Advanced Accounting: Chapter 5 Test Review

Shipping terms where title to the goods passes to the buyer when the buyer receives the goods

is called

• FOB Destination

• FOB Delivery

• FOB Shipping Point

• FOB Consignment

The costing method that uses the price of merchandise purchased last to calculate the cost of

merchandise sold first is called

• first-in, first-out

• lower of cost or market

• last-in, first-out

• weighted average

A form used during a physical inventory to record information about each item of merchandise

on hand is called a(n)

• stock record

• stock ledger

• inventory record

• merchandise-on-hand record

The number of times the average amount of merchandise inventory is sold during a specific period of time is called the

• a. average number of days’ sales in merchandise inventory

• b. average sales turnover ratio

• c. inventory sales period ratio

• d. inventory turnover ratio

Goods that are given to a business to sell but for which title remains with the vendor are called a

• cosignment

• puchase

• sale

• consignee

If an inventory is taken once each year, the business must be using the perpetual inventory method.

• TRUE

• FALSE

A periodic inventory maintains a continuous record of merchandise inventory increases and decreases.

• TRUE

• FALSE

To determine the inventory cost using the lower of cost or market, a business compares the cost of inventory using its normal inventory costing method (FIFO, LIFO, or weighted-average) to the current replacement cost of the inventory. The inventory is valued at whichever cost is

lower.

• TRUE

• FALSE

Comparing inventory costing methods in times of rising prices, the last-in, first-out method will result in the highest cost of merchandise sold.

• TRUE

• FALSE

International financial reporting standards do not allow the use of the last-in, first-out method.

• TRUE

• FALSE