Chapter 13 - Inventory

Errors in inventory will cause errors on which of the following financial statements?

• Income Statement
• Balance Sheet
• Statement of Owner's Equity
• All of the Above

When the ending inventory is overstated, what is the effect on assets?

• Assets are understated
• Assets are overstated
• Assets are accurate
• Assets are not affected

What does the Merchandise Inventory account balance represent in a Periodic Inventory System?

• The sum of all sales made during the period
• The most recent physical inventory
• The total of all goods available for sale
• The average cost of goods sold during the period

What is the purpose of understanding the specific calculations used under the periodic and perpetual systems?

• To assess the company's fixed assets
• To determine the cost of goods sold and ending inventory
• To calculate the company's total revenue
• To evaluate employee performance

What is a natural business year?

• A fiscal year that starts when inventory is at its highest level
• A fiscal year that starts and ends when inventory is normally at its lowest level
• A fiscal year that starts and ends during regular business hours
• A fiscal year that is determined by the perpetual system

In a Perpetual Inventory System, how often are inventory balances updated?

• Yearly, at the end of the fiscal year
• Continuously, whenever a product is received or sold
• Only at the beginning and end of the accounting period
• Monthly, during the closing process

What is the purpose of understanding the specific calculations used under the periodic and perpetual systems?

• To determine the cost of goods sold and ending inventory
• To assess the company's fixed assets
• To calculate the company's total revenue
• To evaluate employee performance

When is the ideal time for a company to count the goods for inventory?

• A fiscal year that starts and ends during regular business hours
• During regular business hours
• A fiscal year that is determined by the perpetual system
• A fiscal year that starts and ends when inventory is normally at its lowest level

What must be assigned to the inventory after counting according to the learning material?

• Estimated Cost
• Market Value
• Proper Cost
• Selling Price

What does "Cost" refer to in the context of inventory cost components?

• Only the purchase price of the goods
• All necessary costs incurred to get the goods to the buyer's place of business
• Only the costs incurred within the seller's place of business
• Only the delivery costs incurred