Inventories

Question 1

FOB Shipping point

Answer 1

Buyer pays

“freight in” added to cost of inventory of buyer

Question 2

FOB destination

Answer 2

seller pays

“freight out” included in selling expense of seller

Question 3

If the seller ships the wrong goods, the title reverts to the:

Answer 3

seller

Question 4

If goods are sold but the buyer has the right to return the goods, the goods should be included in the seller’s inventory if the amount of the goods likely to be returned ________ be estimated

Answer 4

cannot

Question 5

If the amount of goods likely to be returned ____ be estimated, the transaction will be recorded as a sale with an allowance for estimated returns recorded

Answer 5

can

Question 6

In a consignment sale, the ________ is the true owner

Answer 6

consignor

Question 7

A consignee is a:

Answer 7

sales agent

Question 8

Title passes ______ to the third-party buyer from the consignor at the point of sale

Answer 8

directly

Question 9

GAAP requires that inventory be stated at its ______ when sold at a profit

Answer 9

cost

Question 10

When inventory is sold at a profit no loss should be ________ even though replacement or reproduction costs are lower

Answer 10

recognized

Question 11

When inventory is sold at a loss it is stated at the lower of _____ or _____

Answer 11

cost; market

Question 12

Precious metals and farm products are valued at ____ _____ ______

Answer 12

net realizable value (selling price - costs of disposal)

Question 13

Purpose of reducing inventory to the lower of cost or market (2):

Answer 13

conservatism; matching principle

Question 14

Separately lower cost or market to each single item results in the most _________ ending inventory

Answer 14

conservative

Question 15

Under GAAP, the term “market” in the phrase “lower of cost or market” generally means current ________ cost, provided the current _______ cost does not exceed NRV (market ceiling) or fall below NRV - normal profit margin (market floor)

Answer 15

replacement

Question 16

Under IFRS, the write-down of inventory to market is usually reflected in _______

Answer 16

COGS

Question 17

Under GAAP, reversals of inventory write downs are ______

Answer 17

prohibited

Question 18

The median of an inventory item’s replacement cost, its market ceiling, or its market floor

Answer 18

market value

Question 19

NRV (selling price - costs to complete and dispose)

Answer 19

market ceiling

Question 20

NRV - profit margin

Answer 20

market floor

Question 21

IFRS requires inventory to be reported at the lower of cost or _____

Answer 21

NRV

Question 22

IFRS ________ the reversal of inventory write downs for subsequent recoveries of inventory value

Answer 22

allows

Question 23

Losses that are both substantial and unusual are identified:

Answer 23

separately

Question 24

Under this inventory system, units of inventory and the associated costs are counted and valued at the end of the accounting period

Answer 24

periodic

Question 25

Under this inventory system, the inventory record for each item of inventory is updated for each purchase and each sale as they occur

Answer 25

perpetual

Question 26

JE to record sale under periodic method

Answer 26

DR: cash CR: sales

Question 27

JE to record sale under perpetual method

Answer 27

DR: Cash CR: sales DR: COGS CR: inventory

Question 28

JE to record purchase under periodic method

Answer 28

DR: purchases CR: cash

Question 29

JE to record purchases under perpetual method

Answer 29

DR: Inventory CR: cash

Question 30

IFRS prohibits the use of:

Answer 30

LIFO

Question 31

The specific identification method is used for:

Answer 31

physically large or high value items

Question 32

In periods of rising prices, FIFO results in the _____ ending inventory, _____ COGS, and ______ net income

Answer 32

highest; lowest; highest

Question 33

Ending inventory and COGS are the _____ whether a periodic or perpetual inventory system is used under FIFO

Answer 33

same

Question 34

The weighted average method uses the _____ inventory system

Answer 34

periodic

Question 35

Moving average method uses the ________ inventory system

Answer 35

perpetual

Question 36

The moving average method computes the weighted average cost after each ______

Answer 36

purchase

Question 37

LIFO is typically used for _____ purposes

Answer 37

tax

Question 38

In periods of rising prices, LIFO generally results in the _______ ending inventory, the ______ COGS, and the ______ net income

Answer 38

lowest; highest; lowest

Question 39

The calculation of ending inventory and COGS under LIFO is _______ using either the periodic or perpetual system

Answer 39

different

Question 40

Under the dollar-value LIFO method, inventory is measured in dollars and is adjusted for changing ______ ______

Answer 40

price levels

Question 41

Price index for dollar-value LIFO method:

Answer 41

ending inventory at current year cost / ending inventory at base year cost

Question 42

Legally enforceable agreement to purchase a specified amount of goods at some time in the future (signed contract)

Answer 42

firm purchase commitments

Question 43

JE to record a loss on purchase commitment:

Answer 43

DR: estimated loss on purchase commitment CR: estimated liability on purchase commitment