Question

In: Accounting

1. Goods in transit shipped a FOB destination should not be excluded from the buyer’s ending...

1. Goods in transit shipped

a FOB destination should not be excluded from the buyer’s ending inventory.

b FOB shipping point should be included in the buyer’s ending inventory.

c FOB destination should not be included in the seller’s ending inventory.

d FOB shipping point should not be included in the buyer’s ending inventory.

2.Cost of goods available for sale is:

a.beginning inventory + cost of goods sold.

b cost of goods sold + purchases.

c ending inventory + cost of goods sold.

d purchases + ending inventory.

3.What is the impact on cost of goods sold, gross profit, net income before taxes and retained earnings, respectively, if inventory is understated?

a. overstated; understated; overstated; overstated.

b. understated; overstated; overstated; overstated.

c. overstated; understated; understated; understated.

d. understated; overstated; understated; overstated.

4.The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

a valued at their selling price.

b not over-valued.

c not under-valued.

d valued at their current cost.

Expert Solution

1

Goods in transit shipped FOB shipping point should be included in the buyer’s ending inventory.

Under FOB Shipping Point, ownership is passed to the buyer as soon as goods are shipped by seller.

FOB destination should be included in the seller’s ending inventory.

Option B is correct

2

Cost of goods available for sale is ending inventory + cost of goods sold.

Alternatively, Cost of goods available for sale is beginning inventory + purchases

Option C is correct

3

If inventory is understated, cost of goods sold is overstated.

As a result, gross profit, net income before taxes and retained earnings are understated

overstated; understated; understated; understated.

Option C is correct

4

Lower of cost and net realizable value basis ensured that inventories are not over-valued.

This is in line with Principle of Conservatism, which requires a business to not overstate it's income and to account for all probable losses in current period.

Option B is correct

ekkarill92 answered 2 years ago

1.Goods in transit shipped FOB shipping point should be included in the buyer’s ending inventory. FOB...

1.Goods in transit shipped FOB shipping point should be included in the buyer’s ending inventory. FOB shipping point should not be included in the buyer’s ending inventory. FOB destination should not be excluded from the buyer’s ending inventory. FOB destination should not be included in the seller’s ending inventory. 2.An error that understates the ending inventory will cause the cost of goods sold for the period to be understated. in the ending inventory of the current period will have no...

1. Goods in transit which are shipped f.o.b. destination should be A. included in the inventory...

1. Goods in transit which are shipped f.o.b. destination should be A. included in the inventory of the seller. B. included in the inventory of the buyer. C. included in the inventory of the shipping company. D. none of these answers are correct. 2. What is the primary difference between an ordinary annuity and an annuity due? A. Annuity due only relates to present values. B. The timing of the periodic payment. C. Ordinary annuity only relates to present values....

true or false- 1. Goods purchased, shipped FOB shipping point, and in transit should be included...

true or false- 1. Goods purchased, shipped FOB shipping point, and in transit should be included in the purchasers year end inventory. 2. In a period of changing prices, the consistency principle prohibits a company from changing to a more favorable inventory cost method. Explain reason in detail.

1. Compare FOB shipping point and FOB destination terms 2. What are the differences between perpetual...

1. Compare FOB shipping point and FOB destination terms 2. What are the differences between perpetual inventory system and periodic inventory system? (type it in a table to be more clear if you don't mind) Please make sure that the answer is correct and clear

1) What is FOB shipping Point and FOB Destination Point? 2) Where does Office Supply Expense...

1) What is FOB shipping Point and FOB Destination Point? 2) Where does Office Supply Expense go on the Income Statement? 3) Using the Gross Method, how do Discounts Lost and Discounts Taken effect the Purchases Account? 4) In a period of rising prices, which inventory method results in the highest ending inventory: Weighted Average, Moving Average, LIFO, FIFO? 5) Calculate Gross Profit when you are given Sales and the Cost of Goods Sold? 6) Which inventory system provides a...

A seller contracted to sell lumber to the buyer. The contract was a destination contract and the goods were to be shipped by common carrier.

A seller contracted to sell lumber to the buyer. The contract was a destination contract and the goods were to be shipped by common carrier. The lumber was destroyed by fire before it was delivered to the buyer. Which of the following statements best describes this situation? The risk of loss has not yet passed to the buyer and remains on the seller until the goods are delivered. The risk of loss passed to the buyer when the contract was made. The risk...

Aug. 1 Purchased merchandise on account from Arotek Company for $7,500, FOB destination. 5 Sold merchandise...

Aug. 1 Purchased merchandise on account from Arotek Company for $7,500, FOB destination. 5 Sold merchandise on account to Laird Corp. for $5,200. The merchandise had cost $4,000. 8 Purchased merchandise on account from Waters Corporation for $5,400, FOB shipping point. The invoice showed that at Sheng’s request, Waters paid the $140 shipping charges and added that amount to the bill. 10 Laird returned merchandise from the August 5 sale that had cost Sheng $400 and been sold for $600....

A company does not include in ending inventory any goods that have been shipped to consignees...

A company does not include in ending inventory any goods that have been shipped to consignees to be sold on consignment. The company has a policy of removing those goods from the inventory records at the time of shipment. Which of the following is an accurate statement regarding the company’s policy? Multiple Choice The policy is correct if management believes it is probable the inventory will be sold within the next year. The policy is correct if the current selling...

Problem 5-1A June 1 Purchased books on account for $1,300 from Kline Publishers, FOB destination, terms...

Problem 5-1A June 1 Purchased books on account for $1,300 from Kline Publishers, FOB destination, terms 2/10, n/30. The appropriate party also made a cash payment of $40 for the freight on this date. 3 Sold books on account to Reading Rainbow for $2,400. The cost of the books sold was $680. 6 Received $150 credit for books returned to Kline Publishers. 9 Paid Kline Publishers in full, less discount. 15 Received payment in full from Reading Rainbow. 17 Sold...

Determining Merchandise to be Included or Excluded from Ending Inventory The unadjusted inventory balance of Sara...

Determining Merchandise to be Included or Excluded from Ending Inventory The unadjusted inventory balance of Sara Ann Corp. is $500,000 on December 31, 2020, based on a physical inventory count. The following items must be considered before the inventory valuation is finalized. a. On December 31, the physical inventory excluded $500 of merchandise inventory shipped to Sara Ann Corp. from a vendor f.o.b. destination that arrived on January 1, 2021. b. On December 31, the physical inventory included $18,000 of...