M3 Inventory

Question 1

What are the 3 types of inventory for a manufacturer?

Answer 1

Raw materials (including freight in)
Work in process (WIP
Finished Goods

Question 2

Transfer of ownership: FOB Shipping Point

Answer 2

Buyer gets the title when the goods are placed on the truck

Think: ownership changes hands at the shipping origin

Question 3

Transfer of ownership: FOB Destination

Answer 3

Buyer gets the title when the goods are delivered

Question 4

Who has title when the wrong goods are shipped?

Answer 4

Treated as a breach of contract, title reverts to the seller upon rejection by the buyer

Question 5

Per GAAP, inventory must be stated at…

Answer 5

COST

Question 6

Under Periodic, what is your JE for selling inv?

Answer 6

Db Cash or AR
Cr Sales

ONLY ONE JE, nothing including cogs

buying inventory is inverse, with a db to purchases

Question 7

Under perpetual, what is the JE for selling inv?

Answer 7

Db Cash or AR
Cr Revenue

Db COGS
Cr Inventory

Question 8

Under which system, periodic or perpetual, must you perform physical inventory counts?

Answer 8

Periodic