a31.In all cases when average-costing is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.
a32.The moving-average cost flow assumption for a perpetual inventory system and the average-cost cost flow assumption for a periodic inventory system will allocate the same amounts to ending inventory and cost of goods sold.
a33.Companies have the choice of physically counting inventory on hand at the end of the year or using the gross profit method to estimate the ending inventory.
a34.The retail inventory method requires a company to value its inventory on the statement of financial position at retail prices.
a35.In applying the LIFO assumption in a perpetual inventory system, the cost of the units most recently purchased prior to sale is allocated first to the units sold.
a36.A major advantage of LIFO is that the inventory reported on the statement of financial position will approximate current cost.
a37.The LIFO cost flow assumption can also be called the LISH assumption.
38. Finished goods are a classification of inventory for a manufacturer that are completed and ready for sale.
39. Under the FIFO method, the costs of the earliest units purchased are the first charged to cost of goods sold.
40. The specific identification method of inventory costing is appropriate for costly, easily distinguishable items such as cars, pianos, and antigues.
41. In a period of falling prices, the average-cost method results in a lower cost of goods sold than the FIFO method.
42. The lower-of-cost-or-net realizable value basis is an example of the accounting concept of prudence.
43. Inventories are reported in the current assets section of the statement of financial position immediately before receivables.
a44.In a perpetual inventory system, the cost of goods sold under the FIFO method is based on the cost of the latest goods on hand during the period.
a45.The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.