Adv. Accounting Ch. 6 Review

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If ending inventory is overstated, the cost of merchandise sold will be understated

To prepare monthly interim financial statements, a business should take the inventory monthly

The consignor is the owner of the goods on consignment and is responsible for selling the goods

If ending inventory is overstated, net income will be overstated

The cost of items in inventory involves both the price paid to vendors for the merchandise and the costs involved in getting the goods to the place of business and ready for sale

A low merchandise inventory turnover ratio usually indicates a high return on investment

To use the retail method of estamating inventory, the cost of purchase, sales and beginning merchandise inventory must be known. The retail price of items sold must also be known.

Most businesses have a merchandise inventory turnover ratio close to 12, since they offer terms on n/30 to their customers