Term
| What items are included in inventory? |
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Definition
| Inventory refers to the assets a company (1) intends to sell in the normal course of business, and (2) has in producting for future sale (work in process), or (3) uses currently in the production of goods to be sold (raw materials) |
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Term
| How do the perpetual and periodic inventory systems differ? |
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Definition
| The perpetual inventory system continuously tracks and records both changes in inventory quantity and inventory cost. The periodic inventory system adjusts inventory and records cost of goods sold only at the end of each period. |
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Term
| For merchandise shipped f.o.b. destination, when are the goods included in the purchaser's inventory? |
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Definition
| Merchandise shipped f.o.b. destination ((seller is responsible for the shipping costs)) is included in the purchaser's inventory only after it reaches the purchaser's location. |
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Term
| How is weighted-average unit cost determined in a periodic system? |
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Definition
| In a periodic system, the weighted-average unit cost is determined by dividing the cost of goods available for sale by the quantity available for sale. |
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Term
| What cost flow assumption is made when employing the first-in, first out inventory method? |
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Definition
| The FIFO method assumes that items sold are those that were acquired first. Therefore, ending inventory applying FIFO consists of the most recently acquired items. |
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Term
| What cost flow assumption is made when employing the last-in, first out inventory method? |
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Definition
| The LIFO method assumes that items sold are those that were most recently received. Therefore, ending inventory applying LIFO consits of the items received first. |
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Term
| If inventory quantity is stable and the unit costs paid for inventory are rising, which method, FIFO or LIFO, will result in lower ending inventory balence? |
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Definition
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Term
| What is the Cost of goods sold equation? |
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Definition
| Beginning inventory + Net purchases – Ending inventory = Cost of goods sold |
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Term
| How is the gross profit ratio computed? |
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Definition
| The gross profit ratio is computed by dividing gross profit (sales - cost of goods sold) by net sales. |
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Term
| How is the gross profit ratio computed? |
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Definition
| The gross profit ratio is computed by dividing gross profit (sales - cost of goods sold) by net sales. |
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Term
| How is the inventory turnover ratio computed? |
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Definition
| The inventory turnover ratio is computed by dividing cost of goods sold by average inventory. |
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Term
| By the gross method of accounting for purchase discounts, a discount is not taken is recorded as... |
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Definition
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