Accounting 117 Exam 2 with Questions and Answers
Merchandising Company ANSWER a company that resells tangible products previously bought from suppliers
Merchandising Inventory
manufacturing company ANSWER a company that uses labor, plant, and equipment to convert raw materials into new fin...
Accounting 117 Exam 2 with Questions and Answers
Merchandising Company ANSWER a company that resells tangible products previously bought from suppliers
Merchandising Inventory
manufacturing company ANSWER a company that uses labor, plant, and equipment to convert raw materials into new finished products
Raw Materials Work in Progress
Finished Goods
(All goods are current)
physical inventory ANSWER A detailed listing of merchandise on hand.
Is performed when the business is closed or business is slow
perpetual inventory system ANSWER 1. Check accuracy of inventory records
2. Determine amount of inventory lost due to wasted raw materials, shoplifting, or employee theft
periodic inventory system ANSWER 1. Determine the inventory on hand 2. Determine cost of goods sold for the period FOB shipping point ANSWER Ownership transfers when the item is bought
FOB destination ANSWER Ownership transfers when the item reaches its destination
consigned goods ANSWER goods held for sale by one party although ownership of the goods
is retained by another party
Ex: Car Dealership
specific identification method ANSWER Keeping track of each specific item in inventory and assigning cost individually
First-In, First-Out (FIFO) ANSWER Method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are the first sold.
Cost of Goods Sold = Amount of Goods Sold * Cost of the earliest goods purchased
Last-In, First-Out (LIFO) ANSWER Costs of the latest goods purchased are the first to be recognized in determining cost of goods sold
Cost of Goods Sold = Amount of Goods Sold * Cost of the most recent goods purchased
Average Cost Method ANSWER An inventory costing method that uses the weighted-
average unit cost to allocate the cost of goods available for sale to ending inventory and cost of goods sold.
Cost of Goods Sold = Average cost of goods * amount of Goods sold
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