Adv. Accounting - Ch. 6 Review

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An inventory record lists the number of units on hand, the unit price of the item, and the item's total cost.

If ending inventory is understated, merchandise inventory on the balance sheet will be overstated.

If the average number of days' sales in merchandise inventory is 40 days, the merchandise inventory turnover ratio (rounded to the nearest 0.1) is 9.1.

The gross profit method of estimating inventory assumes that a relationship exists between net sales and gross profit.

The 2 methods businesses may use to determine the # of goods in inventory are taking a physical count of the goods and keeping a continuous record for each inventory item.

A stock record is used in a periodic inventory to record the number of goods purchased, the number of goods sold, and the quantity in inventory.

At the end of each fiscal period, the cost of merchandise available for sale divided by the ending merchandise inventory equals net purchases for the fiscal period.

The unit of measurement concept states that the unit price should be used to record inventory cost when merchandise is purchased.