Answered: A retail method of inventory estimation…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 44E: Perpetual and Periodic Inventory Systems Below is a list of inventory systems options. a. Perpetual...

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A retail method of inventory estimation that considers net mark-up but excludes net markdown in determining cost ratio: *

A. FIFO

B. Conservative

C. Average cost

D. Historical cost

E. none of the above

Purchase commitments

A. Are obligations of the company to acquire certain goods at a fixed price and fixed quantity sometime in the future

B. require disclosures when considered common and significant

C. Giving rise to a purchase price falling below the agreed price is accounted for as debit to loss on purchase commitments and credited to an estimated liability

D. All of the above

E. None of the above

Ownership of inventories is normally transferred to the buyer

A. when legal title to inventories is transferred

B. when the purchase price if fully paid

C. upon shipment of the goods

D. upon filling up the sales order

When accounting for inventories

A. the form of sales contract is more important than its substance

B. the agreement between seller and buyer shall be considered in determining the timing of transfer of ownership over the goods

C. sales contract is ignored since ownership over inventories are transferred only upon receipt of delivery by the buyer

D. a journal entry is made only upon receipt of delivery by buyer

In a sales transaction FOB destination, freight prepaid, sales and A/R is recognized by the seller upon

A. production of the goods

B. shipment of the goods

C. receipt of goods by buyer

D. sending the invoice to buyer

Which is not considered in approximating the value of inventory using inventory estimation methods?

A. sales returns

B. sales allowance

C. purchase returns

D. purchase discount

Retail inventory method would include this item in calculating goods available for sale at both cost and retail.

A. freight in

B. purchase returns

C. mark-ups

D. markdowns

Increase in sales price that does not increase the sales price above the original sales price

A. initial mark-up

B. additional markup

C. mark up cancellation

D. mark down cancellation

Share dividend of the same class ______ the shareholders’ investment balance and _______ cost per share of investment. *

A. Increases; increases

B. affects not; decrease

C. decreases; decreases

D. affects not; increases

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