Ch 082

Ch 082 - 10/26/2009 Chapter 08: Valuation of Inventories: A...

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0% (0 out of 21 correct) Responses to questions are indicated by the symbol. 1. Manufacturing companies have two inventory accounts: Work in Process and Finished Goods. A. True B. False Manufacturing companies have three inventory accounts: Work in Process, Finished Goods and Raw Materials. 2. Merchandising concerns report the cost assigned to unsold units left on hand as finished goods inventory. A. True B. False Merchandising firms call their unsold units Merchandise Inventory. 3. In a period of rising prices, LIFO will result in a higher net income than FIFO. A. True B. False LIFO will result in a lower net income because Cost of Goods Sold will be higher by including more recent costs. 4. When goods are shipped FOB destination, title passes to the buyer when the seller delivers the goods to a common carrier. A. True B. False For goods shipped FOB destination, title does not pass until the buyer receives the goods from a common carrier. 10/26/2009 Chapter 08: Valuation of Inventories: A … higheredbcs.wiley.com/…/ch08.html 1/6
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5. LIFO would be appropriate when prices charged to customers tend to lag behind costs paid to suppliers. A. True B. False LIFO is most appropriate when prices do not lag behind costs; this allows a better matching of current costs with current revenues. 6. A physical inventory is only required at year-end if the company has a periodic inventory system. A. True B. False Regardless of the type of inventory system used, the company should take a physical count of inventory at the end of the fiscal year. 7. A sale with a “buyback” agreement allows the seller to finance their inventory and retain the risks of ownership even though the technical title has been transferred. A.
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Ch 082 - 10/26/2009 Chapter 08: Valuation of Inventories: A...

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