Inventories Flashcards
FOB Shipping point
Buyer pays
“freight in” added to cost of inventory of buyer
FOB destination
seller pays
“freight out” included in selling expense of seller
If the seller ships the wrong goods, the title reverts to the:
seller
If goods are sold but the buyer has the right to return the goods, the goods should be included in the seller’s inventory if the amount of the goods likely to be returned ________ be estimated
cannot
If the amount of goods likely to be returned ____ be estimated, the transaction will be recorded as a sale with an allowance for estimated returns recorded
can
In a consignment sale, the ________ is the true owner
consignor
A consignee is a:
sales agent
Title passes ______ to the third-party buyer from the consignor at the point of sale
directly
GAAP requires that inventory be stated at its ______ when sold at a profit
cost
When inventory is sold at a profit no loss should be ________ even though replacement or reproduction costs are lower
recognized
When inventory is sold at a loss it is stated at the lower of _____ or _____
cost; market
Precious metals and farm products are valued at ____ _____ ______
net realizable value (selling price - costs of disposal)
Purpose of reducing inventory to the lower of cost or market (2):
conservatism; matching principle
Separately lower cost or market to each single item results in the most _________ ending inventory
conservative
Under GAAP, the term “market” in the phrase “lower of cost or market” generally means current ________ cost, provided the current _______ cost does not exceed NRV (market ceiling) or fall below NRV - normal profit margin (market floor)
replacement
Under IFRS, the write-down of inventory to market is usually reflected in _______
COGS
Under GAAP, reversals of inventory write downs are ______
prohibited
