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Questions and Answers
Where is inventory reported in the financial statement?
Where is inventory reported in the financial statement?
Balance sheet as a current asset
What are products that have been started in production but are still incomplete called?
What are products that have been started in production but are still incomplete called?
Work-in-process
A multiple step income statement reports multiple levels of __________.
A multiple step income statement reports multiple levels of __________.
Income
What are nonoperating revenues and expenses?
What are nonoperating revenues and expenses?
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Which methods are used for costing inventory?
Which methods are used for costing inventory?
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What does FIFO stand for?
What does FIFO stand for?
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What is the Average Cost Method?
What is the Average Cost Method?
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What is a LIFO Reserve?
What is a LIFO Reserve?
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What costs are related to the manufacturing of products?
What costs are related to the manufacturing of products?
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What is Gross Profit?
What is Gross Profit?
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What is the Specific Identification Method?
What is the Specific Identification Method?
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A company is most likely to utilize the specific identification method if its inventory consists of __________.
A company is most likely to utilize the specific identification method if its inventory consists of __________.
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What is the LIFO Method?
What is the LIFO Method?
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In times of rising prices, ending inventory determined using the LIFO inventory assumption will be lower than ending inventory determined using the FIFO inventory assumption.
In times of rising prices, ending inventory determined using the LIFO inventory assumption will be lower than ending inventory determined using the FIFO inventory assumption.
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What is a perpetual inventory system?
What is a perpetual inventory system?
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What is a periodic inventory system?
What is a periodic inventory system?
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What is the title passage rule for FOB shipping point?
What is the title passage rule for FOB shipping point?
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What is inventory?
What is inventory?
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What is the Inventory Turnover Ratio?
What is the Inventory Turnover Ratio?
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What is a Merchandising Company?
What is a Merchandising Company?
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What do Manufacturers do?
What do Manufacturers do?
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Study Notes
Inventory Reporting
- Inventory is reported as a current asset on the balance sheet.
- Items held for sale are classified as inventory in the normal course of business.
Types of Inventory
- Work-in-process refers to products that are partially completed in production.
- Inventory costing methods include FIFO, LIFO, Weighted Average, and Specific Identification.
Income Statement Structure
- A multiple-step income statement delineates various levels of income.
- Nonoperating revenues and expenses appear immediately after operating income.
Costing Methods
- FIFO (First-In, First-Out) assumes that the first units acquired are the first sold.
- LIFO (Last-In, First-Out) assumes that the oldest units remain in ending inventory.
- Average Cost Method averages the cost of goods available for sale to determine ending inventory.
- Specific Identification Method matches each inventory unit with its actual cost, suited for unique and expensive items.
LIFO Reserve
- The LIFO Reserve is the cumulative difference between LIFO and FIFO reporting methods.
- It reflects the cost variance of inventory based on the LIFO method compared to FIFO.
Cost Components
- Key costs in manufacturing products include raw materials, direct labor, and manufacturing overhead.
- Gross Profit is calculated as Net Sales Revenue minus Cost of Goods Sold.
Inventory Systems
- A perpetual inventory system continuously tracks inventory levels and cost of goods sold with each sale.
- A periodic inventory system does not continuously monitor merchandise cost, updating at specific intervals.
Sale Conditions
- FOB shipping point means the title to goods transfers to the buyer once shipped.
Inventory Turnover
- The Inventory Turnover Ratio indicates how often a firm sells its average inventory during a period, calculated as cost of goods sold divided by average inventory.
Company Types
- Merchandising companies function as intermediaries between manufacturers and end users.
- Manufacturers produce the inventory that they sell.
Studying That Suits You
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Description
Test your knowledge of key concepts from Accounting Chapter 6 with these flashcards. Topics include inventory reporting, work-in-process, and income statement levels. Ideal for students looking to reinforce their understanding of accounting principles.