quiz pesent t2

Goods on consignment:

•  Are goods shipped by the owner to the consignee who sells the goods for the owner.

•  Are reported in the consignee's books as inventory

• Are goods shipped to the consignor who sells the goods for the owner.

• Are not reported in the consignor's inventory since they do not have possession of the inventory.

• Are always paid for by the consignee when they take possession.

Days' sales in inventory is calculated as:

• Ending inventory divided by cost of goods sold.

• Cost of goods sold divided by ending inventory.

• Ending inventory divided by cost of goods sold times 365.

• Cost of goods sold divided by ending inventory times 365.

• Ending inventory times cost of goods sold.

The understatement of the ending inventory balance causes:

• Cost of goods sold to be overstated and net income to be understated.

• Cost of goods sold to be overstated and net income to be overstated.

• Cost of goods sold to be understated and net income to be understated.

• Cost of goods sold to be understated and net income to be overstated.

• Cost of goods sold to be overstated and net income to be correct.

A company uses the periodic inventory system and had the following activity during the current monthly period.

November 1: Beginning inventory of 100 units at $20

November 5: Purchased 100 units at $22

November 8: Purchased 50 units at $23

November 16: Sold 200 units at $45

November 19: Purchased 50 units at $25

In a periodic inventory system, using the weighted-average inventory method, the company's ending inventory would be:

• $2,000.

• $2,200.

• $2,250.

• $2,400.

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

• LIFO method.

• FIFO method.

• Weighted-average cost method.

• Specific identification method.

• Gross profit method.

What is the inventory turnover ratio?

• Used to analyze profitability.

• Used to measure liquidity.

• Reveals how many times a company turns over (sells) its merchandise inventory

• Validates the acid-test ratio.

• Calculation depends on the company's inventory valuation method.

Management must confront which of the following considerations when accounting for inventory:

• Costing (valuation) method.

• Inventory system (perpetual or periodic).

• Items to be included and their prices.

• Use of lowest cost, market, or other estimates.

• All of the above.

Damaged and obsolete goods:

• Never included in inventory.

• Included in inventory at their full cost.

• Included in inventory at their net realizable value.

• Should be disposed of immediately.

• Assigned a value of zero.

Goods in transit are included in a purchaser's inventory:

• At any time during transit.

• When the purchaser is responsible for paying freight charges.

• When the supplier is responsible for freight charges.

• If the goods are shipped FOB destination.

• After the half-way point between the buyer and seller.

Given the following information, determine the cost of the inventory at June 30 using the LIFO perpetual inventory method.

June 1 Beginning inventory, 15 units at $20 each

June 15 Sale of 6 units for $50 each

June 29 Purchase of 8 units at $25 each

The cost of the ending inventory is

• $200.

• $220.

• $380.

• $275.

• $300.