6.1 Determining Inventory Quantities

Question 1

do companies own all the goods on hand?

Answer 1

not always! consignment goods exist and goods sold but not yet shipped

Question 2

can companies own goods that are not on hand?

Answer 2

yes! like goods ordered (fob shipping point) but not shipped yet

Question 3

who should record goods in transit

Answer 3

depends on the shipping terms:

FOB DESTINATION: Seller in transit
FOB SHIPPING POINT: Buyer in transit

Question 4

FOB Shipping FOB Destination
Seller Buyer

Answer 4

cross diagonnally

Question 5

what are consigned goods

Answer 5

inventory held by the company (CONSIGNEE) that is selling it on behalf of another company (CONSIGNOR)

Question 6

What is the consignee

Answer 6

the people holding the goods

Question 7

What is the consignor

Answer 7

the company that gives the goods to be held

Question 8

art gallery example, consignor and consignee

Answer 8

consignee: gallery
consignor: artist

Question 9

How does this impact the books of LaSalle: LaSalle sold inventory for $36,000 that cost $24,000 when purchased. The items were in transit to a customer in Vancouver as at August 31 (terms FOB destination) and were not included in the count.

Answer 9

decrease by 24,000!!! we dont care about selling price, only how inventory is impactd

Question 10

when do companies count inventory

Answer 10

when business is slow/when theyre closed (jan 31)

Question 11

3 types of internal controls

Answer 11

PHYSICAL CONTROLS

review and reconciliation

segregation of duties

Question 12

physical controls

Answer 12

physically safeguarding accounting info! insuring inventory from damage and theft

Question 13

review and reconciliation

Answer 13

counting inventory frequently, and reconciling the inventory on hand to inventory in accounting records!!

Question 14

review and reconciliation examples

Answer 14

1) ensures all iteam are stored easily
2) counting properly: scanning devices
3) excluding and including appropriately
4) identifying consignment inventory and excluding
5) including goods that are held on consignment in different palce
6) adjusting for shrinkage

Question 15

segregation of duties

Answer 15

ensuring the staff doing JEs cant access inventory!!! prevent them from stealing inventory and messing with JE

Question 17

why do companies with perpetual inventory systems still have to do physical inventory cuonts

Answer 17

1) to check accuracy of pereptual invenotry records
2) to determine the amount of inventory los to shrinkage