ACCT 2101 UGA Test #2 questions n
answers graded A+
Merchandise Inventory - CORRECT ANSWER ✔✔all goods that a company owns or holds for
sale, regardless of where the goods are located when inventory is counted
Goods on Consignment - CORRECT ANSWER ✔✔Merchandise given by the owner, or consignor,
to another part, the consignee, for sale
Merchandise is part of the consignor's inventory
Damaged or Obsolete Goods - CORRECT ANSWER ✔✔not counted in inventory if they cannot be
sold
Realizable Value - CORRECT ANSWER ✔✔The costs that damaged or obsolete goods can still be
sold at; a reduced amount
How are inventory costs calculated? - CORRECT ANSWER ✔✔Include all expenditures necessary
to bring an item to a salable condition and location
Equation for inventory costs - CORRECT ANSWER ✔✔Invoice Costs - Returns - Discounts or
Allowances + Any Shipping Costs + Storage Costs + Additional Insurance Costs + Import Duties
What does inventory affect? - CORRECT ANSWER ✔✔The balance sheet and the income
statement
, The balance sheet is affected by ... while the income statement is affected by... - CORRECT
ANSWER ✔✔Ending Inventory, Costs of Goods Sold
Matching Principle - CORRECT ANSWER ✔✔Principle that states that costs of sales must match
up with the sales
Periodic Method - CORRECT ANSWER ✔✔Method of accounting in which inventory is counted
after the period
Perpetual Method - CORRECT ANSWER ✔✔Method of accounting in which inventory is counted
after any change
Cost of goods sold - CORRECT ANSWER ✔✔=Beginning inventory + purchases - ending inventory
Net Income - CORRECT ANSWER ✔✔Sales - COGS
What happens if the calculated amount of inventory is overstated? - CORRECT ANSWER
✔✔Assets are overstated, Net Income is overstated, equity is overstated, and COGS is
understated
What happens if the calculated amount of inventory is understated? - CORRECT ANSWER
✔✔Assets are understated, Net Income is understated, equity is understated, and COGS is
overstated
If COGS is overstated - CORRECT ANSWER ✔✔NI is understated
LIFO: NI is greater, EI is greater, COGS is lower, Income Taxes is greater
FIFO: NI is lower, EI is lower, COGS is greater, Income Taxes is lower - CORRECT ANSWER
✔✔Decreasing Prices
answers graded A+
Merchandise Inventory - CORRECT ANSWER ✔✔all goods that a company owns or holds for
sale, regardless of where the goods are located when inventory is counted
Goods on Consignment - CORRECT ANSWER ✔✔Merchandise given by the owner, or consignor,
to another part, the consignee, for sale
Merchandise is part of the consignor's inventory
Damaged or Obsolete Goods - CORRECT ANSWER ✔✔not counted in inventory if they cannot be
sold
Realizable Value - CORRECT ANSWER ✔✔The costs that damaged or obsolete goods can still be
sold at; a reduced amount
How are inventory costs calculated? - CORRECT ANSWER ✔✔Include all expenditures necessary
to bring an item to a salable condition and location
Equation for inventory costs - CORRECT ANSWER ✔✔Invoice Costs - Returns - Discounts or
Allowances + Any Shipping Costs + Storage Costs + Additional Insurance Costs + Import Duties
What does inventory affect? - CORRECT ANSWER ✔✔The balance sheet and the income
statement
, The balance sheet is affected by ... while the income statement is affected by... - CORRECT
ANSWER ✔✔Ending Inventory, Costs of Goods Sold
Matching Principle - CORRECT ANSWER ✔✔Principle that states that costs of sales must match
up with the sales
Periodic Method - CORRECT ANSWER ✔✔Method of accounting in which inventory is counted
after the period
Perpetual Method - CORRECT ANSWER ✔✔Method of accounting in which inventory is counted
after any change
Cost of goods sold - CORRECT ANSWER ✔✔=Beginning inventory + purchases - ending inventory
Net Income - CORRECT ANSWER ✔✔Sales - COGS
What happens if the calculated amount of inventory is overstated? - CORRECT ANSWER
✔✔Assets are overstated, Net Income is overstated, equity is overstated, and COGS is
understated
What happens if the calculated amount of inventory is understated? - CORRECT ANSWER
✔✔Assets are understated, Net Income is understated, equity is understated, and COGS is
overstated
If COGS is overstated - CORRECT ANSWER ✔✔NI is understated
LIFO: NI is greater, EI is greater, COGS is lower, Income Taxes is greater
FIFO: NI is lower, EI is lower, COGS is greater, Income Taxes is lower - CORRECT ANSWER
✔✔Decreasing Prices
