Chapter 6 Flashcards
Q 6.22: The inventory turnover is the cost of goods sold ____ average inventory
divided by
Q 6.23: If a company carries a lower inventory than the industry average, but are still a highly successful company, outselling the competition, what can explain their success?
They have a just-in-time inventory system.
Q 6.24: ________ methods such as FIFO and LIFO deal more with flow of costs than with flow of goods.
Inventory
Q 6.25: Goods that are held for sale by one party although ownership of the goods is retained by another party are called
consigned goods –
Q 6.26: When goods are shipped FOB destination, the ________ holds the legal title until the goods reach the buyer.
seller
Q 6.27: Goods in transit are included in the inventory of buyer when the terms of sale are
FOB shipping point —
Q 6.28: What is the meaning of work in process inventory?
that portion of manufactured inventory that has begun the production process but is not yet complete
Q 6.29: In a period of increasing prices of goods, if two companies report the same cost of goods available for sale but each employs a different inventory costing method, then the company using the
method will have the highest ending inventory.
FIFO
Q 6.30: Which of the following are categories manufacturers use to classify inventory? Select all that apply.
Raw materials, work in progress, finished goods
Q 6.31: The inventory turnover is calculated as cost of goods sold ______ by average inventory.
divided
Q 6.32: The ________ is the difference between ending inventory using LIFO and ending inventory if FIFO were used instead.
LIFO reserve
Q 6.33: The best term to describe the assumptions made in applying the four inventory methods is “cost flow.”
True
Q 6.34: If companies have identical inventoriable costs available for sale, but use different inventory flow assumptions when the prices of goods have not been constant, which of the following will be true?
The cost of goods purchased during the year will be identical.
Q 6.35: A company interested in the lowest amount of income tax expense in a period of increasing prices should use which inventory cost flow assumption?
LIFO costing–
Q 6.36: Given equal circumstances and generally rising costs, the ________________
method will increase the tax expense more than any other inventory method.
FIFO
Q 6.37: Which of the following are items that will eventually be used in production?
raw materials
Q 6.38: The category Current Assets on the balance sheet includes
all inventory —
Q 6.39: Which of the following is the inventory ready for sale in a manufacturing company?
finished goods inventory –
Q 6.40: What are consigned goods?
goods that are held for sale by one party although ownership of the goods is retained by another party
Q 6.42: Physical possession of inventory determines whether or not goods should be included in a physical count of inventory.
False
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Q 6.43: When is a physical inventory usually taken?
at the end of the company’s fiscal year
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Q 6.44: FOB shipping point means that legal title of goods
Q 6.45: Which of the following statements is correct?
Raw materials are basic goods that will be used in production but not have yet placed into production. ———
Q 6.46: Under the perpetual inventory system, what is not a reason to take physical inventory?
determining ownership of the goods
