FINAL - chapter 1 - Inventories

Question 1

inventory

Answer 1

a CURRENT asset
goods in various stages of production:
- raw materials - input goods a company needs to produce finished goods
- in-progress goods - goods that are still in the manufacturing process, not yet ready for sale
- finished goods

Question 2

COGS

Answer 2

“cost of goods sold”
= COGAFS (cost of goods available for sale) - ending inventory

Question 3

gross margin

Answer 3

= net sales - COGS

Question 4

cost

Answer 4

a price paid for the units purchased

Question 5

specific ID method

Answer 5

for identical items & expensive items
requires IDing cost of each item in ending inventory

Question 6

average cost method

Answer 6

calculates average cost of good available for sale during the period
levels out effects of cost increases & decreases
= total cost of purchased units/total number of units

Question 7

FIFO method

Answer 7

assumes first items acquired are first items sold
costs of ending inventory are most recent purchase costs
if prices ^, income is higher, if prices v, income is lower

Question 8

LIFO

Answer 8

assumes last items acquired are first items sold
cost of goods sold is more recent purchase costs
if prices ^, income v, if prices v, income ^
best for income statement