Chapter 5

Question 1

Fob shipping point

Answer 1

Goods includes in buyers inventory when shipped

Question 2

Fob destination

Answer 2

Goods included in buyers inventory after arrival at destination

Question 3

Damaged goods equation

Answer 3

Net realizable value - sales price - selling costs

Question 4

4 inventory costing methods

Answer 4

Specific identification
FIFO
LIFO
Weighted average

Question 5

Periodic method

Answer 5

Done at end of the month

Question 6

Average cost method equation

Answer 6

Ending inventory/total # of units = $ per stock

Question 7

Inventory costs equation

Answer 7

Invoice cost -discounts + incidental cost

Question 8

Incidental costs include

Answer 8

Shipping
Storage
Insurance
Taxes

Question 9

FIFO advantage

Answer 9

Ending inventory approximates current cost

Question 10

LIFO advantage

Answer 10

Cogs on income statement approximates its current costs

Question 11

Weighted average advantage

Answer 11

smoothes out price changes

Question 12

LIFO costs

Answer 12

Higher cogs, lower Ni

Question 13

FIFO costs

Answer 13

Lower cogs, higher Ni

Question 14

LIFO conformity rule

Answer 14

IRS requires when LIFO is used for tax reporting, it must also be uses for financial reporting

Question 15

Lower costs or market

Answer 15

Inventory must be reported at market value when market is lower than cost

Question 16

Inventory turnover equation

Answer 16

Cogs/average inventory

Question 17

Average inventory equation

Answer 17

(Beginning inventory+ ending inventory)/ 2

Question 18

Days sales in inventory equation

Answer 18

Ending inventory/ cogs x 365