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Questions and Answers
Merchandise inventory includes:
Merchandise inventory includes:
Costs included in the Merchandise Inventory account can include:
Costs included in the Merchandise Inventory account can include:
During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:
During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:
The inventory valuation method that results in the lowest taxable income in a period of inflation is:
The inventory valuation method that results in the lowest taxable income in a period of inflation is:
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Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?
Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?
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An overstatement of ending inventory will cause:
An overstatement of ending inventory will cause:
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Acceptable inventory methods include:
Acceptable inventory methods include:
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A company had the following purchases during the current year: Jan: 10 units at $120, Feb: 20 units at $130, May: 15 units at $140, Sep: 12 units at $150, Nov: 10 units at $160. On December 31, there were 26 units remaining in ending inventory. Using the specific identification method, what is the cost of the ending inventory?
A company had the following purchases during the current year: Jan: 10 units at $120, Feb: 20 units at $130, May: 15 units at $140, Sep: 12 units at $150, Nov: 10 units at $160. On December 31, there were 26 units remaining in ending inventory. Using the specific identification method, what is the cost of the ending inventory?
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Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?
Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?
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Acme-Jones Corporation uses a weighted-average perpetual inventory system. What was the amount of the cost of goods sold for the sale on August 29?
Acme-Jones Corporation uses a weighted-average perpetual inventory system. What was the amount of the cost of goods sold for the sale on August 29?
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What is the cost of the 12 units sold on June 5 using the FIFO perpetual inventory method?
What is the cost of the 12 units sold on June 5 using the FIFO perpetual inventory method?
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What is the value of the inventory at August 15 after the sale using the FIFO perpetual inventory method?
What is the value of the inventory at August 15 after the sale using the FIFO perpetual inventory method?
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Which of the following is not considered a subcategory of owner's equity?
Which of the following is not considered a subcategory of owner's equity?
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The properties used in operational activities of a business are called:
The properties used in operational activities of a business are called:
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Which of the following is a liability?
Which of the following is a liability?
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Flashcards
Merchandise Inventory
Merchandise Inventory
Goods owned by a company and held for sale, including goods in transit and on consignment. Does not include damaged goods.
Costs in Merchandise Inventory
Costs in Merchandise Inventory
Includes costs like invoice price (less discounts), transportation-in, storage, and insurance.
LIFO (Last-In, First-Out)
LIFO (Last-In, First-Out)
A method that assumes the last units purchased are the first ones sold. Results in the lowest net income and taxable income during inflation.
FIFO (First-In, First-Out)
FIFO (First-In, First-Out)
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Specific Identification
Specific Identification
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Ending Inventory Impact
Ending Inventory Impact
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Acceptable Inventory Costing Methods
Acceptable Inventory Costing Methods
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LIFO and FIFO Differences
LIFO and FIFO Differences
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Journal Entries for Inventory
Journal Entries for Inventory
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Owner's Equity Subcategories
Owner's Equity Subcategories
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Business Operations Assets
Business Operations Assets
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Liability and Asset Identification
Liability and Asset Identification
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Inventory Valuation Impact
Inventory Valuation Impact
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Cost Recognition and Categorization
Cost Recognition and Categorization
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Specific Identification and Costs
Specific Identification and Costs
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Study Notes
Merchandise Inventory
- Includes all goods owned by a company and held for sale, including goods in transit and on consignment.
- Does not include only damaged goods.
Costs in Merchandise Inventory
- Costs may consist of invoice price minus any discounts, transportation-in costs, storage, and insurance.
- All these costs are included in the Merchandise Inventory account.
Inventory Valuation Methods
- LIFO method yields the lowest reported net income during periods of steadily rising costs.
- In inflationary periods, LIFO results in the lowest taxable income.
- Specific identification and FIFO methods will give identical values for ending inventory and cost of goods sold regardless of the inventory system (perpetual or periodic).
Ending Inventory Impact
- An overstatement of ending inventory causes an overstatement of assets and equity on the balance sheet.
Acceptable Inventory Costing Methods
- Methods include LIFO, FIFO, specific identification, and weighted average.
Specific Identification Method
- Cost of ending inventory for a company with varied unit costs can be calculated by identifying the actual cost of specific units remaining in inventory.
LIFO and FIFO Methods
- LIFO leads to a different valuation approach than FIFO, especially in terms of cost of goods sold and inventory value.
- The LIFO perpetual method is important for calculating the correct COGS after sales, especially after multiple purchases.
Journal Entries
- Proper journal entries must reflect cash sales, the received income, and the corresponding COGS while adhering to the method used (FIFO or LIFO) for inventory valuation.
Owner's Equity
- Revenue, withdrawals, expenses, and contributed capital are key subcategories, while assets are not considered part of owner's equity.
Business Operations Assets
- Operating properties of a business are classified as assets, which include facilities and equipment used for business activities.
Liability Identification
- Liabilities include accounts payable, whereas assets include accounts receivable, cash, and inventory.
General Principles
- Understanding how various inventory valuation methods affect financial statements is crucial for accurate accounting.
- Recognition of costs and proper categorization of expenses and revenues is essential for the overall financial health of the business.
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Description
Test your knowledge on merchandise inventory concepts with this ACC101 quiz. The flashcards cover key definitions and principles related to inventory management. Perfect for students looking to enhance their understanding of accounting fundamentals.
