QUIZ 2 acct

Question 1

intangible property that is (1) held for sale in the normal course of business or (2) used to produce goods or services for sale

Answer 1

inventory

Question 2

types of inventory

Answer 2

Merchandise and manufacturing

Question 3

acting as a wholesale…not manufacturing the product themselves
ex: dicks sporting goods would consider Nike shoes as merchandise inventory because buy these inventory items from nike

Answer 3

merchandising inventory

Question 4

costs include the sum of costs incurred in bringing an article to usable or salable condition and location

Answer 4

invoice price
freight in
inception costs
preparation costs

Question 5

when producing products themselves

Answer 5

manufacturing inventory

Question 6

items acquired for the purpose of processing into finished goods

Answer 6

raw materials

Question 7

goods in the process of being manufactured
-direct labor
-factory overhead

Answer 7

work in process

Question 8

manufactured goods that are complete and ready for sale

Answer 8

finished goods

Question 9

why do we need the COGS entry

Answer 9

the matching principle

Question 10

inventory costing methods:

Answer 10

Specification identification, FIFO, LIFO, and Average cost

Question 11

costing differs because the price of inventory and raw materials fluctuates throughout time

Answer 11

four alternative methods used

Question 12

identifies the cost of the specific item sold

Answer 12

specification identification method

Question 13

The specific indentification method is _____ when a large quantities of similar items are stocked (screws); appropiate when dealing with expensize unique items(airplanes)

Answer 13

impractical

Question 14

assumes that the first goods purchased are the first goods sold, allocates the oldest unit cost to cost of goods sold and the newest unit costs to ending inventory

Answer 14

FIFO (first in first out)

Question 15

aassumes that the last goods purchased are the first goods sold, allocates the newest unit cost to cost of goods sold and the oldest unit costs to ending inventory

Answer 15

Last-in, first out (LIFO)

Question 16

Uses the weighted average unit cost of the goods available unit cost of the goods available for sale for both cost of goods sold and ending inventory

Answer 16

average cost method

Question 17

choice of an inventory method can have _____ on the financial statements

Answer 17

significant effects

Question 18

reasons companies adopt different inventory flow methods are varied, but usually involve:

Answer 18

income statement effects and income tax effects
2-balance sheet effects

Question 19

-fifo had a higher ending inventory than LIFO
-fifo has lower cost of goods sold than lifo
-fifo has higher taxable net income than fifo

Answer 19

this occurs when costs are rising

Question 20

-lifo has higher ending inventory than fifo
-lifo has lower cost of goods sold than fifo
-lifo has higher taxable net income than fifo

Answer 20

this occurs when costs are decreasing

Question 21

in a period of increasing prices, the inventory system that will yield the highest net income is:

Answer 21

-specific identification
-FIFO
-lifo
-weighted average

Question 22

companies must consistently use one cost flow method. they can change but they must do significant disclosures so comparison to prior years may be made

Answer 22

consistency

Question 23

ending inventory and cost of goods sold are determined at the end of the accountinf period based on a physical count

Answer 23

periodic inventory system

Question 24

a detailed inventory record is maintained, recording each purchase and sale during the accounting period

Answer 24

perpetual inventory system

Question 25

inventories should be measure initially at their purchase cost

Answer 25

historical cost principle

Question 26

special care is required to avoid overstating assets and income and understating expenses and liabilites

Answer 26

conservatism constraint

Question 27

-serves to recognize a loss when replacement cost or net realizable value drops below cost
-when the inventory can be replaced with identical goods at a lower cost the lower replacement cost should be used as the inventory valuation
replacement cost

Answer 27

lower of cost or market

Question 28

the current purchase price for identical goods

Answer 28

replacement cost

Question 29

if an error is made counting inventory due to incorrect pricing or failure to count the goods this will effect all three financial statements

Answer 29

-assets misstated(because inventory off)
-expenses misstated(affects net income and R.E)(Because COGS off)