Chapter 8

Question 1

Parts of Merchandiser Inventory

Answer 1

Inventory

Question 2

Part of Manufacturer Inventroy

Answer 2

Raw Materials, Work in Process, and Finished Goods

Question 3

Work in Process

Answer 3

Raw Materials, labor, and overhead

Question 4

Cost of Goods Manufactured

Answer 4

Finished Goods

Question 5

Perpetual Inventory System

Answer 5

constantly keeping track of inventory

Question 6

Periodic Inventory System

Answer 6

physical count of inventory then figure cost of goods sold

Question 7

If using a perpetual inventory system, companies are legally required to do an end of year physical inventory count (true or false)

Answer 7

True

Question 8

Purchase discounts are used only for a perpetual system (true or false)

Answer 8

False - Purchase discounts are used only for a periodic system

Question 9

Journal Entry for purchase discounts using the gross method

Answer 9

Accounts Payable
Purchase Discounts
Cash

Question 10

Journal Entry for purchase discounts using the net method

Answer 10

Accounts Payable
Purchase Discounts
Cash

Question 11

Gross profit and net income are lowest under LIFO (true or false)

Answer 11

true

Question 12

Taxes are highest under LIFO (true or false)

Answer 12

False - taxes are lowest under LIFO

Question 13

LIFO results in the highest cash balance at the end of the year (true or false)

Answer 13

true

Question 14

Journal Entry to Adjust from FIFO to LIFO

Answer 14

Cost of Goods Sold

Allowance to Reduce Inventory to LIFO

Question 15

Weighted Average Method

Answer 15

Total Goods Available / Total Cost

Question 16

Moving-Average Method

Answer 16

compute a new average unit cost each time a purchase is made

Question 17

LIFO Reserve

Answer 17

the allowance account for adjusting inventory from FIFO to LIFO

Question 18

LIFO Liquidation

Answer 18

if you eat through all of your reserves LIFO will bakcfire and you will show more profit and have higher taxes

Question 19

Explain how using Dollar-Value LIFO to pool inventory works

Answer 19

increase and decreases in inventory pool is measured in terms of total dollar value, not physical quantity of goods