Question 1

Match the terms with the descriptions provided.
a.Consignment
f.Purchase allowance
b.Discount period
g.Purchase discounts
c.Inventory
h.Purchase returns
d.LIFO Reserve
i.Purchases
e.Lower of cost or market rule
-A reduction in the amount of goods available for sale caused by defective merchandise.

Accepted Answer

Purchase returns involve sending back defective or unsatisfactory goods to the supplier, which directly reduces the amount of goods available for sale.

Question 2

Match the terms with the descriptions provided.
a.Consignment
f.Purchase allowance
b.Discount period
g.Purchase discounts
c.Inventory
h.Purchase returns
d.LIFO Reserve
i.Purchases
e.Lower of cost or market rule
-Under the perpetual inventory system, a reduction in the inventory account balance not caused by a sale or return.

Accepted Answer

The answer of Match the terms with the descriptions provided.
a.Consignment
f.Purchase...

Question 3

Match the terms with the descriptions provided.
a.Average days to sell inventory
d.Inventory turnover ratio
b.Gross margin
e.Freight-in
c.Gross profit ratio
f.Freight-out
-The difference between a company's net sales and its cost of goods sold.

Accepted Answer

Gross margin is the difference between a company's net sales and its cost of goods sold.

Question 4

Match the terms with the descriptions provided.
a.Consignment
f.Purchase allowance
b.Discount period
g.Purchase discounts
c.Inventory
h.Purchase returns
d.LIFO Reserve
i.Purchases
e.Lower of cost or market rule
-Represents a departure from reporting assets at their historical cost.

Accepted Answer

The Lower of cost or market rule represents a departure from reporting assets at their historical cost. It requires inventory to be reported at the lower of the cost to acquire or produce the inventory, and the market value of the inventory.

Other terms:
A) Consignment: A business arrangement where a supplier agrees to place their goods in a retail store owned by another party, with the understanding that the supplier will receive payment only when their goods are sold.
B) Discount period: The timeframe during which a buyer can receive a discount for early payment of an invoice.
C) Inventory: The goods a company holds for sale, raw materials used in producing goods, or items that will be used or consumed in the production of goods or services.
D) LIFO Reserve: A reserve account used to adjust the inventory value under the LIFO inventory valuation method.
F) Purchase allowance: A reduction in the purchase price offered by a supplier to a buyer, usually offered when there are defects or other issues with the goods being sold.
G) Purchase discounts: A reduction in the purchase price offered by a supplier to a buyer who pays the invoice within a certain period of time.
H) Purchase returns: When a buyer returns goods that were previously purchased from a supplier.
I) Purchases: The amount of money a company has spent on buying goods or services during a specific period of time.

Question 5

Match the terms with the descriptions provided.
a.Manufacturers
d.Wholesalers
b.Merchandisers
e.Service companies
c.Retailers
-Companies that sell to other retailers.

Accepted Answer

Wholesalers are companies that sell to other retailers.

Question 6

Match the terms with the descriptions provided.
a.Consignment
f.Purchase allowance
b.Discount period
g.Purchase discounts
c.Inventory
h.Purchase returns
d.LIFO Reserve
i.Purchases
e.Lower of cost or market rule
-The time span during which purchase discounts are available.

Accepted Answer

The discount period refers to the time frame during which purchase discounts are available.

Question 7

Match the terms with the descriptions provided.
a.Manufacturers
d.Wholesalers
b.Merchandisers
e.Service companies
c.Retailers
-General term for companies who sell goods to other companies as well as to the final consumer.

Accepted Answer

Merchandisers are businesses that purchase goods to sell them to other businesses or the final consumer, encompassing both wholesale and retail activities.

Question 8

Match the terms with the descriptions provided.
a.Manufacturers
d.Wholesalers
b.Merchandisers
e.Service companies
c.Retailers
-Companies such as Macy's and Target.

Accepted Answer

Retailers refer to companies that sell products directly to consumers. Macy's and Target are both examples of retailers.

Question 9

Match the terms with the descriptions provided.
a.Average days to sell inventory
d.Inventory turnover ratio
b.Gross margin
e.Freight-in
c.Gross profit ratio
f.Freight-out
-Generally speaking, the lower this measure the better.

Accepted Answer

The answer of Match the terms with the descriptions provided.
a.Average...

Question 10

Match the terms with the descriptions provided.
a.Consignment
f.Purchase allowance
b.Discount period
g.Purchase discounts
c.Inventory
h.Purchase returns
d.LIFO Reserve
i.Purchases
e.Lower of cost or market rule
-Merchandise held for sale in the normal course of business.

Accepted Answer

Inventory refers to merchandise held for sale in the normal course of business.

Answer: E
 The lower of cost or market rule requires inventory to be valued at the lower of its historical cost or its market value.

