Ending Inventory

Question 1

Ownership determines what is included in year end inventory

Answer 1

FOB (free-on-board)
FOB destination - ownership transfers when the buyer receive it
FOB shipment - ownership transfers at particular shipping point

Question 2

Good on consignment

Answer 2

-merchandise/inventory is owned by the consignor (seller)
-included in the seller/consignor endig inventory
-

Question 3

Valuation of inventory

Answer 3

-Capitalize in inventory all cost necessary to bring the item of inventory to salable condition
-includes
-freight & insurances in transit paid to seller
-taxes for acquiring the inventory
-material handling cost
-packaging cost
-freight in
-purchase returns (reduces inventory)
period expenses include
-promotional expenses
freight out

Question 4

periodic inventory system

Answer 4

the beginning inventory balance is reflected in the merchandise inventory account

• acquisitions of merchandise is recorded in the purchase and related accounts
• continuous record of the cost of inventory on hand is not maintained under the periodic system
• purchase account is closed to ending inventory and COGS at the end of the period

Question 5

Periodic inventory system - ending inventory

Answer 5

-physical count of ending inventory is required
-value is assigned once physical inventory is counted and year end adjusting entry is prepared
-when updating the account system
-end inventory is entered
opening balance is closed
-purchased account is closed
-COGs is entered (before this COGS did not exist)
-COGs is not identifiable in a periodic inventory system

Question 6

periodic inventory COGS