Financial Accounting Quiz

In a perpetual inventory system, the cost of goods sold under the FIFO method is based on the cost of the latest goods on hand during the period.

The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

The purchase and sale of inventories affects

• only the statement of financial position.

• only the income statement.

• both the statement of financial position and the income statement.

• neither the statement of financial position nor the income statement.

Merchandise inventory is

• reported under the classification of Property, Plant, and Equipment on the statement of financial position.

• often reported as a miscellaneous expense on the income statement.

• reported as a current asset on the statement of financial position.

• generally valued at the price for which the goods can be sold.

Items not yet placed into production are considered to be

• raw materials.

• work in process.

• finished goods.

• merchandise inventory.

In a manufacturing business, inventory that is ready for sale is called

• raw materials inventory.

• work in process inventory.

• finished goods inventory.

• store supplies inventory.

The factor which determines whether goods in transit should be included in a physical count of inventory is

• physical possession.

• legal title.

• management's judgment.

• whether or not the purchase price has been paid.

If goods in transit are shipped FOB destination

• the seller has legal title to the goods until they are delivered.

• the buyer has legal title to the goods until they are delivered.

• the transportation company has legal title to the goods while the goods are in transit.

• no one has legal title to the goods until they are delivered.

An auto manufacturer would classify vehicles in various stages of production as

• finished goods.

• merchandise inventory.

• raw materials.

• work in process.

Which of the following should be included in the physical inventory of a company?

• Goods held on consignment from another company.

• Goods in transit to another company shipped FOB shipping point.

• Goods in transit from another company shipped FOB shipping point.

• Both goods in transit to and from another company shipped FOB shipping point.