Answer: I
 Purchases refer to the cost of merchandise acquired by a business for resale to customers.

Answer: D
 LIFO reserve is a contra inventory account that exists when a company uses the LIFO (last-in, first-out) inventory costing method.

Answer: G
 Purchase discounts are discounts that a vendor may offer to a buyer as an incentive to pay an invoice early.

Answer: H
 Purchase returns occur when a buyer returns merchandise to a vendor for a refund.

Answer: F
 A purchase allowance is a reduction in the cost of a purchase that a vendor may offer to a buyer as an incentive to keep the merchandise instead of returning it.

Answer: A
 Consignment refers to merchandise that a business receives from a third party to sell, but does not yet own. The business receives a commission on the sale of the merchandise.

Question 11

Match the terms with the descriptions provided.
a.Consignment
f.Purchase allowance
b.Discount period
g.Purchase discounts
c.Inventory
h.Purchase returns
d.LIFO Reserve
i.Purchases
e.Lower of cost or market rule
-Arrangement whereby goods owned by one party are held and offered for sale by another party.

Accepted Answer

Consignment is the arrangement whereby goods owned by one party (consignor) are held and offered for sale by another party (consignee).

Answer: C) Inventory
 Inventory refers to the goods that a company has on hand and is available for sale.

Answer: D) LIFO Reserve
 LIFO Reserve is an accounting term that refers to the difference between the value of inventory calculated using the LIFO (last in, first out) method and the value of inventory calculated using another method.

Answer: E) Lower of cost or market rule
 Lower of cost or market rule is an accounting principle that requires companies to value their inventory at the lower of its cost or its current market value.

Answer: F) Purchase allowance
 Purchase allowance is a discount that a supplier offers to a customer in exchange for keeping faulty merchandise instead of returning it.

Answer: G) Purchase discounts
 Purchase discounts refer to discounts that a supplier offers to a customer for paying an invoice within a specified time period.

Answer: H) Purchase returns
 Purchase returns refer to goods that a customer returns to a supplier.

Answer: I) Purchases
 Purchases refer to the goods that a company has bought from a supplier and intends to sell to customers.

Note: B) Discount period is not a directly related term to the given descriptions.

Question 12

Match the terms with the descriptions provided.
a.Consignment
f.Purchase allowance
b.Discount period
g.Purchase discounts
c.Inventory
h.Purchase returns
d.LIFO Reserve
i.Purchases
e.Lower of cost or market rule
-The amount that the inventory would increase or decrease if the company had used FIFO instead of LIFO.

Accepted Answer

The LIFO Reserve represents the difference between the cost of inventory calculated using LIFO versus FIFO. Therefore, it represents the amount that the inventory would increase or decrease if the company had used FIFO instead of LIFO.

Question 13

Match the terms with the descriptions provided.
a.Average days to sell inventory
d.Inventory turnover ratio
b.Gross margin
e.Freight-in
c.Gross profit ratio
f.Freight-out
-For a given level of sales, the higher the cost of goods sold, the lower this measure.

Accepted Answer

The answer of Match the terms with the descriptions provided.
a.Average...

Question 14

Match the terms with the descriptions provided.
a.Consignment
f.Purchase allowance
b.Discount period
g.Purchase discounts
c.Inventory
h.Purchase returns
d.LIFO Reserve
i.Purchases
e.Lower of cost or market rule
-Reduce the amount that is owed to the seller for payment within the discount period.

Accepted Answer

Purchase discounts are a reduction in the amount owed to the seller for payment within a specified discount period.

Question 15

Match the terms with the descriptions provided.
a.Average days to sell inventory
d.Inventory turnover ratio
b.Gross margin
e.Freight-in
c.Gross profit ratio
f.Freight-out
-Term referring to transportation costs paid by the seller.

Accepted Answer

The answer of Match the terms with the descriptions provided.
a.Average...

Question 16

Match the terms with the descriptions provided.
a.Manufacturers
d.Wholesalers
b.Merchandisers
e.Service companies
c.Retailers
-Companies that maintain three separate inventory accounts.

Accepted Answer

Manufacturers maintain separate inventory accounts for raw materials, work in progress, and finished goods.

Question 17

Match the terms with the descriptions provided.
a.Average days to sell inventory
d.Inventory turnover ratio
b.Gross margin
e.Freight-in
c.Gross profit ratio
f.Freight-out
-Transportation costs paid by the buyer.

Accepted Answer

Freight-in refers to transportation costs paid by the buyer. The other terms relate to inventory turnover and profitability ratios.

Question 18

Match the terms with the descriptions provided.
a.Consignment
f.Purchase allowance
b.Discount period
g.Purchase discounts
c.Inventory
h.Purchase returns
d.LIFO Reserve
i.Purchases
e.Lower of cost or market rule
-In the periodic inventory system, the account used to record the cost of merchandise acquired for resale.

