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Account Chapter 5

Inventories and Cost of sales

QuestionAnswer
Goods in transit shipped to Abbey (purchaser) FOB Destination : included or exclude from inventory Exclude from inventory
Goods in transit shipped to Abbey (purchaser) FOB Shipping Point: included or exclude from inventory Include in inventory
Goods in transit shipped by Abbey (seller) FOB Destination: included or exclude from inventory Include in inventory
Goods in transit shipped by Abbey (seller) FOB Shipping Point: included or exclude from inventory Exclude from inventory
Under the conformity rule, companies who use the _____ method for tax reporting, are required by the IRS to also use it in their financial statements. multiple choice LIFO FIFO Weighted-average Specific identification LIFO because when purchase costs are consistenly rising, LIFO lowers the income taxes paid by deferring some of them to future periods.
A reports end. inv. in year 1 of $25,000 instead of the correct amount of $20,000. this error is (U: understated, O: overstated) End. Inv. is U and COGS is O End. Inv. is O and COGS is U End. Inv. is U and COGS is U End. Inv. is O and COGS is O end. inv. is overstated and COGS is understated
A company reports merchandise inventory on December 31 at $250,000 but LCM applied to items is $200,000. Record the journal entry to report merchandise inventory at the correct amount: Dr. COGS 50,000 Cr. Merchandise Inv. 50,000
If all units are purchased at the same unit cost, cost of goods sold will ____? be the same for all four methods.
An error in the ending inventory balance in Year 1 will also affect: year 2 end. inv. and year 2 beg. inv.
The _____ principle states that inventory costs are expensed as cost of goods sold when inventory is sold. expense recognition
Which statement(s) below is(are) correct regarding the purpose of taking a physical inventory count? The physical count is used to adjust the Inventory account balance to the actual inventory available. and The physical count is used to determine if there has been any theft, loss, damage or errors in inventory.
If goods are shipped FOB shipping point, then the .... is responsible for paying freight charges and the .... will not include the merchandise in their inventory. purchaser and seller
The FIFO cost flow assumption assumes that the cost of items purchased ... (earliest/latest) are the costs that will be transferred first to cost of goods sold on the ... (balance sheet/income statement). earliest and income statement
Why would the physical count of inventory be different than what is shown in perpetual inventory records? Events such as damage Events such as errors Events such as theft Events such as loss
Which statement(s) below correctly describe(s) the relationship of cost of goods sold and ending inventory? Cost of goods available for sale must be allocated between cost of goods sold and ending inventory. and Cost of goods sold plus ending inventory will equal the total goods available for sale.
Demonstrate how inventory costs are treated both as assets and expenses by selecting the correct statement(s) Inv. items sold are considered part of cost of goods sold on the income statement. Inv. items retained at the end of the period are considered part of Merchandise Inventory on the balance sheet. Inv. costs are treated as an expense when they are sold.
The kind of business that would use the specific identification method of inventory costing A car dealership
Identify the safeguards that companies implement to protect their inventory. Implement security measures, such as cameras. Restrict access to inventory. Match inventory received with purchase orders. Control access to inventory records.
All of the following are safeguards for inventory except: restricted access security measures authorized requisitions preventing risk preventing risk
Assuming purchase costs are rising in a periodic inventory system, determine which of the statements below are correct regarding the cost of goods sold under FIFO, LIFO and weighted average cost flow methods. (1) FIFO will report the highest gross profit and net income; will pay higher taxes than companies using LIFO, assuming all else being equal, will report the smallest cost of goods sold.
Assuming purchase costs are rising in a periodic inventory system, determine which of the statements below are correct regarding the cost of goods sold under FIFO, LIFO and weighted average cost flow methods. (2) Weighted average cost of goods sold will be between FIFO and LIFO costs of goods sold.
Assuming purchase costs are declining and a periodic inventory system is used, determine the statements below which correctly describe what is happening to cost of goods sold under FIFO, LIFO and weighted average cost flow methods.(1) Companies using LIFO will report the highest ending inventory on their balance sheets, as compared to companies using FIFO or weighted average. Weighted average cost of goods sold will be between FIFO and LIFO costs of goods sold.
Assuming purchase costs are declining and a periodic inventory system is used, determine the statements below which correctly describe what is happening to cost of goods sold under FIFO, LIFO and weighted average cost flow methods.(2) Companies using LIFO will report the lowest cost of goods sold.
An advantage of the weighted average method under a periodic inventory system is that it: smooths out erratic changes in costs
There are advantages to using each of the four inventory costing methods. Identify the statements below that are correct regarding these advantages. FIFO assigns an amount to inventory on the balance sheet that approximates its current cost. Weighted average tends to smooth out erratic changes in costs.
Which of the statements below explain why LCM is used? (1) LCM allows companies to recognize a loss in value of an asset in the period the loss occurs. Assets are not shown at an inflated value on the balance sheet, but rather at lower of cost or replacement cost.
Which of the statements below explain why LCM is used? (2) Companies never want to report inventory on a balance sheet that is higher than replacement cost.
Q-mart failed to include inventory that was kept in a separate warehouse in its end-of-the-period inventory count. Explain how this error will affect this year's balance sheet. This year's total assets will be understated. This year's total equity will be understated.
company overstated its ending inventory in the current year by $5,000. The company incorrectly reported $100,000 of net income. Explain the consequences of this error on the current period's income statement. Cost of goods sold will be too low by $5,000.
Cake Mart understated its ending inventory in the current year by $5,000. The company incorrectly reported net income of $100,000. Determine the effect of the error on the financial statements. Cost of goods sold will be too high by $5,000, and this caused net income to be understated by $5,000.
Review the statements below and select the ones that are correct regarding the days' sales in inventory ratio (1) is useful in evaluating liquidity of inventory. reveals how much inventory is available in terms of the number of days' sales.
Review the statements below and select the ones that are correct regarding the days' sales in inventory ratio (2) is often viewed as a measure of the buffer against out-of-stock inventory. estimates how many days it will take to convert inventory into accounts receivable or cash.
Internal controls that should be applied when a business takes a physical count of inventory should include all of the following except: Counters of inventory should be those who are responsible for the inventory.
The understatement of the beginning inventory balance causes: Cost of goods sold to be understated and net income to be overstated.
Hull Company reported the following income statement information for the current year: Sales: $420,000 Beg. inv.:$147,000 Cost of goods purchased: 283,000 Cost of goods available for sale: 430,000 Ending inventory: 154,000 Cost of goods sold: Hull Company reported the following income statement information for the current year: Sales: $420,000 Beg. inv.:$147,000 Cost of goods purchased: 283,000 Cost of goods available for sale: 430,000 Ending inventory: 154,000 Cost of goods sold:
Created by: Oanhvu1412
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