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RNOWLEDGE CHECK$-$UP

The following items should be included in merchandise inventory:

a$.$ Goods in transit with sales terms FOB destination

b$.$ Additional costs necessary to put inventory in a place and condition for sale

c$.$ Goods held by a consignee

d$.$ All of the above.

Under both a perpetual and a periodic inventory system goods must be counted at the end of the accounting period for the following reason:

a$.$ Items that are damaged or obsolete can be identified through the count

b$.$ Merchandise inventory can be adjusted to reflect the actual inventory on hand at the end of the accounting period

c$.$ Lost or stolen items can be removed from the balance of inventory

d$.$ All of the above.

Costing methods are an important accounting policy choice for the following reasons:

a$.$ Once selected, companies must restate financial statements if they decide to change their accounting policy.

b$.$ The costing method used in a period of changing unit costs will impact ending inventory balances and cost of goods sold.

c$.$ In a period of rising prices, FIFO has a higher per unit cost held in ending inventory.

d$.$ All of the above.

Under the first$-$in$,$ first$-$out inventory costing method:

a$.$ Inventory items are assumed to be sold in the order they are acquired.

b$.$ Inventory items are assumed to be purchased in the order they are acquired.

c$.$ Items in ending inventory do not reflect the most recent purchases.

d$.$ Average cost per unit is calculated after each sale of goods.

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