ACCT ch6 Study Plan - ACCT ch6 Study Plan pre-test:...

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ACCT ch6 Study Plan pre-test: Inventory turnover is computed by dividing cost of goods sold by average inventory Inventory turnover is computed by dividing cost of goods sold by average inventory. It indicates the number of times a company's average inventory is sold during an accounting period. An understatement of Year 1's beginning inventory will cause Year 1's cost of goods sold to be understated An understatement of Year 1's beginning inventory will cause Year 1's cost of goods sold to be understated . Misstating Year 1's beginning inventory will only affect Year 1. A misstatement of ending inventory, however, will have effects in both Year 1 and Year 2. The consequences of misstatements can be determined using the formulas Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold and Net Sales - Cost of Goods Sold - Operating Expenses = Income Before Income Taxes. Inventory cost includes invoice price less purchase discounts., freight in, including insurance in transit. , applicable taxes and tariffs, All of these choices are correct. Inventory cost includes invoice price less purchase discounts, freight in, including insurance in transit, and applicable taxes and tariffs. The lower-of-cost-or-market rule requires that a loss be recorded, when the replacement cost of inventory falls below historical cost, the inventory is written down to the lower value. Both of these choices are correct. The lower-of-cost-or-market rule requires that when the replacement cost of inventory falls below historical cost, the inventory is written down to the lower value and a loss is recorded. An argument to support LIFO is that the current costs of merchandise are matched against current sales prices. The effect of LIFO does not agree with the actual physical movement of goods in most businesses. An argument to support LIFO is that the current costs of merchandise are matched against current sales prices Under FIFO, the actual goods are sold in exactly the same order as they are purchased. False Under FIFO, the costs of the first items acquired are assigned to the first items sold. The actual physical flow of goods is not known. If FIFO is being used for tax purposes, it must be used for reporting purposes as well. False If LIFO is being used for tax purposes, it must be used for reporting purposes as well. Which inventory method generally best follows the matching rule?
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This note was uploaded on 03/28/2011 for the course ACCT 2301 taught by Professor G.a.gross during the Spring '11 term at Richland Community College.

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ACCT ch6 Study Plan - ACCT ch6 Study Plan pre-test:...

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