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Principles of Accounting, Volume 1: Financial Accounting

Questions

Principles of Accounting, Volume 1: Financial AccountingQuestions

Questions

1.

LO 10.1What is meant by the term gross margin?

2.

LO 10.1Can a business change from one inventory costing method to another any time they wish? Explain.

3.

LO 10.1Why do consignment arrangements present a challenge in inventory management? Explain.

4.

LO 10.1Explain the difference between the terms FOB destination and FOB shipping point.

5.

LO 10.1When would a company use the specific identification method of inventory cost allocation?

6.

LO 10.1Explain why a company might want to utilize the gross profit method or the retail inventory method for inventory valuation.

7.

LO 10.1Describe the goal of the lower-of-cost-or-market concept.

8.

LO 10.1Describe two separate and distinct ways to calculate goods available for sale.

9.

LO 10.3Describe costing inventory using first-in, first-out. Address the different treatment, if any, that must be given for periodic and perpetual inventory updating.

10.

LO 10.3Describe costing inventory using last-in, first-out. Address the different treatment, if any, that must be given for periodic and perpetual inventory updating.

11.

LO 10.3Describe costing inventory using weighted average. Address the different treatment, if any, that must be given for periodic and perpetual inventory updating.

12.

LO 10.4How long does it take an inventory error affecting ending inventory to correct itself in the financial statements? Explain.

13.

LO 10.4What type of issues would arise that might cause inventory errors?

14.

LO 10.5Explain the difference between the flow of cost and the flow of goods as it relates to inventory.

15.

LO 10.5What insights can be gained from inventory ratio analysis, such as inventory turnover ratio and number of days’ sales in inventory ratio?

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