ACCY 201 Test 2 - Ole Miss (Nichols) QUESTIONS &
ANSWERS 100% VERIFIED!!
what are the two primary objectives of control over inventory? correct answers 1) safeguard
inventory from damage or theft
2) to report inventory in the financial statements
what does a purchase order authorize? correct answers the purchase of inventory from an
approved vendor
what does the receiving report establish? correct answers establishes an initial record of
receipt of the inventory
what qualities of the inventory (from the purchase order and receiving report) are compared
to the vendors invoice? correct answers price
quantity
description
what is available in the subsidiary inventory ledger?
*using a perpetual inventory system is a good way to maintain internal control* correct
answers the amount of inventory
*also helps keep inventory quantities at normal levels*
what is a physical inventory? correct answers it is a count of inventory that should be taken
near year end to make sure that the quantity of inventory reported in the financial statements
is accurate
what is the group of three assumptions called that company owners use to assign costs to their
inventories? correct answers inventory cost flow assumptions
LIFO
FIFO
Weighted average cost
what does the specific identification inventory cost flow method entail? correct answers
means that the unit sold is identified with a specific purpose
what does the first in, first out (FIFO) method mean? give an example. correct answers the
first units purchased are assumed to be sold first and the ending inventory is made up of the
most recent remaining purchases
dairy products, the oldest items are usually stacked in front of the newest items to ensure their
purchase first
what does the last in last out (LIFO) method mean? correct answers the most recent units
purchases are the first sold and the first bought inventory is what usually gets counted into the
ending inventory/ inventory costs
, what is the weighted average cost flow method? correct answers the inventory remaining and
the inventory sold is an average of the purchase costs
when do you use the cost flow methods? correct answers when identical units of an item are
purchased at different unit costs
under which cost flow method do we find the moving average?` correct answers weighted
average cost method
defintion (moving average) - the technique in which you compute the average cost of units
sold
what is recorded when the periodic inventory system is used> correct answers revenue is
recorded each time a sale is made
what is important to know about the time of recording in regard to a periodic inventory
system? correct answers NO entry is made at the time of sale to record goods sold. rather, at
the end of an acct. period the physical inventory is taken to determine the cost of inventory
and cost of goods sold
what is the equation for finding weighted average unit cost correct answers weighted average
unit cost = total cost of units available for sale / units available for sale
what amounts do the 3 cost flow methods produce?` correct answers - cost of goods sold
- profit
- net income
- ending inventory
what is the equation for gross profit correct answers gross profit = sales - COGS
what does valuation at lower cost or market mean? correct answers whether it is lower at the
NRV (net realizable value) or if it is lower at market
if beginning inventory is understated, what effect does that have on the COGS, gross profit,
and net income? correct answers COGS - understated
G.P. - overstated
net income - overstated
if beginning inventory is overstated, what effect does that have on the COGS, gross profit,
and net income? correct answers COGS - over
G.P. - under
net income - under
if ending inventory is understated, what effect does that have on the COGS, gross profit, and
net income? correct answers COGS - over
G.P. - under
net income - under
ANSWERS 100% VERIFIED!!
what are the two primary objectives of control over inventory? correct answers 1) safeguard
inventory from damage or theft
2) to report inventory in the financial statements
what does a purchase order authorize? correct answers the purchase of inventory from an
approved vendor
what does the receiving report establish? correct answers establishes an initial record of
receipt of the inventory
what qualities of the inventory (from the purchase order and receiving report) are compared
to the vendors invoice? correct answers price
quantity
description
what is available in the subsidiary inventory ledger?
*using a perpetual inventory system is a good way to maintain internal control* correct
answers the amount of inventory
*also helps keep inventory quantities at normal levels*
what is a physical inventory? correct answers it is a count of inventory that should be taken
near year end to make sure that the quantity of inventory reported in the financial statements
is accurate
what is the group of three assumptions called that company owners use to assign costs to their
inventories? correct answers inventory cost flow assumptions
LIFO
FIFO
Weighted average cost
what does the specific identification inventory cost flow method entail? correct answers
means that the unit sold is identified with a specific purpose
what does the first in, first out (FIFO) method mean? give an example. correct answers the
first units purchased are assumed to be sold first and the ending inventory is made up of the
most recent remaining purchases
dairy products, the oldest items are usually stacked in front of the newest items to ensure their
purchase first
what does the last in last out (LIFO) method mean? correct answers the most recent units
purchases are the first sold and the first bought inventory is what usually gets counted into the
ending inventory/ inventory costs
, what is the weighted average cost flow method? correct answers the inventory remaining and
the inventory sold is an average of the purchase costs
when do you use the cost flow methods? correct answers when identical units of an item are
purchased at different unit costs
under which cost flow method do we find the moving average?` correct answers weighted
average cost method
defintion (moving average) - the technique in which you compute the average cost of units
sold
what is recorded when the periodic inventory system is used> correct answers revenue is
recorded each time a sale is made
what is important to know about the time of recording in regard to a periodic inventory
system? correct answers NO entry is made at the time of sale to record goods sold. rather, at
the end of an acct. period the physical inventory is taken to determine the cost of inventory
and cost of goods sold
what is the equation for finding weighted average unit cost correct answers weighted average
unit cost = total cost of units available for sale / units available for sale
what amounts do the 3 cost flow methods produce?` correct answers - cost of goods sold
- profit
- net income
- ending inventory
what is the equation for gross profit correct answers gross profit = sales - COGS
what does valuation at lower cost or market mean? correct answers whether it is lower at the
NRV (net realizable value) or if it is lower at market
if beginning inventory is understated, what effect does that have on the COGS, gross profit,
and net income? correct answers COGS - understated
G.P. - overstated
net income - overstated
if beginning inventory is overstated, what effect does that have on the COGS, gross profit,
and net income? correct answers COGS - over
G.P. - under
net income - under
if ending inventory is understated, what effect does that have on the COGS, gross profit, and
net income? correct answers COGS - over
G.P. - under
net income - under
