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23 Cards in this Set
- Front
- Back
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Which costs are inventoriable?
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Purchases - Net of Discounts, Freight, Warehouse expenditures
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When does ownership of goods transfer when shipped FOB Shipping Point?
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FOB Shipping Point puts the inventory into the hands of the buyer from the loading dock
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When does ownership transfer when goods are sent FOB Destination?
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FOB Destination keeps the items in the seller's inventory until it reaches the buyer
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Which costs are non-inventoriable?
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Sales Commissions
Interest on liabilities to vendors Shipping expense to customers |
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When are discounts recorded under the gross method?
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Under the gross method, discounts are recorded only when used.
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Under the net method, when are discounts recorded?
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Under the net method, discounts are recorded whether used or not.
Unused discounts are allocated to financing expense. |
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How is gross margin calculated?
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Gross Margin : Sales - COGS (BI + P - EI)
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Describe the periodic inventory system.
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Inventory is counted at certain times throughout the period
Weighted-average cost flow method is used. |
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Describe the perpetual inventory system.
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Inventory count continually updated
Uses a moving-average cost flow method |
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In periods of rising prices, under which cost flow system would ending inventory be the same under both periodic and perpetual inventory methods?
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Under the FIFO system, periodic and perpetual inventory methods will both have the same ending inventory.
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How is inventory turnover calculated?
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COGS / Average Inventory
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How is Average Day's Sales in inventory calculated?
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365 / Inventory Turnover
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Under a consignment system, who holds the consigned goods in inventory?
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The CONSIGNOR holds the consigned items in their inventory count. The cost includes the shipping to the consignee.
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Under a consignment system, does the consignee hold consignment inventory in their own inventory?
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No. Consignment goods are maintained in the inventory of the consignor, not the consignee.
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What effect does overstatement or understatement of inventory have on ending retained earnings?
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Misstatement of beginning inventory does NOT have an effect on ending retained earnings.
Misstatement of ENDING inventory does have an effect on retained earnings. |
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How does misstatement of ending inventory effect Ending Retained Earnings?
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EI Over : COGS Under : ERE Over
EI Under : COGS Over : ERE Under |
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Which costs are included in COGS first under the FIFO (first in first out) system?
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The first (oldest) inventory you have in stock is the first inventory you record for COGS purposes. If your oldest inventory on the shelf cost you $1 when you bought it, COGS is $1
This is just for inventory pricing. It has nothing to do with physically selling the oldest item on the shelf - It is purely for accounting purposes |
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Which costs are included in COGS under the LIFO (last in first out) system?
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The last (newest) inventory you have in stock is the first inventory you record for COGS purposes. If your newest inventory on the shelf cost you $1.50 when you bought it, COGS is $1.50
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How is Weighted Average Cost Per Unit calculated under a weighted average inventory system?
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COGAS / Total Units : Weighted Average Cost Per Unit
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How does FIFO's COGS relate to LIFO's in a time of changing prices?
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FIFO's relationship to COGS will be opposite LIFO's relationship to COGS in periods of falling/rising prices.
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How do FIFO and LIFO change in a period of rising prices?
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FIFO has the Lowest COGS
FIFO is a cat that sees a mouse starts Low and is Rising If COGS is Low, that means EI is High |
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How do FIFO and LIFO change in a period of falling prices?
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FIFO has the Highest COGS
Remember: FIFO, that silly cat, got High from Catnip and is Falling off the couch If COGS is High, that means EI is Low |
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Under a Lower of Cost or Market, how are the benchmarks calculated?
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Market Ceiling : Net Realizable Value : Selling Price - Selling Costs
Market : Replacement Cost Market Floor : Net Realizable Value - Normal Profit |
