Test 3 Flashcards
If foods in transit are shipped FOB destination
the seller has title to the goods until they are delivered to the buyer
Which of the following should be included in the physical inventory of a company…
goods in transit from another company shipped FOB shipping point
Frieght terms of FOB shipping point mean that the.
buyer must bear the frieght cost
The terms FOB denotes
free on board
Under a consignment arrangement the…
co-signer has ownership until goods are sold to a customer
- Cost of goods sold is computed from the following equation?
(Beginning inventory + purchases) - Ending inventory = Cost of goods sold
The LIFO inventory method assumes that the cost of the latest units purchased are
the first to be allocated to the cost of goods sold
Which of the following statements are correct with respect to inventories
under FIFO the ending inventory is based on the latest units purchased
In periods of rising prices the inventory method which results in the inventory value is the balance sheet that is closest to the current cost is the
FIFO metho
Understanding beginning inventory will understate…
costs of goods sold
If the beginning inventory is understated by $13,000 the effect of this error in the current period is.
cost of goods sold understated-net income overstated
Overstating ending inventory will overstate all of the following except…
costs of goods sold
If employees are bonded…
they have been insured against misappropriation of assets
The entry to replenish a petty cash fund includes a credit to…
cash
A debit balance in Cash Over and Short is reoriented as a
miscellaneous expense
A petty cash fund of $100 when the fund contains $4 in cash and receipts for $93….
The entry to replenish the fund would… debit cash over and short for $3
A petty cash fund is generally established in order to
pay relatively small expenditures
Work in process
Portion of manufactured Inventory that has been placed into production process but is not yet complete
Raw materials
The basic goods that will be used in production but have not yet been placed into production
Merchandise inventory
The many different items that make up the total inventory
FOB (free on board) shipping point
Ownership of the good passes to the buyer when the public carrier accepts the goods from the seller
FOB destination
Ownership of the good remain with the seller until the good reach the buyer
Specific identification method
Being able to identify which particular units it’s sold in which are still in anything inventory
Using this method companies can accurately determine ending inventory and cost of goods sold
FIFO
First in, first out method
The earliest goods purchased are the first to be sold
Often parallels the actual physical flow of merchandise
Oldest goods I recognize the first
The ending inventory is based on the prices of the most recent units purchased
Companies obtain the cost of the ending inventory by taking the unit cost of the most recent purchase in working backward until all units of inventory have been costed
LIFO
Last day in, first out method
The latest goods purchased are the first to be sold
Coincides with the physical flow of inventory
The cost of the latest goods purchased are the first to be recognized in determining cost of goods sold
Companies attain the cost of the ending inventory by taking the unit cost of the earliest good available for sale in working for until all units in inventory have been costed
Average cost method
Allocates the cost of goods available for sale on the basis of the weighted average unit cost incurred, the average cost method assumes that good are similar in nature
Current replacement cost
The cost of purchasing the same goods at the present time from the usual suppliers in the usual quantities current replacement cost is used because a decline in replacement cost of an item usually leads to a decline in the selling price of the item
Inventory turnover
A ratio that measures the number of times on average the inventory sold during the period, computed by dividing the cost of good sold by the average inventory during the period
