New Chapter 6

Question 1

Goods FOB shipping point, whose possession should they be in when in transit?

Answer 1

• Goods in transit should be in the inventory of the buyer as they are their responsibility once they leave the buyer.

Question 2

T/F - • Goods held in consignment shouldn’t be included in the inventory.

Answer 2

T

Question 3

What are the cost flow assumptions?

Answer 3

Lifo
Fifo
Avg. Costs.

Question 4

T/F * cost flow assumptions need to be consistent with the physical movement of Goods.

Answer 4

False, they do not need to be consistent with the physical movement of goods.

Question 5

How do you calculate Cost of goods sold?

Answer 5

(Beginning Inventory + Purchase) - Ending inventory

Question 6

In a period of inflation which cost flow assumption contributes to the lowest income taxes?

Answer 6

Lifo

Question 7

Which kinds of industries are most likely to use LCNR

lower of cost net realizable value

Answer 7

• in industries where style are frequently changing, (fashion), and rapid advancements occur (technology)

Question 8

What are some factors that effect which cost flow assumption you settle on?

Answer 8

1. ) Tax effects
2. ) Balance sheet effects.
3. ) income statement effects

Question 9

What is the Net realizable value?

Answer 9

The expected selling price - any associated costs

Question 10

T/F In FIFO the cost of goods is not the same in perpetual as it is in periodic?

Answer 10

False, this is true for LIFO

Question 11

What happens when there is an error in stockholders equity?

Answer 11

It becomes offset by the next year.