6.1 Describe the three different inventory costing methods
1) Merchandise inventory represents the goods that a merchandiser has available to sell to its customers.
2) Merchandising companies can be either wholesalers or retailers.
3) Manufacturers generally purchase large amounts of products from wholesalers and resell them to retailers.
4) GAAP allows two different kinds of inventory costing methods.
5) Under the specific-identification method, the flow of goods through the accounting records will:
A) be the opposite of the physical flow of goods through the business.
B) closely match the physical flow of goods through the business.
C) exactly match the physical flow of goods through the business.
D) have no relationship to the physical flow of goods through the business.
E) sometimes match the physical flow of goods through the business.
6) Under the FIFO method, the flow of goods through the accounting records will:
A) be nearly the opposite of the physical flow of goods through the business.
B) closely match the physical flow of goods through the business.
C) exactly match the physical flow of goods through the business.
D) have no relationship to the physical flow of goods through the business.
E) sometimes match the physical flow of goods through the business.
7) Under the average cost method, the flow of goods through the accounting records will:
A) be the opposite of the physical flow of goods through the business.
B) closely match the physical flow of goods through the business.
C) exactly match the physical flow of goods through the business.
D) have no relationship to the physical flow of goods through the business.
E) sometimes match the physical flow of goods through the business.
8) An inventory layer is synonymous with a separate:
A) sale of merchandise.
B) purchase of merchandise.
C) return of merchandise.
D) customer return of merchandise.
E) discount of goods from the supplier.
9) An accounting department only needs to know:
A) how many units were sold, not which units were sold.
B) which units were sold, not how many units were sold.
C) the specific price of a specific unit.
D) the average price of a specific unit.
E) the physical flow of goods.
10) Cost of goods sold may include all of the following EXCEPT for:
A) the actual cost of the item.
B) shipping costs.
C) insurance.
D) management salaries.
E) the cost to make the item.