Chapter 6

Question 1

FOB Shipping Point

Answer 1

goods are included in buyer’s inventory once they are shipped

Question 2

FOB Destination

Answer 2

goods are included in buyer’s inventory after arrival at the destination

Question 3

Goods on Consignment

Answer 3

goods sent by the owner (consignor) to another party (consignee) to be sold by consignee
consignor owns the goods and reports them in its inventory

Question 4

Net Realizable Value

Answer 4

Sale Price minus cost of making the sale

Question 5

Goods Damaged or Obsolete

Answer 5

no reported in inventory if they cannot be sold; if sold they are reported at net realizable value
a loss is recorded when the damage or obsolescence occurs

Question 6

Weighted Average (Inventory Costing)

Answer 6

requires that we use average cost per unit of inventory at the time of each sale

Question 7

Inventory Turnover

Answer 7

tells how many times a company turns over (sells) inventory in a period; used to tell how well management is controlling the amount of inventory