The LIFO inventory method assumes that the cost of the latest units purchased are

The inventory turnover is calculated as cost of goods sold divided by ending inventory.

True

False

The LIFO inventory method assumes that the cost of the latest units purchased are

the first to be allocated to cost of goods sold.

the first to be allocated to ending inventory.

the last to be allocated to cost of goods sold.

not allocated to cost of goods sold or ending inventory.

In periods of falling prices, FIFO will result in a larger net income than the LIFO method.

True

False

If an account is collected after having been previously written off

both income statement and balance sheet accounts will be affected.

there will be both a debit and a credit to accounts receivable.

the allowance account should be debited.

only the control account needs to be credited.

The primary difference between a periodic and perpetual inventory system is that a periodic system

The primary difference between a periodic and perpetual inventory system is that a periodic system

provides better control over inventories.

records the cost of the sale on the date the sale is made.

keeps a record showing the inventory on hand at all time.

determines the inventory on hand only at the end of the accounting period.

Gross profit does not appear

on a merchandising company income statement.

to be relevant in analyzing the operation of a merchandising company.

on the income statement if the periodic inventory system is used because it cannot be calculated.

on a service company income statement.

Interest expense would be classified on a multiple-step income statement under the heading

Cost of goods sold.

Operating expenses.

Other expenses and losses.

Other revenues and gains.

Ending inventory plus cost of goods sold minus purchases results in beginning inventory: $20,000 + $560,000 -$540,000 = $40,000.

Inventory should include all goods owned by the company regardless of whether the company holds physical possession or not. Goods held on consignment are owned by others and should not be included.

Which of the following should not be included in the physical inventory of a company?

All of the answer choices are correct.

Goods shipped on consignment to another company

Goods held on consignment from another company

Goods in transit from another company shipped FOB shipping point

Last in, last-out is not one of the inventory costing methods.

Which of the following is not an acceptable inventory costing method?

Last-in, first-out

First-in, first-out

Last-in, last-out

Average cost

Ending inventory plus cost of goods sold minus purchases results in beginning inventory: $20,000 + $560,000 -$540,000 = $40,000.

Cost of goods purchased is $540,000, ending inventory is $20,000, and cost of goods sold is $560,000. How much is beginning inventory?

$20,000

$0

$40,000

$10,000