Identifying Inventory Concepts

When the FIFO method is used, cost of merchandise sold is priced at

• the average price

• the earliest price

• the most recent price

• none of these

Stock records do not reflect

• decreases in quantity on hand

• increases in quantity on hand

• the cost of the merchandise

• the balance on hand after each increase or decrease is recorded

In periods of rising prices, the inventory method which gives the lowest cost of merchandise sold is the

• FIFO method

• LIFO method

• weighted-average method

• lower of cost or market inventory method

In periods of rising prices, the inventory method which gives the lowest possible ending inventory cost is the

• FIFO method

• LIFO method

• weighted-average method

• lower of cost or market inventory method

The actual flow of inventory in a company

• should influence the inventory costing method a company chooses

• must always be on a LIFO basis

• must match the inventory costing method a company chooses

• does not have to match the inventory costing method a company chooses

When the LIFO method is used, ending inventory units are priced at

• the average price

• the earliest price

• the most recent price

• none of these

When using the perpetual inventory method,

• physical inventories are never taken

• day-to-day information about the quantity of merchandise on hand is not available

• it is not necessary to show the minimum balance on stock records

• a physical inventory should be taken at the end of the fiscal year

Calculating an accurate inventory cost to assure that gross profit and net income are reported correctly on the income statement is an application of the accounting concept

• Adequate Disclosure

• Business Entity

• Consistent Reporting

• Perpetual Inventory

Companies that use a product's UPC code and a point-of-sale terminal

• should still take a physical inventory at least once each fiscal year

• eliminate the need for a physical inventory

• are assured of totally accurate inventory records at all times