Question 1

Match the terms with the descriptions related to merchandise sales and purchases.
-Collected cash from a customer for payment within the discount period.

Accepted Answer

The answer of Match the terms with the descriptions related...

Question 2

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. (Choices may be used more than once.)
-Invoice price paid for resale goods.

Accepted Answer

The invoice price paid for resale goods is a cost that is directly related to acquiring the inventory and should therefore be added to the cost of inventory.

Question 3

Match the terms with the descriptions related to merchandise sales and purchases.
-Shipping costs paid to acquire merchandise.

Accepted Answer

Transportation-in refers to the shipping costs paid to acquire merchandise.

Answer: B
 The perpetual inventory system is a method of tracking inventory in real-time, continuously updating records with each sale or purchase.

Answer: C
 Net purchases refers to the amount of inventory purchased after deducting various discounts, returns, and allowances.

Answer: D
 FOB destination means that the seller is responsible for paying shipping costs until the merchandise reaches the buyer's destination.

Answer: E
 Cost of goods available for sale refers to the total cost of inventory available for sale during a given period.

Answer: F
 The periodic inventory system is a method of tracking inventory where physical counts are conducted periodically, typically at the end of an accounting period.

Answer: G
 FOB shipping point means that the buyer is responsible for paying shipping costs once the merchandise leaves the seller's shipping point.

Answer: H
 Delivery expense refers to the cost of delivering merchandise to customers.

Question 4

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers.
-Costs to purchase goods ready to sell.

Accepted Answer

Merchandise inventory is the account used to record the cost of goods purchased and held for resale by a retailer.

Answer: B, C, D
 Raw materials, work-in-process, and finished goods are the inventory accounts used by manufacturers to record the costs associated with the production process.

Answer: E
 Cost of goods sold is not an inventory account, but rather an expense account used to record the cost of the goods that have been sold during a specific accounting period.

Question 5

Match the terms with the descriptions related to merchandise sales and purchases.
-Requires updating of the inventory account at the time of each purchase and each sale.

Accepted Answer

The perpetual inventory system requires the updating of the inventory account at the time of each purchase and each sale.

Answer: C
 Net purchases are the total purchases made by a company after deducting any returns, discounts, and allowances.

Answer: G
 FOB shipping point indicates that the buyer takes ownership of the goods and is responsible for them once they leave the seller's facility.

Answer: D
 FOB destination indicates that the seller is responsible for the goods until they reach the buyer's destination.

Answer: E
 Cost of goods available for sale is the total cost of inventory that was available for sale during a period, including beginning inventory and purchases.

Answer: F
 The periodic inventory system involves taking physical inventory counts periodically and adjusting the inventory account accordingly.

Answer: A
 Transportation-in is the cost of shipping and delivering goods to the buyer and is considered part of the cost of inventory.

Answer: H
 Delivery expense refers to the cost of transporting goods from the seller to the buyer and is treated as a separate expense on the income statement.

Question 6

Match the terms with the descriptions related to merchandise sales and purchases.
-Sold merchandise on credit to customers.

Accepted Answer

When Maxim Company sells merchandise on credit, it increases its accounts receivable (asset) and revenue (which increases owners' equity). Therefore, there is an increase in both assets and owners' equity.

Question 7

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers.
-Cost of completed, unsold items.

Accepted Answer

The cost of completed, unsold items would be included in finished goods inventory for both retailers and manufacturers.

Question 8

Match the terms with the descriptions related to merchandise sales and purchases.
-Relies on a count of inventory on the last day of the year to determine the amount on hand.

Accepted Answer

The periodic inventory system relies on a count of inventory on the last day of the year to determine the amount on hand.

Answer: B 
 The perpetual inventory system records inventory changes in real-time, allowing for up-to-date information on inventory levels.

Answer: C 
 Net purchases is the total amount of merchandise purchases less any returns, discounts, or allowances.

Answer: G 
 FOB shipping point means the buyer is responsible for transportation costs and assumes ownership of the goods once they are picked up by the carrier.

Answer: E 
 Cost of goods available for sale is the total cost of merchandise available for purchase, including beginning inventory and net purchases.

Answer: D 
 FOB destination means the seller is responsible for transportation costs and retains ownership of the goods until they are delivered to the buyer.

Answer: A 
 Transportation-in is a type of freight expense that is incurred when goods are transported to the buyer's location.

Answer: H 
 Delivery expense is a type of cost that is incurred when goods are transported to the buyer's location, typically associated with the FOB shipping point term.

Question 9

You are the Orlando store manager for Kruge Enterprises. When you came in this morning, you found the front door ajar. Once Security had arrived and you eventually got inside, you discovered that most of your inventory had been stolen. In order to file a claim with your insurance company you need to estimate the amount of inventory you had yesterday at closing time. Unfortunately, Kruge Enterprises uses a periodic inventory system. How can you estimate your lost inventory amount?

Accepted Answer

The answer of  
You are the Orlando store manager...

Question 10

Match the terms with the descriptions related to merchandise sales and purchases.
-The seller is responsible for the cost of delivering the merchandise to the buyer.

Accepted Answer

FOB destination means the seller is responsible for the cost of delivering the merchandise to the buyer.

Answer: B
 Perpetual inventory system is a system that immediately updates inventory records as sales and purchases occur.

Answer: C
 Net purchases refer to the total cost of merchandise purchased during a period after taking into account any purchase returns or allowances.

