CPB / BookKeeping Inventory and Cost of Goods Sold 2

Question 1

Which inventory cost flow assumption produces the same result under both periodic and perpetual systems when prices are stable?

Accepted Answer

FIFO

Answer

FIFO produces the same COGS and ending inventory values under both periodic and perpetual systems because the same oldest units are always sold first regardless of timing.

Question 2

Freight-in costs on purchased inventory should be recorded as:

Accepted Answer

Part of the cost of inventory

Answer

Freight-in is a cost necessary to bring inventory to its usable location and is therefore capitalized as part of inventory cost.

Question 3

A purchase return reduces which account under a perpetual inventory system?

Accepted Answer

Inventory

Answer

Under the perpetual system, inventory is debited on purchase and credited when goods are returned, directly reducing the inventory account.

Question 4

Which ratio measures how many times a company sells and replaces its inventory during a period?

Accepted Answer

Inventory turnover ratio

Answer

Inventory turnover (COGS ÷ Average Inventory) shows how efficiently a company manages and sells its stock.

Question 5

Goods shipped FOB shipping point are included in whose inventory while in transit?

Accepted Answer

The buyer's inventory

Answer

FOB shipping point means title and risk transfer to the buyer at the point of shipment, so the buyer owns the goods in transit.

CPB / BookKeeping Practice Test

CPB / BookKeeping Practice Test

CPB / BookKeeping Inventory and Cost of Goods Sold 2