Exam 6: Cost Of Goods Sold and Inventory

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. (Choices may be used more than once.) -Prices are rising; cost of goods sold is lower with this method.

Under the periodic inventory system, a physical inventory must be taken to determine cost of goods sold.

Several sales transactions and purchasing activities for Yu Company are described below. Yu Company uses a perpetual inventory system. -Refer to the information provided for Yu Company. For each of the items above, describe its economic effects on the company's accounting equation. A)Yu Company purchased merchandise from Mia Company on credit. B)Yu Company returned to Mia Company defective merchandise before payment is made. C)Yu Company pays for the merchandise purchased from Mia Company. D)Yu Company sells merchandise to its customers for cash and on credit. E)Credit customers returned merchandise to Yu Company for a refund. F)Credit customers pay their account balances to Yu Company.

The weighted average cost is calculated by adding the units' costs from each purchase and then dividing by the number of purchases.

What effects on a retail store's accounting equation occur when it records merchandise purchased for cash, assuming the use of a perpetual inventory system?

Several sales transactions and purchasing activities for Yu Company are described below. Yu Company uses a perpetual inventory system. -Refer to the information provided for Yu Company. Explain the advantages to Yu Company for using the perpetual inventory system. Assume that Yu Company uses a computer system which is linked to its cash registers and that all products have bar codes that are read by bar code readers attached to the cash registers. A)Yu Company purchased merchandise from Mia Company on credit. B)Yu Company returned to Mia Company defective merchandise before payment is made. C)Yu Company pays for the merchandise purchased from Mia Company. D)Yu Company sells merchandise to its customers for cash and on credit. E)Credit customers returned merchandise to Yu Company for a refund. F)Credit customers pay their account balances to Yu Company.

The amount recognized on the balance sheet as the cost of inventory will ultimately be recognized as

A LIFO reserve represents the amount by which cost of goods sold on a FIFO basis exceeds the cost of goods sold on a LIFO basis for the current year.

Under a periodic inventory system, shipping costs are not charged to the inventory asset account. Instead, such costs are charged to the ____________________ account.

Parlato Corp. has an inventory turnover rate of 8 times. If its cost of goods sold is $150,000, then the company

Match the terms with the descriptions provided. -Companies that maintain three separate inventory accounts.

Which of the following statements is false?

What is a LIFO liquidation? Why is it important to disclose the effects of a LIFO inventory liquidation?

Match the terms with the descriptions related to merchandise sales and purchases. -Purchased merchandise on credit.

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. (Choices may be used more than once.) -Prices are rising; profits are higher under this method.

On August 1, White Appliances purchased 75 refrigerators for $45,000 cash and also paid $1,500 transportation costs related to this purchase. On the same date, White purchased 100 dishwashers for $20,000 on credit; however, the seller paid the $1,200 freight. The credit terms for the dishwashers were 2/10, n/30. On August 3rd, White determined that 5 of the refrigerators were defective, so they were returned to the seller. White paid for the dishwashers on August 9th. On August 10th, White purchased 90 microwave ovens for $9,000 on credit with terms 1/10, n/30. The seller paid the freight. White paid for the microwave ovens on August 21st. -Refer to the information presented for White Appliances. Prepare all of the company's journal entries for August assuming the use of a perpetual inventory system.

Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June.June -Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, cost of goods sold for the month of June is:

Which inventory cost flow method assigns the cost of the most recent items purchased to ending inventory?

Echols Company sells merchandise on credit. If a customer pays its balance due after the discount period has passed, what is the effect of the payment on seller's accounting equation?

An overstatement error in the inventory account in the current period will result in an understatement of ____________________ in the subsequent period.