Inventory

Question 1

What are the requirements of a consignment agreement?

Answer 1

Consignee receives the inventory but does not purchase it

Consignor retains legal ownership and reports goods on B/S until sold. Transportation costs are added to cost of inventory

Consignee sells merchandise for commission plus reimbursable costs

Question 2

What is FOB Destination?

Answer 2

• Seller owns goods and pays shipping

- Records freight-out as a selling exp

Question 3

What is FOB Shipping?

Answer 3

• Buyer owns goods and pays shipping

- Records freight-in and adds to inventory cost

Question 4

What are considered costs of inventory?

Answer 4

-Acquisition cost
-WH Cost
-Insurance, repacking
-Freight-in
Transport of consigned goods
Costs to bring to saleable condition
Normal spoilage

Question 5

Lower of cost or market is…

Answer 5

Celing (NRV)
Floor (NRV - Profit margin)
Replacement cost

Put in numerical order and select the middle value

Question 6

What are the types of inventory systems?

Answer 6

Periodic - adjustments only at end of period

Perpetual - point in time

Question 7

What periodic methods of estimating inventory exist?

Answer 7

Retail (current data)
Gross profit (historical data)