Accounting for Merchandising Inventory

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What are the two characteristics of merchandise inventory in a merchandising company?

They are in a form ready for sale to customers and owned by suppliers.

They are owned by the company and in a form ready for sale to customers. (correct)

They are owned by suppliers and in a form ready for sale to customers.

They are owned by customers and in a form ready for sale to suppliers.

What is the classification of inventory in a manufacturing environment?

Raw materials, finished goods, and manufacturing inventory

Raw materials, work in progress, and finished goods (correct)

Raw materials, work in progress, and merchandise inventory

Finished goods, work in progress, and merchandise inventory

What is the purpose of segregating duties when taking a physical inventory?

To ensure that employees are not responsible for counting the inventory they are in charge of. (correct)

To ensure that employees are responsible for counting the inventory they are in charge of.

To ensure that only one employee is responsible for counting the inventory.

To ensure that multiple employees are responsible for counting the inventory.

What is the formula for calculating the gross profit percentage?

Gross profit / net sales x 100 Signup and view all the answers

What is the significance of inventory on the balance sheet of a merchandising company?

It is a significant current asset. Signup and view all the answers

What is the objective of merchandise inventory management techniques?

To optimize inventory levels. Signup and view all the answers

Which of the following is a key aspect of establishing responsibility in inventory management?

Verifying the authenticity of each inventory item Signup and view all the answers

Goods in transit are included in the inventory of the party that has:

Legal title to the goods Signup and view all the answers

In a consignment arrangement, who owns the goods until they are sold?

The consignor Signup and view all the answers

What is the primary difference between a perpetual inventory system and a periodic inventory system?

The timing of cost of goods sold determination Signup and view all the answers

Which of the following is an independent internal verification technique?

Designating a supervisor to check inventory tags Signup and view all the answers

What type of inventory system maintains detailed records of the cost of each item and determines the cost of each item sold when the sale occurs?

Perpetual inventory system Signup and view all the answers

What is the primary difference between periodic and perpetual inventory systems?

The frequency of inventory record updates Signup and view all the answers

In a periodic inventory system, when is the cost of goods sold calculated?

At the end of the accounting period Signup and view all the answers

What is the purpose of taking a physical inventory in a periodic inventory system?

To determine the cost of merchandise on hand and the cost of goods sold Signup and view all the answers

How are inventory costs allocated in a periodic inventory system?

Between ending inventory and cost of goods sold Signup and view all the answers

What is the result of subtracting the cost of ending inventory from the cost of goods available for sale?

Cost of goods sold Signup and view all the answers

According to the matching principle, what is deducted from sales revenue to get gross profit?

Cost of goods sold Signup and view all the answers

Accounting for Merchandising Inventory

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