Question 1

documents used for inventory control

Accepted Answer

purchase orderreceiving reportvendor's invoice

Question 2

purchase order

Accepted Answer

authorizes the purchase of the inventory from an approved vendor

Question 3

receiving report

Accepted Answer

established an initial record of the receipt of the inventory

Question 4

subsidiary inventory ledger

Accepted Answer

contains individual accounts for items of inventory

Question 5

specific identification inventory cost flow method

Accepted Answer

using this method the unit sold is identified with a specific purchase (this method is not very practical, except example car dealerships)

Question 6

first in, first out (FIFO) inventory cost flow method

Accepted Answer

the first units purchased are assumed to be sold and the ending inventory is made up of the most recent purchases

Question 7

last in, first out (LIFO) inventory cost flow method

Accepted Answer

the last units purchased are assumed to be sold and the ending inventory is made up of the first purchases

Question 8

weighted average inventory cost flow method (average cost flow method)

Accepted Answer

the cost of the units sold and in ending inventory is a weighted average of the purchase costs.

Question 9

moving average

Accepted Answer

used in the weighted average cost method. a weighted average unit cost for each item is computed each time a purchase is made and a new average is computed.

Question 10

the three different inventory cost flow method normally yield different amounts for the following:

Accepted Answer

1. cost of merchandise sold2. gross profit3.net income4. ending merchandise inventory

Question 11

when cost are increasing what method reports higher profit

Accepted Answer

FIFO reports higher gross profit and net income than LIFO method when costs are increasing.

Question 12

larger FIFO gross profit and net income are called

Accepted Answer

inventory profits/illusory profits

Question 13

....method more nearly matches current costs with current revenues

Accepted Answer

LIFO

Question 14

..... offers an income tax savings during period of increasing costs

Accepted Answer

LIFO

Question 15

Why does LIFO offer an income tax savings during period of increasing costs?

Accepted Answer

because LIFO reports the lowest amount of gross profit and, thus, taxable net income.

Question 16

lower-of-cost-or-market (LCM) method

Accepted Answer

a method of valuing inventory that reports the inventory at the lower of its cost or current market value ( replacement costs)

Question 17

market

Accepted Answer

is the cost to replace the inventory

Question 18

the market value is based on

Accepted Answer

normal quantities that would be purchased from suppliers

Question 19

what kind of merchandise would be valued at its net realizable value?

Accepted Answer

merchandise that is out of date, spoiled, or damaged

Question 20

how is net realizable value determined?

Accepted Answer

estimated selling price- direct costs of disposal

Question 21

what method is used to value inventory?

Accepted Answer

lower-of-cost-or-market (LCM) method

Question 22

direct costs of disposal include

Accepted Answer

selling expenses such as special advertising or sales commissions

Question 23

what is reported in addition to the merchandise inventory amount under the current assets section of the balance sheet?

Accepted Answer

1. the method of determining the cost of the inventory (FIFO, LIFO, or weighted average) 2. the method of valuing the inventory ( cost of the lower of cost or market)

Question 24

errors in merchandise inventory will affect what financial statements

Accepted Answer

the balance sheet and the income statement

Question 25

some reasons why inventory errors occur:

Accepted Answer

1. physical inventory on hand was miscounted2. costs were incorrectly assigned to inventory (methods were incorrectly applied) 3. inventory in transit was incorrectly included or excluded from inventory4. consigned inventory was incorrectly included or excluded from inventory

Question 26

if beginning inventory is understated the cost of merchandise sold is

Accepted Answer

understated

Question 27

if beginning inventory is understated the gross profit will be

Accepted Answer

overstated

Question 28

if beginning inventory is understated the net income will be

Accepted Answer

overstated

Question 29

if ending inventory is understated cost of merchandise sold will be

Accepted Answer

overstated

Question 30

if ending inventory is understated gross profit will be

Accepted Answer

understated

Question 31

if ending inventory is understated net income will be

Accepted Answer

understated

Question 32

if beginning inventory is overstated cost of merch. sold will be

Accepted Answer

understated

Question 33

if beginning inventory is overstated gross profit will be

Accepted Answer

understated

Question 34

if beginning inventory is overstated net income will be

Accepted Answer

understated

Question 35

if ending inventory is overstated cost of merch. sold will be

Accepted Answer

understated

Question 36

if ending inventory is overstated gross profit will be

Accepted Answer

overstated

Question 37

if ending inventory is overstated net income will be

Accepted Answer

overstated

Question 38

consignor

Accepted Answer

is the manufacturer

Question 39

consignee

Accepted Answer

retailer

Question 40

if ending inventory error is understated merchandise inventory will be

Accepted Answer

understated

Question 41

if ending inventory error is understated currents assets wil be

Accepted Answer

understated

Question 42

if ending inventory error is understated total assets will be

Accepted Answer

understated

Question 43

if ending inventory error is understated owner's equity will be

Accepted Answer

understated

Question 44

if ending inventory error is overstated merchandise inventory will be

Accepted Answer

overstated

Question 45

if ending inventory error is overstated currents assets will be

Accepted Answer

overstated

Question 46

if ending inventory error is overstated total assets will be

Accepted Answer

overstated

Question 47

if ending inventory error is overstated owner's capital will be

Accepted Answer

overstated

Question 48

two measures to analyze the efficiency and effectiveness of inventory management are:

Accepted Answer

1. inventory turnover2. number of days' sales in inventory

Question 49

how to calculate inventory turnover

Accepted Answer

cost of merchandise sold/ average inventory

Question 50

the larger the inventory turnover the ...... the company is managing inventory

Accepted Answer

more efficient and effective

Question 51

number of day's sales in inventory measures

Accepted Answer

the lengths of time it takes to acquire, sell, and replace the inventory

Question 52

how is the number of days' sales in inventory calculated

Accepted Answer

average inventory/ average daily cost of merchandise sold

Question 53

the average daily cost of merchandise sold is calculated by

Accepted Answer

cost of merchandise sold/ 365

Question 54

The.... the number of days' sales in inventory the more efficient and effective the company is in managing inventory

Accepted Answer

lower

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