241 - Unit 2

Inventory item 101 purchased in October cost $100. Inventory item 102 purchased in November cost $110. The two inventory items are identical in all respects, except the price paid to acquire them. If item 102 is sold for $150, which of the following cost flow methods results in $105 of ending inventory?

• First-in, first-out (FIFO)

• Weighted average

• Last-in, first-out (LIFO)

The cost of shipping inventory to customers after it has been sold will ____ the cost of inventory.

• not affect

• increase

• decrease

Inventory costs include the ____.

• cost paid to have items delivered to a retail company

• cost of delivering inventory to customers after it has been sold

• cost of personnel in the accounting department

• cost of painting an item to prepare for sale

Period costs are also called ____.

• cost of goods sold

• inventory costs

• administrative costs

• selling costs

Product costs are normally expensed in the period ____.

• in which they are incurred

• after inventory has been sold

• period before inventory is sold

• in which inventory is sold

The beginning balance in the inventory account plus the amount of inventory purchased during the accounting period is equal to the ____.

• total period costs

• total administrative costs

• cost of goods available for sale

• cost of goods sold

Cost of goods available for sale is allocated between ending inventory and ____.

• cost of goods sold

• retained earnings

• accounts payable

• beginning inventory

Credit terms of 2/10, n/30 means the ____.

• buyer will receive a 2% discount if payment is made within 10 days

• total amount due must be paid within 30 days

• buyer will receive a 2% discount if payment is made within 30 days

• total amount due must be paid within 10 days

Green Company purchased merchandise inventory. Green is not responsible for the freight cost which means the goods were shipped FOB ____.

• Shipping Point

• Destination

The entry to recognize inventory shrinkage will cause the balance in the Merchandise Inventory account to ____.

• increase and the balance in the COGS account to decrease

• decrease and the balance in the COGS account to increase

• increase and the balance in the COGS account to increase

• decrease and the balance in the COGS account to decrease