Inventory Accounting Methods Flashcards
The following is true of inventory in a merchandise business.:
It is considered an asset on the balance sheet
When sold, there should always be two journal entries
It is raw materials used to create a finished product
It is considered an asset on the balance sheet
When sold, there should always be two journal entries
True or false. Because of the cost principle, inventory is reported on the balance sheet at its selling price, not at what it cost to purchase the merchandise.
False
Where is the value of a raw material tracked?
Inventory sub-account
Inventory errors will affect all of the following except:
Balance Sheet
Income Statement
The following month’s books
Other accrued liabilities
Other accrued liabilities
School’s back in session and Stan at ‘The Bizzy Bee’ has sold 85 of his Fidget Bands this week alone, and at the end of September, he had sold 142 total. He purchased 500 of them in August at $1,200 including shipping, and he is selling them for $12.99 each.
What is 1. The Purchase Cost for the 500 units before any sales 2.The area where Stan would record the 85 Fidget bands he sold this week 3.Stan’s Gross revenue from the sale of 142 Fidget Bands 4. Stan’s COGS for those 142 Fidget Bands? 5. Gross profit on Stan’s income statement for the sale of those 142 Fidget Bands?
- 1200
- There is not enough information to answer this question. We don’t know how each of the 85 Fidget Bands was sold (cash or credit). Sales are recorded depending on how the customer paid.
- 1844.58
- 340.8
- 1503.78
When you buy raw materials, and record the purchase of those materials, this entry is a ________________ to raw materials inventory, and a ____________________ to cash or accounts payable
Debit, Credit
“Leaps and Bounds” is a seller and installer of funky playground equipment. At the beginning of 2019, they had a total of $105,000 of inventory (mostly tire swings, jungle gyms, and suspension bridges). During the year they purchased $60,000 worth of additional inventory (towers and zip lines). At the end of the year, they had a $3,500 inventory balance. What was their cost of goods sold?
161,500
In order to better keep track of their inventory levels, “Leaps and Bounds” has also just switched from an inventory monitoring system that updates every quarter, to one that updates every week. This kind of system is called ________?
Periodic System
Emily is the owner and operator of “Wine Not”, a wine shop for those who like to try wines from lesser-known vintners. She has grown in popularity with her weekly “Wine-down Wednesdays” tastings and inventory is a consistent worry for her. As Emily’s bookkeeper, you have to ensure that her inventory levels are accurately accounted for at the beginning and end of each month.
In March, she ended with a total of 350 bottles with a cost of $15.00 each. In April, she ordered a total of 150 bottles with a cost of $17.00 each. During the month of April, she sold a total of 225 bottles.
- What is the opening inventory value for April?
2.What was the additional inventory value for April?
- What was the total inventory value for April? Also known as the cost of goods available?
- What was the cost of goods sold in April?
- What was the closing inventory value in April/opening inventory for May?
- 5,250
- 2550
- 7800
4.3375
- 4,425
When raw materials are used to create a final product, that product becomes a finished good. When that good is sold, the journal entry includes _______________ and ______________________.
Debit to cash/accounts receivable, Credit to sales income
To correct inventory errors, a bookkeeper needs to do all of the following except? (select the best answer)
Include a disclaimer explaining why new financial reports are being run
Create a reverse journal entry
Correct the errors by erasing the old journal entries and make sure the numbers are correct moving forward
Create new financial reports pertaining to the affected periods
Correct the errors by erasing the old journal entries and make sure the numbers are correct moving forward
