Inventory and Cost Accounting Concepts

Sales minus the cost of goods sold equals _________________.

• A) Gross Profit

• B) Net Income

• C) Operating Income

• D) Revenue

Goods in transit at the end of the year should be reported as inventory by the seller when the terms are FOB _________________.

• A) Shipping Point

• B) Destination

• C) Warehouse

• D) Store

FIFO is an inventory ________________ assumption.

• Valuation

• Costing

• Pricing

• Accounting

One method for estimating the ending inventory is the ________________ profit method.

• Gross

• Net

• Operating

• Contribution

If the sole proprietorship of Amy Ott understates the ending balance in its inventory account, another balance sheet account, ________________, will also be understated.

• A) Accounts Payable

• B) Accounts Receivable

• C) Owner's Equity

• D) Cash

Which method is used to calculate the inventory turnover ratio?

• Cost of Goods Sold / Average Inventory

• Sales / Ending Inventory

• Purchases / Total Inventory

• Revenue / Beginning Inventory

Under the periodic system for inventory, the buyer will record the purchase of merchandise with a debit to the account __________.

• Inventory

• Purchases

• Sales

Goods in transit at the end of an accounting period should be reported on the balance sheet of the buyer when the terms are __________.

• FOB destination

• FOB shipping point

If a company overstates its ending inventory under the periodic system, the company’s gross profit and net income will be __________.

• overstated

• understated

Under the perpetual system for inventory, the buyer will record the purchase of merchandise with a debit to the account Inventory.

• True

• False