Chapter 5

Question 1

Merchandise inventory

Answer 1

All goods a company owns and holds for sale`

Question 2

FOB Shipping Point

Answer 2

buyer owns

Question 3

FOB destination

Answer 3

seller owns

Question 4

consignor

Answer 4

owner- in their inventory

Question 5

consignee

Answer 5

selling agent- does not own

Question 6

Goods that are damaged or obsolete

Answer 6

Not counted if they cant be sold, mark to net realizable value if can be sold

Question 7

Inventory Costs

Answer 7

Cost to bring item to salable condition and location

Question 8

Inventory Costs Equation

Answer 8

Invoice

<returns>
<discount>
\+freight in
</discount></returns>

Question 9

shrinkage

Answer 9

theft, loss, damage

Question 10

what kind of count is taken of inventory at least once a year

Answer 10

physical

Question 11

kinds of inventory count controls

Answer 11

prenumbered tickets
count by outsider: existence/amount/quality
2nd count with auditor/manager

Question 12

Kinds of inventory Safeguard controls

Answer 12

physical- cameras, limited access, locked merch documents- purchase order, receiving report, invoice

Question 13

Inventory Decisions

Answer 13

1. What to include
2. perpetual or periodic
3. costing method (Specific ID, FIFO, LIFO, WA)
4. Use of market values

Question 14

Costing Methods

Answer 14

we make up assumptions to determine which units in EI and which units in CGS

Question 15

Specific ID

Answer 15

Luxury Items

Question 16

FIFO

Answer 16

refers to units sold, assumes you sell in chronological order

Question 17

LIFO

Answer 17

refers to units sold, assumes you sell the ones you just bought

Question 18

weighted average

Answer 18

all units are treated alike

Question 19

decide which ones are sold

Answer 19

CGS

Question 20

decide which ones are left

Answer 20

End inv

Question 21

Periodic

Answer 21

assumes sale is on the last day of the month

Question 22

perpetual

Answer 22

tracks dates of sales

Question 23

which two groups are the same under both methods

Answer 23

specific ID and FIFO

Question 24

which two groups are different under the different methods

Answer 24

LIFO and WA

Question 25

LIFO

Answer 25

most recent purchases are sold first

Question 26

FIFO

Answer 26

first in first out

Question 27

overriding principle

Answer 27

if market is below cost, must take inventory to lower cost or market (LCM)

Question 28

market

Answer 28

current placement cost/net realizable value

Question 29

Inventory turnover

Answer 29

CGS/Avg Inv

Question 30

days sales in inventory

Answer 30

365/inventory turnover