INVENTORIES

Question 1

Assets held for sale in the ordinary course of business, in the process of production for sale or in the form of materials/supplies to be consumed in the production process o in the rendering of services

Answer 1

Inventories

Question 2

What are the two classes of inventories?

Answer 2

Trading concern and Manufacturing concern

Question 3

What is trading concern?

Answer 3

one that buys and sells goods in the same form purchased

Question 4

What is manufacturing concern?

Answer 4

one that buys goods which are altered or converted into another form before they are made available for sale

Question 5

What are the 4 inventories of manufacturing concern?

Answer 5

1. Raw materials
2. Goods in process
3. Finished goods
4. Factory/manufacturing supplies

Question 6

What are finished goods?

Answer 6

completed products that are ready for sale

Question 7

What are goods in process?

Answer 7

partially completed products which requires further process or work before sold

Question 8

What are raw materials?

Answer 8

goods to be used in the production process

Question 9

What are factory supplies?

Answer 9

indirect materials

Question 10

Legal test question

Answer 10

Is the entity the owner of the goods to be inventoried?

Question 11

Items that are included in the inventory (6)

Answer 11

1. Goods owned and on hand
2. Goods in transit, FOB destination
3. Goods in transit and purchased, FOB shipping point
4. Goods out on consignment
5. Goods in the hands of salesmen or agents
6. Goods held by customers on approval or on trial

Question 12

FOB destination

Answer 12

Seller is the owner of the goods in transit and is legally responsible for freight charges, ownership is transferred once the buyer receives the goods

Question 13

FOB shipping point

Answer 13

Buyer is the owner of the goods once shipped and is legally responsible for freight charges

Question 14

Freight collect

Answer 14

actually paid by the buyer

Question 15

Freight prepaid

Answer 15

actually paid by the seller

Question 16

Method of marketing goods in which the consignor transfers physical possession of the goods to an agent/consignee who sells them on the owner’s behalf

Answer 16

Consignment

Question 17

Consigned goods shall be

Answer 17

included in the consignor’s inventory and excluded from the consignee’s inventory

Question 18

Two systems in accounting for inventories

Answer 18

Perpetual and Periodic

Question 19

What is periodic system?

Answer 19

records inventory transactions at the end of the period

Question 20

What is perpetual system?

Answer 20

continual record of inventory transactions

Question 21

Perpetual system required maintenance of

Answer 21

stock cards

Question 22

What are stock cards?

Answer 22

a running summary of the inventory inflow and outflow