Question 1

Merchandise inventory represents the goods that a merchandiser has available to sell to its customers.

Accepted Answer

Merchandise inventory is indeed the goods that a merchandiser has on hand to sell to its customers.

Question 2

Under the FIFO method, the flow of goods through the accounting records will:

Accepted Answer

The first-in, first-out (FIFO) method assumes that the first items purchased or produced are the first ones sold or used. Therefore, the flow of goods through the accounting records will closely match the physical flow of goods through the business. This is because the cost of goods sold (COGS) will reflect the cost of the oldest inventory items, which corresponds to the FIFO assumption.

Question 3

A manufacturer uses __________ inventory to produce the goods it sells.

Accepted Answer

raw materials

Question 4

Beginning inventory plus net purchases equals cost of goods sold.

Accepted Answer

Beginning inventory plus net purchases equals the cost of goods available for sale, not the cost of goods sold. The formula for calculating cost of goods sold is beginning inventory plus net purchases minus ending inventory.

Question 5

Cost of goods sold may include all of the following EXCEPT for:

Accepted Answer

Cost of goods sold includes direct costs like the actual cost of the item, shipping costs, insurance, and the cost to make the item. However, management salaries are indirect costs and are not typically included in cost of goods sold.

Question 6

What is the method of valuing inventory that is based on the assumption that the oldest goods will be
sold first?

Accepted Answer

The answer of What is the method of valuing inventory...

Question 7

Merchandising companies can be either wholesalers or retailers.

Accepted Answer

Merchandising companies can be either wholesalers or retailers, as they are involved in purchasing and selling goods to consumers. Wholesalers sell to other businesses or retailers, whereas retailers sell directly to consumers.

Question 8

An inventory layer is synonymous with a separate:

Accepted Answer

An inventory layer represents a distinct purchase of merchandise, so option B is the correct choice. The other options may affect inventory levels, but they do not create separate inventory layers.

Question 9

Which method of valuing inventory is based on the average of units?

Accepted Answer

The answer of Which method of valuing inventory is based...

Question 10

Goods such as milk, bread, and cheese would probably be costed using what method?

Accepted Answer

The answer of Goods such as milk, bread, and cheese...

Question 11

Manufacturers generally purchase large amounts of products from wholesalers and resell them to retailers.

Accepted Answer

Manufacturers typically produce products and sell them to wholesalers or directly to retailers, not the other way around. Wholesalers buy in bulk from manufacturers and then sell to retailers.

Question 12

The inventory system that uses the merchandise inventory account as an active account is called:

Accepted Answer

The answer of The inventory system that uses the merchandise...

Question 13

What does a manufacturer's goods available for sell represent?

Accepted Answer

The answer of What does a manufacturer's goods available for...

Question 14

The inventory system whereby the merchandise inventory account balance is merely a record of the most recent physical inventory count is called the:

Accepted Answer

The answer of The inventory system whereby the merchandise inventory...

Question 15

GAAP allows two different kinds of inventory costing methods.

Accepted Answer

GAAP (Generally Accepted Accounting Principles) allows for several inventory costing methods, including First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and the weighted average cost method, not just two.

Question 16

What is the method of valuing inventory that is based on the costs for each individual item?

Accepted Answer

The answer of What is the method of valuing inventory...

Question 17

An accounting department only needs to know:

Accepted Answer

The accounting department is primarily concerned with the overall financial transactions and performance of the company. Therefore, they only need to know how many units were sold, not the specific ones. This information allows them to calculate revenue, profit, and taxes accurately.

Question 18

Under the average cost method, the flow of goods through the accounting records will:

Accepted Answer

The average cost method of inventory valuation does not track or mirror the physical flow of goods through a business. Instead, it calculates the cost of inventory based on the average cost of all similar goods available during the period, making its relationship to the physical flow of goods indirect or non-existent.

Question 19

A new car lot would probably cost its inventory using what method?

Accepted Answer

The answer of A new car lot would probably cost...

Question 20

Under the specific-identification method, the flow of goods through the accounting records will:

Accepted Answer

The specific-identification method tracks the actual cost of specific items sold and those remaining in inventory, thus the flow of goods through the accounting records exactly matches the physical flow of goods through the business.

Quiz 6: Inventory