Question 1

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.)
-Prices are rising; profits are higher under this method.

Accepted Answer

When prices are rising and profits are higher under a particular inventory costing method, it typically indicates that the costs being considered are being added to the inventory cost. This is because, under methods like FIFO (First In, First Out), the earlier, lower-cost items are sold first, leaving the higher-cost items in inventory, thus increasing the inventory value on the balance sheet.

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.)
-freight costs incurred by the seller to ship goods to its customers

Accepted Answer

Freight costs incurred by the seller to ship goods to its customers are considered selling expenses and are not included in the cost of inventory. These costs are typically expensed as incurred and do not increase the value of inventory on the balance sheet.

Question 3

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 4

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

Accepted Answer

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

Question 5

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.)
-Prices are declining; ending inventory is lower with this method.

Accepted Answer

When prices are declining, the cost of inventory purchased at earlier, higher prices would be added to the inventory cost under methods that recognize these costs, such as FIFO (First In, First Out). This results in a higher cost of goods sold and lower ending inventory value compared to methods like LIFO (Last In, First Out), which would recognize lower costs associated with later, cheaper purchases first.

Question 6

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.)
-Prices are declining; income taxes are higher with this method.

Accepted Answer

LIFO achieves the effect of lower net income and higher income taxes when prices are declining. This is because LIFO assumes that the last units purchased are the first ones sold, leading to higher cost of goods sold and lower ending inventory value. As a result, the company reports lower profits, leading to higher income tax expense.

Question 7

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.)
-Prices are declining; gross margin is higher with this method.

Accepted Answer

The answer of Match the costs that might be included...

Question 8

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.)
-returned goods to the seller

Accepted Answer

Returned goods to the seller are subtracted from inventory cost because they are no longer part of the inventory that the company will sell.

Question 9

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 directly attributable to the acquisition of inventory, thus it is added to the inventory cost.

Question 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

Net purchases are the total purchases of merchandise for a period, minus any returns, allowances, or discounts.

Question 12

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.)
-Prices are rising; ending inventory best approximates replacement cost with this method.

Accepted Answer

When prices are rising, the inventory valuation method that best approximates the replacement cost is likely to be the Last-In, First-Out (LIFO) method. However, the question seems to focus on what costs are included in the inventory cost, not specifically on inventory valuation methods. Generally, costs that are necessary to bring the inventory to its present location and condition are added to the inventory cost. This includes purchase costs, conversion costs, and other costs incurred in bringing the inventories to their present location and condition.

Question 13

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.)
-Prices are rising; ending inventory is lower with this method.

Accepted Answer

Prices are rising, which means that the cost of inventory is increasing. Therefore, any costs that are subtracted from inventory cost would result in a lower ending inventory value, reflecting the higher prices. This could include things like purchase returns, discounts, or allowances.

Question 14

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 15

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.)
-Prices are rising; cost of goods sold is lower with this method.

Accepted Answer

When prices are rising, using methods such as FIFO (First In, First Out) results in older, cheaper costs being allocated to the cost of goods sold, while the newer, more expensive costs are added to the inventory. This leads to a lower cost of goods sold and higher ending inventory values.

Question 16

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

Accepted Answer

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

Question 17

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.)
-paid for purchased goods within the discount period

Accepted Answer

The answer of Match the costs that might be included...

Question 18

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.)
-Prices are declining; ending inventory with this method falls between the amounts for the other two methods.

Accepted Answer

The answer of Match the costs that might be included...

Question 19

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.)
-freight costs incurred by the buyer to ship goods to its place of business

Accepted Answer

Freight costs incurred by the buyer to ship goods to their place of business are considered necessary to bring the inventory to its current location and condition, so they are added to the cost of inventory.

Question 20

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...

Quiz 6: Cost of Goods Sold and Inventory

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.) -Prices are rising; profits are higher under this method.

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.) -freight costs incurred by the seller to ship goods to its 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 balance due for goods that were returned

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.) -Prices are declining; ending inventory is lower with this method.

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.) -Prices are declining; income taxes are higher with this method.

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.) -Prices are declining; gross margin is higher with this method.

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.) -returned goods to the seller

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. -purchased merchandise on credit

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

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.) -Prices are rising; ending inventory best approximates replacement cost with this method.

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.) -Prices are rising; ending inventory is lower with this method.

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

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.) -Prices are rising; cost of goods sold is lower with this method.

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

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.) -paid for purchased goods 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.) -Prices are declining; ending inventory with this method falls between the amounts for the other two methods.

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.) -freight costs incurred by the buyer to ship goods to its place of business

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