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Flashcards in exam 1 Deck (57):
1

is an inventory account necessary in a perpetual inventory system

yes at least a year

2

which inventory record system keep running record inventory and cost of goods sold

perpetual

3

in what amount purchase discounts are calculated

on the amount of merchandise purchased excluding freight

4

in what account a purchase discounts are calculated

merchandise inventory

5

how is a purchase returns recorded in a perpetual inventory system


debit account payable and credit merchandise inventory

6

into what account freight-in is recorded in a perpetual inventory system

merchandise inventory

7

when does title passes to a purchaser under terms FOB destination

when the goods are received by purchaser

8

sales returns and allowances

the return of goods or granting

9

sale discount

reduction in the amount received from a costumer for early payment

10

how are sells returns recorded on a perpetual inventory system

debit, sales returns, allowances and credit account receivable

11

are goods return in a sale allowance

no

12

how is freight-out recorded in a perpetual inventory system

debit delivery expense and credit cash

13

when is the specific identification method of inventory recommended

when the business deal in unique and high priced inventory items

14

what cost of goods sold and ending inventory correlate to in the FIFO inventory system

cost of good sold correlate to the oldest goods in stock.Ending inventory correlates to the most recently purchased goods.

15

what cost of goods sold is based on the lifo inventory system

on the newest purchases

16

what cost of goods sold and ending inventory correlate to in the LIFO inventory system

cost of good sold correlate the most recently purchased good

17

when a new weighted average cost per unit is calculate in a wighted average inventory system

after each purchase

18

Which one results in lower cost and lower net income in time of rising costs from the inventory system FIFO/ LIFO

first in first out

19

which inventory system from FIFO/LIFO results in higher cost of goods sold and lower net income at a time of rising costs

last in first out

20

when does a business needs to write down its inventory

when the historical cost of the inventory is more than it corrent replacement cost

21

when does a business must adjust its inventory value

when the current replacement cost of the inventory is less than it historical cost

22

what market value means for inventories

it means the current replacement cost of the inventories

23

what does the lower of cost or market rule demonstrate

accounting conservatism in action

24

how does the cost of goods sold account is affected when writing down inventory as per LCM rule

it's debited

25

5 components of internal control

control procedures,risk assessment, info system,monetary of controls,environment

26

the environment is in an internal control system and who it starts with

it's the culture of a business

27

can a system be overcome or broken into its internal controls are properly designed

yes

28

petty cash

meet the needs and to streamline record keeping for a small cash transaction, companies keep cash on hand to pay small amount

29

journal entry used to open a new petty cash fund

debit petty cash and credit cash

30

impress system

maintaining the petty cash amount at its designated balance in nature

31

signature card

a card that shows each authorized persons signature for a bank account

32

the journal entry used to replenish petty cash

debit the expense accounts and credit cash

33

payee

the individual or business to whom the check is paid

34

how deposits in transit are recorded in a bank reconciliation

ass an addition to the bank side of the reconciliation

35

which items on a bank reconciliation require journal entries

all inteams on the book side of the bank reconciliation

36

gross profit

net sales- cost of good sold

37

main expense of a merchandise

cost of good sold

38

two main categories of merchandising system

perpetual,periodic

39

interpretation of credit terms

3/15 n/30

40

how discounts by a buyer are recorded in a perpetual inventory system

credit merchandise system

41

how defective merchandise that is returned is related on the books

as purchase returns

42

who pays the shipping cost under FOB terms

the buyer

43

freight out

transportation cost and sales

44

freight in

the transportation cost to ship goods into the purchaser warehouse;therefore freight in purchase goods

45

the normal balances for sales, sale discount and sales returns and allowances

sells as credit balance,sells discounts is a debit balance

46

sales discounts contra account

sells revenue

47

how merchandise returned by a costumer to a seller is recorded

as a sale return

48

how is the taking of inventory shrinkage due to theft, damage or errors done

with the help of a visible count of the inventory

49

which inventory valuation method is used for unique items

specific identification

50

which inventory costing method results in the highest value of ending inventory during a period of rising inventory sells

first in first out

51

which inventory costing method results in the lowest value of ending inventory during a period of rising inventory sells

last in first out

52

weighted average method

the inventory costing method that requires the calculation of a new average after each purchase

53

which inventory costing method yield the highest cost of goods sold during a period of riding inventory costs

last in first out

54

which inventory valuation method minimizes the income tax expense during a period of rising inventory cost

last in first out

55

how is conservatism applied regarding inventory

by reporting inventory at the lower of cost market

56

which asset is reported at the lower of cost or market

merchandise inventory

57

know what is consider the market value of inventory for purpose of the LCM rule

current replacement cost