accounting test 4 Flashcards
inventory
tangible resource that is held for resale in the normal course of operations
acquisition cost
inventory is Recorded at ________ cost
expense
Inventory becomes ____ when sold
gross profit
the amount of resources that are left to pay operating expenses (selling and administrative expenses) and provide for net income
perpetual
Cost of goods Sold updated with each sale
FOB shipping point
ownership of the inventory passes from seller to buyer at the shipping point and buyer pays and includes transportation costs termed as freight-in. Freight-in is included in the cost of inventor
FOB destination
ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.
FOB destination
ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.
FOB destination
ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.
FOB destination
ownership of the inventory passes from seller to buyer when goods are delivered. Seller pays transportation costs termed as freight-out. Freight-out is included as an expense on the seller’s income statement.
Consigment
Goods owned by one party are held and offered for sale by another
2
In perpetual system, sales require ______ journal entries
One to recognize revenue *
One to recognize cost of goods sold and a reduction of inventory
What 2 transactions needed for sales in perpetual system
Restore inventory and decrease COGS *
Decrease A/R or cash and revenue
What 2 journal entries does returns and allowance require under perpetual
net method
returns and allowances liability is debited and A/R or Cash is credited
gross method
revenue account is debited and A/R or cash is credited
BI + p + EI
COGS equation
COGS - EI
COGAFS equation
Average cost equation
Total Extended Cost/Total Units = Average Cost per Unit
highest ending inventory, lowest COGS, highest income
in rising purchase prices FIFO produces
lowest ending inventory, highest COGS, and lowest income
in falling purchase prices FIFO produces
highest ending inventory, lowest COGS, and highest income
In falling purchase prices LIFO produces
FIFO
Inventory on the balance sheet and net income on the income statement are higher under
LIFO
Lower tax liability under