Accepted Answer

Purchases are the account used to record the cost of merchandise acquired for resale in the periodic inventory system.

Question 19

Match the terms with the descriptions provided.
a.Average days to sell inventory
d.Inventory turnover ratio
b.Gross margin
e.Freight-in
c.Gross profit ratio
f.Freight-out
-Measures how quickly merchandise is purchased and sold.

Accepted Answer

Inventory turnover ratio measures how quickly merchandise is purchased and sold. A measures the average number of days it takes to sell inventory, B and C measure profitability, and E and F are related to shipping costs.

Question 20

Match the terms with the descriptions provided.
a.Manufacturers
d.Wholesalers
b.Merchandisers
e.Service companies
c.Retailers
-Companies such as advertising agencies and auto repair shops.

Accepted Answer

Service companies provide services such as advertising and auto repair, whereas manufacturers produce goods, merchandisers sell products, retailers sell directly to consumers, and wholesalers sell to retailers.

Quiz 6: Cost of Goods Sold and Inventory

Match the terms with the descriptions provided. a.Consignment f.Purchase allowance b.Discount period g.Purchase discounts c.Inventory h.Purchase returns d.LIFO Reserve i.Purchases e.Lower of cost or market rule -A reduction in the amount of goods available for sale caused by defective merchandise.

Match the terms with the descriptions provided. a.Average days to sell inventory d.Inventory turnover ratio b.Gross margin e.Freight-in c.Gross profit ratio f.Freight-out -The difference between a company's net sales and its cost of goods sold.

Match the terms with the descriptions provided. a.Consignment f.Purchase allowance b.Discount period g.Purchase discounts c.Inventory h.Purchase returns d.LIFO Reserve i.Purchases e.Lower of cost or market rule -Represents a departure from reporting assets at their historical cost.

Match the terms with the descriptions provided. a.Manufacturers d.Wholesalers b.Merchandisers e.Service companies c.Retailers -Companies that sell to other retailers.

Match the terms with the descriptions provided. a.Consignment f.Purchase allowance b.Discount period g.Purchase discounts c.Inventory h.Purchase returns d.LIFO Reserve i.Purchases e.Lower of cost or market rule -The time span during which purchase discounts are available.

Match the terms with the descriptions provided. a.Manufacturers d.Wholesalers b.Merchandisers e.Service companies c.Retailers -General term for companies who sell goods to other companies as well as to the final consumer.

Match the terms with the descriptions provided. a.Manufacturers d.Wholesalers b.Merchandisers e.Service companies c.Retailers -Companies such as Macy's and Target.

Match the terms with the descriptions provided. a.Average days to sell inventory d.Inventory turnover ratio b.Gross margin e.Freight-in c.Gross profit ratio f.Freight-out -Generally speaking, the lower this measure the better.

Match the terms with the descriptions provided. a.Consignment f.Purchase allowance b.Discount period g.Purchase discounts c.Inventory h.Purchase returns d.LIFO Reserve i.Purchases e.Lower of cost or market rule -Merchandise held for sale in the normal course of business.

Match the terms with the descriptions provided. a.Average days to sell inventory d.Inventory turnover ratio b.Gross margin e.Freight-in c.Gross profit ratio f.Freight-out -For a given level of sales, the higher the cost of goods sold, the lower this measure.

Match the terms with the descriptions provided. a.Consignment f.Purchase allowance b.Discount period g.Purchase discounts c.Inventory h.Purchase returns d.LIFO Reserve i.Purchases e.Lower of cost or market rule -Reduce the amount that is owed to the seller for payment within the discount period.

Match the terms with the descriptions provided. a.Average days to sell inventory d.Inventory turnover ratio b.Gross margin e.Freight-in c.Gross profit ratio f.Freight-out -Term referring to transportation costs paid by the seller.

Match the terms with the descriptions provided. a.Manufacturers d.Wholesalers b.Merchandisers e.Service companies c.Retailers -Companies that maintain three separate inventory accounts.

Match the terms with the descriptions provided. a.Average days to sell inventory d.Inventory turnover ratio b.Gross margin e.Freight-in c.Gross profit ratio f.Freight-out -Transportation costs paid by the buyer.

Match the terms with the descriptions provided. a.Average days to sell inventory d.Inventory turnover ratio b.Gross margin e.Freight-in c.Gross profit ratio f.Freight-out -Measures how quickly merchandise is purchased and sold.

Match the terms with the descriptions provided. a.Manufacturers d.Wholesalers b.Merchandisers e.Service companies c.Retailers -Companies such as advertising agencies and auto repair shops.