Chapter 6 Flashcards Preview

ACCT 2001 > Chapter 6 > Flashcards

Flashcards in Chapter 6 Deck (46):
1

Q 6.22: The inventory turnover is the cost of goods sold ____ average inventory

divided by

2

Q 6.23: If a company carries a lower inventory than the industry average, but are still a highly successful company, outselling the competition, what can explain their success?

They have a just-in-time inventory system.

3

Q 6.24: ________ methods such as FIFO and LIFO deal more with flow of costs than with flow of goods.

Inventory

4

Q 6.25: Goods that are held for sale by one party although ownership of the goods is retained by another party are called

consigned goods --

5

Q 6.26: When goods are shipped FOB destination, the ________ holds the legal title until the goods reach the buyer.

seller

6

Q 6.27: Goods in transit are included in the inventory of buyer when the terms of sale are

FOB shipping point ---

7

Q 6.28: What is the meaning of work in process inventory?

that portion of manufactured inventory that has begun the production process but is not yet complete

8

Q 6.29: In a period of increasing prices of goods, if two companies report the same cost of goods available for sale but each employs a different inventory costing method, then the company using the
method will have the highest ending inventory.

FIFO

9

Q 6.30: Which of the following are categories manufacturers use to classify inventory? Select all that apply.

Raw materials, work in progress, finished goods

10

Q 6.31: The inventory turnover is calculated as cost of goods sold ______ by average inventory.

divided

11

Q 6.32: The ________ is the difference between ending inventory using LIFO and ending inventory if FIFO were used instead.

LIFO reserve

12

Q 6.33: The best term to describe the assumptions made in applying the four inventory methods is "cost flow."

True

13

Q 6.34: If companies have identical inventoriable costs available for sale, but use different inventory flow assumptions when the prices of goods have not been constant, which of the following will be true?

The cost of goods purchased during the year will be identical.

14

Q 6.35: A company interested in the lowest amount of income tax expense in a period of increasing prices should use which inventory cost flow assumption?

LIFO costing--

15

Q 6.36: Given equal circumstances and generally rising costs, the ________________
method will increase the tax expense more than any other inventory method.

FIFO

16

Q 6.37: Which of the following are items that will eventually be used in production?

raw materials

17

Q 6.38: The category Current Assets on the balance sheet includes

all inventory ---

18

Q 6.39: Which of the following is the inventory ready for sale in a manufacturing company?

finished goods inventory --

19

Q 6.40: What are consigned goods?

goods that are held for sale by one party although ownership of the goods is retained by another party

20

Q 6.42: Physical possession of inventory determines whether or not goods should be included in a physical count of inventory.

False
----

21

Q 6.43: When is a physical inventory usually taken?

at the end of the company's fiscal year
----

22

Q 6.44: FOB shipping point means that legal title of goods

is transferred to the buyer when the goods are accepted by a carrier
-----

23

Q 6.45: Which of the following statements is correct?

Raw materials are basic goods that will be used in production but not have yet placed into production. ---------

24

Q 6.46: Under the perpetual inventory system, what is not a reason to take physical inventory?

determining ownership of the goods

25

Q 6.47: Companies that use a
inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period.

periodic

26

Q 6.48: Consigned goods should be included in the ending inventory of the person or company

that consigned the goods ---

27

Q 6.49: When goods are shipped FOB destination, when does the legal title transfer from the seller to the buyer?

when the buyer receives the goods---

28

Q 6.50: Which of the following should be included in the buyer's ending inventory?

goods in transit shipped FOB shipping point

29

Q 6.51: Manufactured goods that are partially built but still in production are considered

work in process

30

Q 6.52: Which of the following is correct?

A manufacturer's inventory consists of raw material, work in process, and finished goods.

31

Q 6.54: Inventory should be reported

as a current asset on the balance sheet

32

Q 6.55: Inventory ready for sale in a manufacturing company is called

finished goods inventory

33

Q 6.56: Consigned goods are goods that are

sold by a dealer on behalf of a party who retains the ownership ---

34

Q 6.57: Which one of the following determines whether or not goods should be included in a physical count of inventory?

legal title of goods ----

35

Q 6.58: At the end of the company's fiscal year, a company takes a physical inventory to

count the inventory on hand

36

Q 6.59: Calculate the days in inventory by dividing

365 by the inventory turnover

37

Q 6.60: One type of inventory costing method is

specific identification

38

Q 6.61: The LIFO inventory method assumes that the cost of the latest units purchased is the first to be allocated to cost of goods sold.

true

39

Q 6.62: Companies that use LIFO are not required to disclose LIFO reserve.

False

40

Q 6.63: Which of the following statements concerning lower-of-cost-or-market (LCM) are correct? Select all that apply.

LCM is applied after one of the cost flow assumptions has been applied.
==========
LCM is an example of a company choosing the accounting method that will be least likely to overstate assets and income.
=================
The LCM basis uses current replacement cost because a decline in this cost usually leads to a decline in the selling price of the inventory item.

41

Finished goods inventory

is manufactured items that are completed and ready for sale.

42

Work in process

is that portion of manufactured inventory that has begun the production process but is not yet complete.

43

Raw materials

are basic goods that will be used in production but have not yet been placed into production.

44

Just-in-Time (JIT) inventory

Many companies have significantly lowered inventory levels and costs using JIT, under this method, companies manufacture or purchase goods just in time for use. (ex, dell developed a system for making computers in response to individual customer requests).

45

Inventory turnover formula

= Cost of goods sold ÷ average inventory (Beg + End/2)

46

Days in Inventory Formula

= 365 ÷ Inventory Turnover.