Answer: G
 FOB shipping point means the buyer is responsible for the cost of delivering the merchandise from the seller's location.

Answer: E
 Cost of goods available for sale refers to the total cost of inventory a company has available for sale during a period.

Answer: F
 Periodic inventory system is a system where inventory records are updated periodically, usually at the end of an accounting period.

Answer: A and H
 Transportation-in refers to the cost of shipping merchandise to the buyer and delivery expense refers to other costs associated with delivering the merchandise to the buyer, such as labor or fuel costs.

Question 11

Match the terms with the descriptions related to merchandise sales and purchases.
-Gave a customer a cash refund.

Accepted Answer

The answer of Match the terms with the descriptions related...

Question 12

You are the inventory accounting manager at XB Tools. Your company is considering the purchase of software that would allow the company to switch from the periodic inventory system to a perpetual system. Prepare a compare and contrast table to summarize the similarities and differences between the two systems. (Use the table that has been started for you below.)

Accepted Answer

The answer of  
You are the inventory accounting manager...

Question 13

Match the terms with the descriptions related to merchandise sales and purchases.
-The buyer must pay the shipping costs.

Accepted Answer

FOB shipping point means that the buyer is responsible for shipping costs from the point of shipment. This term indicates that the ownership of the goods transfers to the buyer when the goods leave the seller's premises, and the buyer must pay for the shipping costs.

Question 14

Match the terms with the descriptions related to merchandise sales and purchases.
-Purchased merchandise on credit.

Accepted Answer

Transportation-in refers to the cost of shipping or transporting merchandise from the supplier to the buyer. Purchasing merchandise on credit does not impact the other terms listed.

Note: The other terms listed are:
B) Perpetual inventory system - a method of keeping track of inventory levels in real-time
C) Net purchases - the total amount of inventory purchased, minus any returns or discounts
D) FOB destination - a shipping term indicating that the seller is responsible for the cost of transportation until the merchandise reaches its destination
E) Cost of goods available for sale - the total cost of all inventory that was available for sale during a given period
F) Periodic inventory system - a method of keeping track of inventory levels by physically counting inventory at the end of each period
G) FOB shipping point - a shipping term indicating that the buyer is responsible for the cost of transportation once the merchandise leaves the seller's location
H) Delivery expense - the cost of shipping or transporting merchandise to the buyer

Question 15

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers.
-Costs of completed items that have been sold to customers.

Accepted Answer

The costs of completed items that have been sold to customers are included in the cost of goods sold account, which is a separate account from the inventory accounts (merchandise inventory, raw materials, work-in-process, finished goods).

Question 16

Match the terms with the descriptions related to merchandise sales and purchases.
-Paid for merchandise outside of the discount period.

Accepted Answer

The answer of Match the terms with the descriptions related...

Question 17

Match the terms with the descriptions related to merchandise sales and purchases.
-Granted a customer a credit on its balance due for goods that were returned.

Accepted Answer

The answer of Match the terms with the descriptions related...

Question 18

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers.
-Cost of material, labor, and other production-related costs incurred to date in unfinished goods.

Accepted Answer

The account for costs incurred to date in unfinished goods is work-in-process, which specifically represents the inventory of unfinished products in the manufacturing process.

Question 19

Match the terms with the descriptions related to merchandise sales and purchases.
-Recorded cash sales for the day.

Accepted Answer

The answer of Match the terms with the descriptions related...

Question 20

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers.
-Cost of ingredients used to make a product.

Accepted Answer

Raw materials are the costs of ingredients used to make a product, which are included in inventories for both retailers and manufacturers. Merchandise inventory is the cost of goods purchased for resale by retailers, while work-in-process and finished goods are specific to manufacturing inventory. Cost of goods sold is the cost of goods sold by retailers or manufacturers and is expensed when the goods are sold.

Quiz 6: Cost Of Goods Sold and Inventory

Match the terms with the descriptions related to merchandise sales and purchases. -Collected cash from a customer for payment within the discount period.

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. (Choices may be used more than once.) -Invoice price paid for resale goods.

Match the terms with the descriptions related to merchandise sales and purchases. -Shipping costs paid to acquire merchandise.

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Costs to purchase goods ready to sell.

Match the terms with the descriptions related to merchandise sales and purchases. -Requires updating of the inventory account at the time of each purchase and each sale.

Match the terms with the descriptions related to merchandise sales and purchases. -Sold merchandise on credit to customers.

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Cost of completed, unsold items.

Match the terms with the descriptions related to merchandise sales and purchases. -Relies on a count of inventory on the last day of the year to determine the amount on hand.

Match the terms with the descriptions related to merchandise sales and purchases. -The seller is responsible for the cost of delivering the merchandise to the buyer.

Match the terms with the descriptions related to merchandise sales and purchases. -Gave a customer a cash refund.

Match the terms with the descriptions related to merchandise sales and purchases. -The buyer must pay the shipping costs.

Match the terms with the descriptions related to merchandise sales and purchases. -Purchased merchandise on credit.

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Costs of completed items that have been sold to customers.

Match the terms with the descriptions related to merchandise sales and purchases. -Paid for merchandise outside of the discount period.

Match the terms with the descriptions related to merchandise sales and purchases. -Granted a customer a credit on its balance due for goods that were returned.

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Cost of material, labor, and other production-related costs incurred to date in unfinished goods.

Match the terms with the descriptions related to merchandise sales and purchases. -Recorded cash sales for the day.

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Cost of ingredients used to make a product.