Inventory Quiz

What are inventories classified as?

• Liabilities

• Assets

• Equities

• Expenses

Which type of company purchases merchandise in a form ready for sale?

• Retail Company

• Merchandising Company

• Service Company

• Manufacturing Company

What is the primary purpose of a perpetual inventory system?

• To record sales only

• To maintain a continuous record of inventory

• To calculate taxes

• To track employee performance

In a periodic inventory system, how is ending inventory determined?

• By physical count

• By estimation

• By sales records

• By supplier invoices

What is debited to Inventory in a perpetual system when merchandise is purchased?

• Inventory

• Freight-out

• Purchases

• Cost of Goods Sold

What is the cost of goods sold if beginning inventory is $100,000, purchases are $800,000, and ending inventory is $125,000?

• $775,000

• $100,000

• $900,000

• $800,000

What does the term 'goods in transit' refer to?

• Goods that are on their way to the buyer

• Goods sold but not yet delivered

• Goods that are being returned

• Goods that are damaged

What is the treatment of purchase discounts according to IASB?

• Recorded as income

• Recorded as a reduction from the cost of inventories

• Ignored in financial statements

• Recorded as an expense

Which method assumes goods are used in the order in which they are purchased?

• Last-In, First-Out (LIFO)

• First-In, First-Out (FIFO)

• Weighted-Average

• Specific Identification

What is the effect of understating ending inventory on net income?

• Doubles net income

• Increases net income

• Decreases net income

• No effect on net income