Cost of Sales and Inventories

Question 1

Which are the aims of accounting the inventories?

Answer 1

To correlate the costs of goods sold of a certain period to the revenues from the products’ sales of the same period and to measure the amount of the ending inventory at the end of the period

Question 2

Beginning Inventory + Purchases = ?

Answer 2

Ending inventory + COGS (Cost of goods sold)

Question 3

COGS = ? (periodic inventory method)

Answer 3

Available for Sale - Ending Inventory

Question 4

Available for Sale = ?

Answer 4

Initial Inventory + Purchases

Question 5

Cost of Sales = ?

Answer 5

Conversione Costs + Raw Material and Parts Costs of the Goods

Question 6

Tell 3 types of inventory accounts

Answer 6

Materials, WIP (work in progress), Finished Goods

Question 7

How are the cost of goods available for sale divided into cost of goods sold and ending inventory?

Answer 7

They are divided using 4 methods:
Specific identiication
Average cost
FIFO
LIFO

Question 8

COGS (Specific Identification Method) = ?

Answer 8

SUM[(Number of Item #n Sold) * (Unit Cost)]

Question 9

COGS (Average Methos) = ?

Answer 9

(Number of Units sold) * (Average Unit Cost)

Question 10

How does the FIFO method operate?

Answer 10

It pushes the first item purchased to be the first sold in order to avoid expiration dates or obsolescence

Question 11

How does the LIFO method operate?

Answer 11

It is the opposite of FIFO and commonly used for nonperishable commodities

Question 12

Inventory = ?

Answer 12

There are 2 methods:

• Ending Inventory
• [(Ending Inventory) + (Beginning Inventory] / 2

Question 13

Inventory Turnover (FIFO) = ?

Answer 13

COGS / Inventory

Question 14

Days Inventory (LIFO) = ?

Answer 14

[Inventory / (COGS)] * (Number of Days in Period)