Exam 6: Cost of Goods Sold and Inventory

Coffski, Inc. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10th; credit terms were 1/10, n/30. Which of the following statements is true?

Cost of goods sold is the difference between costs of goods available for sale and ending inventory.

MATCHING Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. a. merchandise inventory d. finished goods b. raw materials e. cost of goods sold c. work-in-process -Cost of completed, unsold items.

Identify which inventory costing method achieves the effect listed in the following items. (Choices may be used more than once.) a.FIFO method c.Average cost method b.LIFO method d.Specific identification method -Prices are rising; ending inventory is lower with this method.

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?

Under a periodic inventory system, the Purchases account accumulates the cost of the inventory acquired during the period.

-Refer to the information provided for Lemke Corp. How much is ending inventory on April 30th?

Match the terms with the descriptions provided. a.Average days to sell inventory d.Inventory turnover ratio b.Gross margin e.Freight-in c.Gross profit ratio f.Freight-out -Measures how quickly merchandise is purchased and sold.

Deeter Company, which sells auto parts, uses a perpetual inventory system. Identify the effects on the accounting equation. (Choices may be used more than once.) a.Increase in assets and liabilities b.Decrease in assets and liabilities c.Increase in assets and stockholders' equity d.Decrease in assets and stockholders' equity e.Increase in liabilities and decrease in stockholders' equity f.Decrease in liabilities and increase in stockholders' equity -Sold merchandise on credit to customers.

A company using a periodic inventory system must total the selling prices of the units on hand at the end of the period in order to value the ending inventory.

Madlock Company, which started business at the beginning of 2013, selected the FIFO method for its inventory costing. In order to maximize profits for 2013 under this method, purchase prices must be

Tedder Co. Tedder uses a periodic inventory system. At the end of January, 20 units were on hand. The following additional information is available for the month of January: -Refer to the information provided for Tedder Co. If the company uses FIFO inventory costing, how much is cost of goods sold for January?

The _______________ method most closely approximates replacement cost of inventory on the balance sheet.

Transportation-in is

If a company understates its inventory, what are the effects on cost of goods sold and net income for the current year?

With the perpetual inventory system, the inventory account is updated after each sale or purchase.

Match the terms with the descriptions provided. a.Consignment f.Purchase allowance b.Discount period g.Purchase discounts c.Inventory h.Purchase returns d.LIFO Reserve i.Purchases e.Lower of cost or market rule -Reduce the amount that is owed to the seller for payment within the discount period.

The ratio of a company's cost of goods sold to its average inventory is called its __________.

-Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, ending inventory at June 30th is:

When a company using LIFO experiences a partial or complete liquidation of its older, lower-priced inventory, its gross margin will be ____________________ for the period.