Inventory and Cost of Goods Sold Flashcards
6 cards from real CPB / BookKeeping practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Inventory and Cost of Goods Sold flashcards as text
Which inventory cost flow assumption produces the same result under both periodic and perpetual systems when prices are stable?
Answer: FIFO
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.
Freight-in costs on purchased inventory should be recorded as:
Answer: Part of the cost of inventory
Freight-in is a cost necessary to bring inventory to its usable location and is therefore capitalized as part of inventory cost.
A purchase return reduces which account under a perpetual inventory system?
Answer: Inventory
Under the perpetual system, inventory is debited on purchase and credited when goods are returned, directly reducing the inventory account.
Which ratio measures how many times a company sells and replaces its inventory during a period?
Answer: Inventory turnover ratio
Inventory turnover (COGS ÷ Average Inventory) shows how efficiently a company manages and sells its stock.
Goods shipped FOB shipping point are included in whose inventory while in transit?
Answer: The buyer's inventory
FOB shipping point means title and risk transfer to the buyer at the point of shipment, so the buyer owns the goods in transit.
Which inventory method is NOT permitted under U.S. GAAP for financial reporting purposes?
Answer: Base stock method
The base stock method is not an accepted inventory costing method under U.S. GAAP; acceptable methods include FIFO, LIFO, and weighted-average.