Quiz 6 Flashcards
Damaged goods are not counted in inventory if they cannot be sold
True
If absolute or damaged goods can be sold, they will be included in inventory at their net realizable value if it is less than cost
true
If the supplier pays freight charges, then ownership of inventory passes when goods arrive at their destination
true
The cost of an inventory item includes its invoice price any added or incidental costs necessary to put it in a place and condition for sale
true
Incidental costs added to the value of inventory include import duties, transportation-in, storage, and insurance
true
A business that had inventory items that are ordinarily interchangeable is required to use the specific identification method of assigning costs to inventory
false
a business that has inventory items that are ordinarily interchangeable may use either the FIFO or moving weighed average methods to assign costs to inventory
true
the three methods of inventory valuation that are most often used in Canada are specific identification FIFO and moving weighted average
true
The FIFO method assumes that costs for the most recently purchased items are recovered frist
false
The consistency principle helps ensure that financial statements are comparable across periods
true
The decline in merchandise inventory from cost to NRV is recorded in an adjusting entry at the end of the period
true
Trekking Company’s total cost of inventory was $305,000 the net realizable value is $297,000 under LCNRV the amount reported should be $305,000
false
Trekking Company has inventory with a net realizable value of $217,000 and a cost of $241,000 according to the guidance provided by the principle of faithful representation the inventory should be written down to $217,000
true
Trekking Conpany’s cost of inventory was $317,500 Due to phenomenal demand the net realizable value has increased to $323,00 trekking Company should write up the value of inventory under the LCNRV rule
false
An error in valuing inventory will cause an error in the amount of cost of goods sold
true
An understatement of beginning inventory will understate cost of goods sold and overstate net income
true
If the cost to retail ratio is 60% and ending inventory at retail is $45,000 then estimated ending inventory at cost is $27,000
true
if your inventory is destroyed by fire you can estimate the estimate the amount of inventory destroyed if you know: beginning inventory, purchases, net sales, and gross profit ratio
true
all businesses should take an inventory count once each year to avoid inventory errors or shortages
false
All businesses should take an inventory count once each year to identify inventory errors or shortages
true
a company’s ability to pay its short-term obligations depends on how quickly it sells it merchandise inventory
true
Costs included in the value of inventory are
purchase price less discounts plus transportation-in
If an inventory amount is reported in error, it can cause a misstatement in
cost of goods sold, gross profit, net income, current assets
interim statement
are usually monthly or quarterly statements prepared in between the traditional, annual statements
the merchandise turnover ratio
measures how quickly a firm sells its merchandise inventory
