Inventory

Question 0

Inventory valuation method In which inventory is counted periodically and then priced

Answer 0

Periodic system

Question 1

Tangible personal property

• Held for sale in the ordinary course of business
• In the process of production for such sale
• To be used currently in the production of items for sale

Answer 1

Inventory

Question 2

Inventory counting method in which a running total is kept of the units on hand by recording all increases and decreases as they occurred

Answer 2

Perpetual system

Question 3

And inventory method in which the seller determines which item is sold
-Appropriate when there’s a small number of large value items

Answer 3

Specific identification

Question 4

And inventory costing method in which the seller averages the cost of all items on hand and purchased during the period

Answer 4

Weighted average– May only be used with periodic systems

Question 5

And inventory valuation method in which the seller does not wait the average for units purchased or in beginning inventory

Answer 5

Simple average

Question 6

And inventory valuation method in which the average cost of goods on hand must be recalculated anytime for additional inventory purchase a unit cost different from the previous the calculated average cost of goods on hand

Answer 6

Moving average– may only be used with perpetual systems

Question 7

An inventory Method used when the utility of the good it’s no longer as great as it cost

Answer 7

Lower of cost or market

Question 8

A value used to determine market cost that is equal to its net realizable value–prevents recognition of loss in future perios

Answer 8

Ceiling

Question 9

A value used to determine market cost that’s equal to et realizable value minus normal profit–prevents recognition of more than normal profits in future periods

Answer 9

Floor

Question 10

If inventory decreases when using this results in large profits because the earlier dollars value layers are included in the cost of goods sold – the primary disadvantage of LIFO

Answer 10

LIfo liquidation

Question 11

RUle that states that if LIFO is used for tax purposes it must be used for financial reporting purposes

Answer 11

LIFO conformity rule

Question 12

When a company uses LIFO for external reporting purposes and another inventory method for internal purposes this account is used to reduce inventory from the interna valuation to the LIFO valuation

Answer 12

LIFO reserve–a Contra account to inventory Adjusted up and down at year end

Question 13

A form of LIFO applied to pools of inventory rather that individual items– makes the costs of keeping inventory records less than under unit LIFO

Answer 13

Dollar value LIFO

Question 14

An inventory valuation method that considers only product costs as variable costs and fixed costs as period costs–not an acceptable method to value inventory

Answer 14

Direct/ variable costing

Question 15

Inventory may be valued using this method only if variances are reasonable

• if large dr. Balance–>unfavorable and inventory and cost of sales are undervalued
• -if large cr. balance–>favorable and indicates that inventory is overvalued

Answer 15

Standard costs

Question 16

Ratio that measures the number of times inventory was sold

Answer 16

Inventory turnover

=( cost of goods / average inventory)

Question 17

A ratio that measures the number of days inventory is held before sale; reflects on efficiency of inventory policies

Answer 17

Number of days supply in average inventory

=365/inventory turnover

Question 18

In method of accounting for long term contracts in which the recognition of contract revenue and profit are held off until the contract is complete and all related costs are deferred until completion and then matched to revenues

Answer 18

Completed contract method

Question 19

I method of accounting for long-term contracts in which contract revenue and profit during construction are based on expected total profit an estimated progress towards completion in the current. All related costs are recognized in the period in which they occur

Answer 19

Percentage of completion method