Inventory Concepts
Which of the following is included in inventory cost?
A) Advertising
B) Freight-in
C) Sales commission
D) Shipping to customers
B) Freight-in
Purchase inventory on account for $4,000.
✅ Answer:
Debit Inventory 4,000
Credit Accounts Payable 4,000
What do the terms 2/10, n/30 mean?
✅ Answer:
2% discount if paid within 10 days; full amount due in 30 days.
TechTrend Gadgets has the following inventory purchases:
10 units @ $20
15 units @ $24
If FIFO is used and 12 units are sold, what is COGS?
A) $240
B) $248
C) $260
D) $288
✅ Answer: B) $248
Explanation:
FIFO sells oldest first
10 × 20 = 200
2 × 24 = 48
COGS = 248
What Netflix show about a group of kids in Hawkins, Indiana fighting supernatural forces became one of the most popular shows of the last decade?
stranger things
What does it mean to capitalize a cost?
To add the cost to inventory so it becomes part of the asset instead of being expensed immediately.
Pay $300 freight-in in cash.
✅ Answer:
Debit Inventory 300
Credit Cash 300
Inventory purchased for $5,000, terms 1/10.
Paid within discount period.
How much cash is paid?
✅ Answer:
5,000 × 1% = 50 discount
Cash paid = 4,950
FreshBean Coffee Roasters purchased inventory:
20 bags @ $8
30 bags @ $10
If LIFO is used and 25 bags are sold, what is COGS?
A) $200
B) $230
C) $250
D) $260
✅ Answer: C) $250
Explanation:
LIFO sells newest first
25 × 10 = 250
What year was KSU founded?
1963
A company pays $250 to insure goods while they are being transported to the warehouse.
How is this recorded?
A) Debit Selling expense
B) Debit COGS
C) Debit inventory
D) Credit COGS
C) Debit inventory
Inventory bought at $600 on account is returned to the supplier.
✅ Answer:
Debit Accounts Payable 600
Credit Inventory 600
Inventory total cost = $9,000
Total units = 300
Units sold = 120
Weighted average COGS?
Unit cost = 9,000 ÷ 300 = 30
COGS = 30 × 120
✅ Answer: 3,600
BlueWave Surf Shop purchased surfboards:
8 boards @ $150
12 boards @ $170
Using weighted average, what is the average cost per board?
A) $160
B) $162
C) $164
D) $168
Total cost:
(8 × 150) + (12 × 170)
= 1,200 + 2,040 = 3,240
Total units = 20
3,240 ÷ 20 = 162
✅ Answer: B) $162
How many semesters has Mellayne been an SI?
3 semesters
Under a perpetual inventory system, when is COGS recorded?
A) End of period
B) When inventory is purchased
C) When inventory is sold
D) When cash is paid
✅ Answer: C) When inventory is sold
A company sells inventory for $2,500 on account. The inventory cost was $1,400.
How many journal entries are recorded?
2
A company sells 50 units at $40 each.
Unit cost = $22.
What is gross profit?
Sales = 2,000
COGS = 1,100
✅ Answer: 900
SunGlow Skincare purchased inventory:
30 units @ $12
20 units @ $14
10 units @ $16
If FIFO is used and 40 units are sold, what is ending inventory?
300
10 × 14 = 140
10 × 16 = 160
Ending Inventory:
140 + 160 = 300
How many hearts does an octopus have?
3
A company has the following costs related to a new inventory purchase:
Purchase price: $12,000
Freight-in: $600
Insurance during transit: $200
Import duties: $500
Advertising for the product launch: $1,000
Shipping costs to customers: $350
Question:
What amount should be capitalized as inventory?
Included:
Purchase price = 12,000
Freight-in = 600
Insurance during transit = 200
Import duties = 500
Total capitalized:
12,000 + 600 + 200 + 500 = 13,300
A company sells inventory for $2,500 on account. The inventory cost was $1,400.
How many journal entries are recorded?
what is the second journal entry? (recording inventory adjustment)
✅ Answer:
Debit COGS 1,400
Credit Inventory 1,400
- You purchase $10,000 inventory on account terms 1/10, n/30
- You pay Freight-in $400 cash
- You return $1,000 worth of defective inventory
- 1% discount taken for paying in the discount period
how much money do you owe for the inventory? and what is the journal entry
8,910
(10,000 -1,000) * 0.99 = 8,910
Accounts Payable 9,000
Inventory 90
Cash 8,910
Vertex Gaming Supplies purchased gaming headsets:
25 units @ $18
20 units @ $20
15 units @ $22
Total units = 60
If weighted average is used and 30 units are sold, what is COGS?
Step 1: total cost
25 × 18 = 450
20 × 20 = 400
15 × 22 = 330
Total cost = 1,180
Step 2: average cost
1,180 ÷ 60 = 19.67
Step 3: COGS
19.67 × 30 = 590.10
✅ Answer: $590.10
What is Mellayne's favorite color
Pink