ch06 - ch06 Student 1 Goods in transit are automatically...

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ch06 Student: ___________________________________________________________________________ 1. Goods in transit are automatically included in inventory. True False 2. Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor. True False 3. If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value. True False 4. If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination. True False 5. Net realizable value for damaged or obsolete goods is sales price plus the cost of making the sale. True False 6. The cost of an inventory item includes its invoice cost minus any discount, and plus any added or incidental costs necessary to put it in a place and condition for sale. True False 7. When taking a physical count of inventory, the use of prenumbered inventory tickets is an application of internal control. True False 8. Incidental costs often added to the costs of inventory include import duties, freight, storage, and insurance. True False 9. The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product. True False 10. Few companies take a physical count of inventory each year, and rely on inventory records alone to determine the inventory value. True False 11. The matching principle is used by some companies to avoid allocating incidental inventory costs to cost of goods sold. True False 12. The consistency concept prescribes that a company use the same accounting methods period after period, so that financial statements are comparable across periods. True False 13. A company can change its inventory costing method without mentioning this change in its financial statements because it is an internal management decision. True False 14. Whether purchase costs are rising or falling, FIFO always will yield the highest gross profit and net income. True False
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15. An advantage of the weighted average inventory method is that it tends to smooth out erratic changes in costs. True False 16. In a period of rising purchase costs, FIFO usually gives a lower taxable income and therefore, yields a tax advantage. True False 17. LIFO is preferred when purchase costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation. True False 18. The LIFO method of inventory valuation can result in a company's ending inventory being valued at less than the inventory's replacement cost because LIFO inventory leaves the oldest costs in inventory. True False 19. The full disclosure principle requires that the notes to the financial statements report a change in accounting method for inventory. True False 20. An advantage of LIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.
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  • Spring '10
  • Brown
  • retail inventory

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