Inventory

Question 1

Cost to Retail Ratio = COST/Retail

Answer 1

Cost = Inventory + Purchases
Retail = Inventory + Purchases + Net Additional Markups

Cost/Retail

Ending Inventory = Inventory + Purchases + Net Additional Markups - Net Markdowns - Sales Revenue

Question 2

COGS = Beginning Inventory + Purchases (when ending inventory is not provided)

Answer 2

True

Question 3

Estimated COGS

Answer 3

= Sales - Gross Profit

Question 4

COGS%

Answer 4

100-Gross Profit %

Question 5

Goods once ACTUALLY SHIPPED means title transferred to the customer. If not, include in vendor’s inventory.

Answer 5

True

Question 6

Dollar Value LIFO

Answer 6

Uses price index (Index = Ending Inventory at CY cost)
_____________________________
Ending Inventory at Base Year cost

Question 7

NRV or Ceiling =

Answer 7

Selling Price - Cost of disposal

Question 8

Floor Limitation

Answer 8

= NRV - Profit

Question 9

FIFO

Answer 9

Cost of goods sold balance is the same in both perpetual and/or periodic inventory system

Question 10

This method must also be used for financial reporting purposes if used for tax purposes.

Answer 10

LIFO (LFT or left)

Question 11

__________ Method that uses historical sales margins to estimate ending inventory.

Answer 11

Gross Profit

Question 12

GAAP allows the ____________ for interim financial statements or to determine inventory that is destroyed

Answer 12

Gross profit method

Question 13

The operating cycle is Days’ supply in inventory + Avg receivables collection period. Since the inventory turnover increased, as a result, the days’ supply in inventory decreased. The avg receivables collection period remained the same; therefore, there was a decrease in the operating cycle.

Answer 13

True

Question 14

LIFO follows LCM

Answer 14

Lower of Cost or Market (market - middle value)

Question 15

FIFO follows LCNRV

Answer 15

Lower of Cost or NRV

Question 16

Moving Avg is used for Perpetual

Answer 16

True

Question 17

Weighted Avg is used for Periodic

Answer 17

True

Question 18

FIFO and Specific Identification - same result for perpetual and periodic inventory

Answer 18

True

Question 19

FIFO

Answer 19

Lowest COGS, Highest Ending Inventory, highest profits

Question 20

Gross Profit % + COGS % = 100%

Answer 20

True

Question 21

FIFO - Manufacturing situations, manufacturing firm

Answer 21

Most manufacturing operations process and sell inventory in the order it is received, that is the first items in are the first to be sold, which is FIFO.

Question 22

Cost of Sales = Cost of Goods sold

Answer 22

True

Question 23

Consignor (wholesaler) retains ownership. Inventory includes transportation costs. BS reports unsold inventory at year end.

Answer 23

IS - Sales revenue, COGS and selling expenses.

Question 24

Consignee (retailer/dealer) has possession, BS- no inventory reported, reimbursable costs (receivable).

Answer 24

IS - Commission revenue

Question 25

Goods held on consignment are not included by COmpany as they are owned by consignor (not to be included in ending inventory)

Answer 25

True

Question 26

Although ending inventory is $10,000, the amount is included in the $400,000 of inventory purchased. Under cash-basis accounting, inventory is expensed when purchased with cash, therefore, no adjustment is required.

Answer 26

True

Question 27

CONSIGNEE also known as the retailer/dealer __________________

Answer 27

–Has physical possession of merchandise
–Reports Commission Revenue

Question 28

Consignor (seller) reports consigned goods as inventory, has legal ownership of merchandise, bears the risk of unsold merchandise, reports sales revenue and COGS

Answer 28

True

Question 29

FIFO

Answer 29

Perpetual and Periodic COGS calc result will be same example $5,900 and $5,900

Question 30

LIFO

Answer 30

COGS (expense is) higher and Current tax liability is lower

Question 31

In a periodic inventory system, the weighted avg method results in NI that is lower than FIFO net income and higher than LIFO net income when prices are rising

Answer 31

In perpetual inventory system, the moving avg method results in NI that is lower than FIFO NI and Higher than LIFO NI when prices r rising

Question 32

Selling expense is period cost /expense

Answer 32

PRODUCT (INventoriable cost)

Question 33

While an agent (consignee) will hold and sell goods on behalf of the consignor, until the Inventory is sold, the seller (consignor) will include in his inventory because title and risk of loss are retained by the consignor.

Answer 33

Goods held on consignment should be included in ending inventory of the consignor.

Question 34

Balance sheet should include for Consigned inventory

Answer 34

=Inventory shipped plus freight paid

Question 35

Perpetual JEs

Answer 35

At the time of purchase
_____________________________
Inventory Dr. XX
A/P or Cash XX

At the time of Sale
__________________
Cash or A/R Dr. XX
Sales Revenue XX

COGS Dr. XX
Inventory XX

Question 36

Periodic JEs

Answer 36

At the time of purchase
______________________________
Purchases Dr. XX
A/P or Cash XX

At the time of Sale
__________________________
Cash or A/R Dr. XX
Sales Revenue XX

At year-end
______________________
Ending Inventory Dr. XX
COGS (plug) Dr. XX
Purchases XX