Financial Accounting Quiz

Goods in transit should be included in the inventory of the buyer when the:

• public carrier accepts the goods from the seller.

• goods reach the buyer.

• terms of sale are F O B destination.

• terms of sale are F O B shipping point.

Goods in transit should be included in the inventory of the buyer when the:

• public carrier accepts the goods from the seller.

• goods reach the buyer.

• terms of sale are F O B destination.

• terms of sale are F O B shipping point.

Discuss how this information affects the reported cost of inventory.

Inventory should be ¥195,000 (¥200,000 − ¥15,000 + ¥10,000)

The cost flow method that often parallels the actual physical flow of merchandise is the:

• FIFO method

• LIFO method

• average cost method

• gross profit method

Understating ending inventory will overstate:

• assets

• cost of goods sold

• net income

• stockholders’ equity

Visual Designs overstated its 2019 ending inventory by NT$22,000. Determine the impact this error has on ending inventory, cost of goods sold, and owner’s equity in 2019 and 2020.

Determine the value of the company’s inventory under the lower-of-cost-or-net realizable value approach.

Determine the inventory turnover and days in inventory for 2019 and 2020.

Compute the estimated cost of the ending inventory at January 31 under the gross profit method.