Inventory

What inventory costing method tracks the actual cost of each specific item in inventory?

• First-In-First-Out (FIFO)

• Last-In-First-Out (LIFO)

• Specific Identification

•  Average-Cost

Which inventory costing method is commonly used in industries where products are perishable?

• Last-In-First-Out (LIFO)

• Average-Cost

• Specific Identification

• First-In-First-Out (FIFO)

What is the formula to calculate Cost of Goods Available for Sale?

• Total Purchases - Ending Inventory

• Beginning Inventory + Total Purchases

• Ending Units × Average Cost per Unit

• Cost of Goods Sold + Ending Inventory

What is the effect of inventory errors on the financial statements?

• They only affect the balance sheet

• They affect the computation of cost of goods sold and net income in two periods

• They do not affect the financial statements

• They only affect the income statement

What type of goods are referred to as consigned goods?

• Goods owned by the consignee

• Goods owned by the consignor but held by the consignee

• Goods in transit

• Goods that are sold but not yet delivered

What is the method that averages the cost of all items to determine the inventory value?

• Specific Identification

• First-In-First-Out (FIFO)

• Last-In-First-Out (LIFO)

• Average-Cost

What is the effect of inventory errors on the balance sheet?

• They do not affect the balance sheet

• They affect the computation of cost of goods sold and net income

• They only affect the income statement

• They only affect the cash flow statement

What is the first step in calculating Cost of Goods Available for Sale?

• Subtract ending inventory from total purchases

• Add up the beginning inventory and all purchases

• Calculate average cost per unit

• Take a physical inventory

What type of inventory do merchandising companies report?

• Raw Materials

• Work in Process

• Goods ready for sale

• Consigned Goods

What is the purpose of taking a physical inventory?

• To calculate the average cost per unit

• To count, weigh, or measure each kind of inventory on hand

• To determine the cost of goods sold

• To identify goods in transit