Inventory Flashcards
Learn this FAR stuff
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Which costs are inventoriable?
Purchases - Net of Discounts, Freight, Warehouse expenditures
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When does ownership of goods transfer when shipped FOB Shipping Point?
FOB Shipping Point puts the inventory into the hands of the buyer from the loading dock
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When does ownership transfer when goods are sent FOB Destination?
FOB Destination keeps the items in the seller’s inventory until it reaches the buyer
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Which costs are non-inventoriable?
Sales Commissions
Interest on liabilities to vendors
Shipping expense to customers
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When are discounts recorded under the gross method?
Under the gross method, discounts are recorded only when used.
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Under the net method, when are discounts recorded?
Under the net method, discounts are recorded whether used or not.
Unused discounts are allocated to financing expense.
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How is gross margin calculated?
Gross Margin : Sales - COGS (BI + P - EI)
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Describe the periodic inventory system.
Inventory is counted at certain times throughout the period
Weighted-average cost flow method is used.
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Describe the perpetual inventory system.
Inventory count continually updated
Uses a moving-average cost flow method
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In periods of rising prices, under which cost flow system would ending inventory be the same under both periodic and perpetual inventory methods?
Under the FIFO system, periodic and perpetual inventory methods will both have the same ending inventory.
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How is inventory turnover calculated?
COGS / Average Inventory
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How is Average Day’s Sales in inventory calculated?
365 / Inventory Turnover
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Under a consignment system, who holds the consigned goods in inventory?
The CONSIGNOR holds the consigned items in their inventory count. The cost includes the shipping to the consignee.
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Under a consignment system, does the consignee hold consignment inventory in their own inventory?
No. Consignment goods are maintained in the inventory of the consignor, not the consignee.
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What effect does overstatement or understatement of inventory have on ending retained earnings?
Misstatement of beginning inventory does NOT have an effect on ending retained earnings.
Misstatement of ENDING inventory does have an effect on retained earnings.