T/F Inventories are presented as one-line item in SFP and all the details of inventory are disclosed in the notes of financial statements.

Answer 25

True

Question 26

For #'s 27-33 - Journal Entry (Perpetual System)

Question 27

Adjustment of ending Inventory

Answer 27

No Entry

Question 28

Purchase of Merchandise on Account

Answer 28

Merchandise Inventory Accounts Payable

Question 29

Payment of freight on the purchase

Answer 29

Merchandise Inventory Cash

Question 30

Return of merchandise purchased to supplier

Answer 30

Accounts Payable Merchanise Inventory

Question 31

Sale of merchandise on account

Answer 31

Accounts Receivable Sales

Question 32

Return of merchandise sold from customer

Answer 32

Sales Accounts Receivable Merchandise Inventory Cost of Goods Sold

Question 33

Is usually closed to COGS because this is often the result of normal shrinkage and breakage in inventory

Answer 33

Inventory shortage

Question 34

T/F Abnormal and material shortage shall be separately classified and presented as other expenses

Answer 34

True

Question 35

T/F Abnormal and material shortage shall be separately classified and presented as other expenses

Answer 35

True

Question 36

Are deductions from the list or catalog price in order to arrive at the invoice price which is the amount actually charged to the buyer.

Answer 36

Trade Discounts

Question 37

Are deductions from price when payment is made within the discount period.

Answer 37

Cash Deductions

Question 38

Cash discounts are recorded as ____________ by the buyer and ___________ by the seller.

Answer 38

Purchase Discount Sales Discount

Question 39

T/F Trade discounts are recorded

Answer 39

False

Question 40

The debit balance of Inventory is 65,000. The physical count shows an inventory of 55,000 on hand.

Answer 40

Inventory Shortage 10,000 Merchandise Inventory 10,000

Question 41

The debit balance of Inventory is 65,000. The physical count shows an inventory of 75,000 on hand.

Answer 41

Inventory Overage 10,000 Merchandise Inventory 10,000