Quiz 4 (chpt. 6)

Question 1

COGS

Answer 1

COGS=COGAS-Ending inventory

Question 2

FIFO

Answer 2

First-In-First-Out (FIFO)-sell older products first before you sell the newer ones
Obtain same results if you use periodic or perpetual system

Question 3

LIFO

Answer 3

Last-In-First-Out–> Sell newer products first
Results would differ from using periodic or perpetual system

Question 4

COGAS

Answer 4

COGAS=Beginning Bal. + Net Purchases

Question 5

Net Purchases

Answer 5

Net Purchases= Gross purchases +(Freight In) -(purchase Discount)-(Purchases returns and Allowances)

Question 6

What are the affects of FIFO under inflation?

Answer 6

under inflation FIFO gives you the greatest Gross profit bc your selling the first ones you bought and you bought those when goods were cheaper so you have a lower COGS expense

Question 7

What are the affect of LIFO under inflaction?

Answer 7

Under inflation LIFO gives you the smallest Gross profit bc your COGS expense is the highestet

Question 8

Why do some people want to use LIFO under inflation?

Answer 8

because it will result in a lower Gross Profit (for that yr) and with lower their taxes.

Question 9

What to do if Ending Inventory + COGS doesn’t equal COGAS

Answer 9

tack the difference into the COGS amount, this difference will result from rounding

Question 10

Inventory Turnover ratio

Answer 10

COGS/Avg Inventory

Question 11

Days in Inventory

Answer 11

365/Inventory Turnover

Question 12

Lower of Cost or net realizable value (Lower of Cost or market, LCM)

Answer 12

Always take the lower value btwn the book value and the net realizable value (Accounting takes a more conservative approach)