mgmt 212 - ch 6: inventory and cost of goods sold

inventory

A major difference between companies that provide services and companies that manufacture or sell goods is that those that manufacture or sell goods must account for:

a) revenue

b) gains and losses

c) operating expenses

d) inventory

Materials used currently in the production of goods to be sold, Items currently in production for future sale

The definition of inventory includes which of the following items? (select all that apply)

a) Items held for use or disposal

b) Materials used currently in the production of goods to be sold

c) Items currently in production for future sale

d) Items held for resale

profitability

A multiple-step income statement reports multiple levels of ______.

NIFO, Simple-average

Which of the following methods are not used for inventory costing? (select all that apply)

a) NIFO

b) Specific identification

c) Simple-average

d) LIFO

e) Weighted-average

f) FIFO

higher

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be ______ than cost of goods sold determined using the FIFO inventory assumption.

cost of goods sold, inventory

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for (select all that apply)

a) current assets

b) cost of goods sold

c) inventory

d) liabilities

periodic inventory system

Sherman Company recognizes cost of goods sold afte rcompleting a physical inventory.

a) perpetual inventory system

b) periodic inventory system

perpetual inventory system

Peter Company recognizes cost of goods sold each time it recognizes a sale.

a) perpetual inventory system

b) periodic inventory system

inventory

Items held for sale in the normal course of business are referred to as ______

Inventory

Margot Inc, which uses the perpetual inventory system, purchases 500 units of inventory to be held for resale. Margot should debit the purchase to:

a) Inventory

b) Puchases

c) Cost of Goods Sold

d) Raw Materials

multiple-step

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ______ income statement.

a) classified

b) current

c) multiple-step

d) single-step

lower of cost and net realizable value; greater

The ______ method of valuing inventory was developed to avoid reporting inventory at an amount that is ______ than the benefits it can provide.

a) lower of cost and net realizable value; smaller

b) lower of cost and sales revenue; greater

c) cost-benefit; smaller

d) cost-benefit; greater

e) lower of cost and sales revenue smaller

f) lower of cost and net realizable value; greater

Weighted-average, Specific identification, FIFO, LIFO

Which of the following methods are available for costing inventory? (select all that apply)

a) Simple-average

b) Weighted-average

c) NIFO

d) Specific identification

e) FIFO

f) LIFO

old

Managers typically monitor inventory very closely to ensure that sufficient units are available for sale and to prevent inventory from becoming ______

lower

In times of rising prices, ending inventory determined using the LIFO inventory assumption will be ______ than ending inventory determined using the FIFO inventory assumption.

Periodic inventory system

Which of the following inventory systems requires a physical count in order to determine cost of goods sold?

a) Perpetual inventory system

b) Periodic inventory system

c) Periodic and perpetual inventory systems

Perpetual inventory system

Neumann Company can determine the cost of inventory still on hand by referring to the inventory account.

a) Perpetual inventory system

b) Periodic inventory system

Periodic inventory system

Shelly Company must first take a physical inventory to determine the cost of inventory still on hand.

a) Perpetual inventory system

b) Periodic inventory system

immediately

Robert Skinner, an accountant, discovers an error in accounting for an inventory purchase. He should correct the error

a) at the end of the fiscal period

b) at the end of the month

c) immediately

Debit Inventory

Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?

a) Debit Sales Revenue

b) Debit Inventory

c) Debit Purchases

d) Debit Accounts Payable

avoid reporting inventory at an amount that exceeds the benefits it provides

The lower of cost and net realizable value method was developed to

a) prevent th ecompany from selling the inventory below its original cost

b) avoid reporting invenory at an amount that exceeds the benefits it provides

c) provide an alternative to the FIFO, LIFO, and weighted-average methods

To minimize costs of inventory write-downs due to obsolete inventory, To ensure that sufficient units are available

Which of the following represent reasons why managers closely monitor inventory levels? (select all that apply)

a) To minimize costs of inventory write-downs due to obsolete inventory

b) To ensure that sufficient units are available

c) To increase the average days in inventory

perpetual, periodic

A ______ inventory system updates the inventory account each time a sale or purchase is made, whereas a ______ inventory system calculates cost of goods sold and ending inventory at the end of the reporting period.

as soon as they are discovered

Accounting errors must be corrected:

a) at the end of hte accounting period

b) at the end of the year

c) as soon as they are discovered