LIFO
FIFO
Specific Identification
Inventory Quantities
Ownership of Goods
100
What does LIFO stand for?
Last in First out
100
What does FIFO stand for?
First in First out
100
What does the specific identification method do?
The specific identification method tracks the actual physical flow of the goods.
100
Companies using a periodic inventory system must use take what kind of inventory?
Physical inventory
100
Ownership of goods is needed in order to calculate what?
Cost of Inventory
200
Name a company we discussed that uses LIFO.
Petro-Canada
200
What is ignored in a periodic inventory system?
In a periodic inventory system the different dates are ignored on each of the sales
200
What is done with the inventory in order to be tracked?
Each inventory is marked, tagged, or coded with its specific unit cost.
200
Whats one way of determining inventory quantities? Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand
Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand.
200
With FOB shipping point who has legal title of the goods and when?
FOB shipping point. Legal title of the goods passes to the buyer when the public carrier accepts the goods from the seller.
300
What type of goods would have LIFO match the physical flow of inventory?
Goods stored in piles, such as sand, hay, or gravel.
300
With FIFO what assumption must be made?
With FIFO the assumption must be made that the most recent purchases are still in inventory
300
What is done with the items still in inventory at the end of the year?
Items that are still in inventory at the end of the year are specifically costed to determine the total cost of the ending inventory.
300
Whats one way of determining inventory quantities?
1) By taking a physical inventory of goods on hand. 2) By determining the ownership of goods.
300
With FOB destination who has legal title and when?
FOB destination. Legal title of the goods remains with the seller until the goods reaches the buyer.
400
When the ending inventory and costs of goods sold amounts are added together what does it equal to?
they should equal the cost of goods available for sale
400
How is cost of goods sold determined?
Cost of goods sold is determined by deducting the ending inventory from the cost of goods available for sale
400
What does this method report?
This method reports ending inventory at actual cost and matches the cost of goods sold against sales revenue
400
Name one way of internal control procedures for counting inventory.
1. The counting should be done by employees who are not responsible for either custody of the inventory or keeping inventory records. 2. There should be a second count by another employee or auditor. Counting should be done in teams of 2.
400
Why are FOB destination and FOB shipping point terms important?
These terms are important in determining the exact date for a recording a purchase or sale of inventory and what items should be included in inventory.
500
How is the cost of the ending inventory determined?
The cost of the ending inventory is determined by taking the unit cost of the earliest goods available for sale and working forward until all units of inventory have been costed.
500
How is the cost of the ending inventory determined?
The cost of the ending inventory is determined by taking the unit cost of the most recent purchase and working backward until all units of inventory have been costed.
500
What is a good example of a type of inventory that works well with specific identification?
Automobiles are a good example of a type of inventory that works well with specific identification because they can be individually identified by serial number.
500
Once ending inventory known what is it used for?
Once the ending inventory amount is known, the amount is then used to calculate the cost of goods sold for the period and to update the merchandise inventory account in the general ledger.
500
Inaccurate inventory quantities affect what?
Inaccurate inventory quantites affect not only the inventory amount on the balance sheet; they also affect the cost of goods sold reported in the income statement.
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