Accounting Principles Fundamental Prep Questions With Verified ANSWERs

Accounting Principles Fundamental Prep Questions With Verified ANSWERs Identify the safeguards that companies implement to protect their inventory. - ANSWER Restrict access to inventory.Match inventory received with purchase orders.Implement security measures, such as cameras.Control access to inventory records. The FIFO cost flow assumption assumes that the cost of items purchased __________ are the costs that will be transferred first to cost of goods sold on the __________. - ANSWER -Earliest -Income Statement An advantage of the LIFO method is that it best matches - ANSWER current costs with revenues Determine which of the following statements are correct regarding the difference between physical flow and the cost flow of inventory. - ANSWER -Cost flow is an assumption about which goods/items are sold. -Physical flow is focused on the actual movement of goods. -A business may adopt any cost flow assumption when accounting for perishable items. -Perishable items must have an actual physical flow of FIFO. Why would the physical count of inventory be different than what is shown in perpetual inventory records? - ANSWER -Events such as errors -Events such as theft -Events such as loss -Events such as damage The kind of business that would use the specific identification method of inventory costing includes: - ANSWER A car dealership The _____ principle states that inventory costs are expensed as cost of goods sold when inventory is sold. - ANSWER expense recognition Which statement(s) below correctly describe(s) the relationship of cost of goods sold and ending inventory? - ANSWER -Cost of goods available for sale must be allocated between cost of goods sold and ending inventory. -Cost of goods sold plus ending inventory will equal the total goods available for sale. Show your understanding of the ownership of goods in transit by completing the following statement. If goods are shipped FOB shipping point, then the __________ is responsible for paying freight charges and the __________ will not include the merchandise in their inventory. - ANSWER - Purchaser -Seller One identical unit is purchased on each of the following three dates and at the respective costs: June 1 at $10 June 2 at $15 July 4 at $20 The company sells two units during the period. Conclude which inventory items are sold first and which unit remains in ending inventory if the company is using the FIFO cost flow assumption. - ANSWER The June 1 at $10 and the June 2 at $15 are both sold; the July 4 unit remains in ending inventory. Which of the following lists the four methods used to assign costs to inventory and to cost of goods sold? - ANSWER FIFO, LIFO, weighted average and specific Identification Which statement(s) below is(are) correct regarding the purpose of taking a physical inventory count? - ANSWER -The physical count is used to determine if there has been any theft, loss, damage or errors in inventory. -The physical count is used to adjust the Inventory account balance to the actual inventory available. Which of the costs below would be included in the recorded cost of merchandise inventory? - ANSWER Invoice cost, Storage costs, Insurance costs