Adv. Accounting - Ch. 6 Review

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

Comparing inventory costing methods in times of rising prices, the last-in, first-out method will result in the lowest reported net income.

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

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.

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.

A consignee agrees to care for goods and attempt to sell the goods, but does not count the goods in its inventory.

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

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.