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Comparing inventory costing methods in times of rising prices, the last-in, first-out method will result in the lowest reported net income.
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If ending inventory is understated, merchandise inventory on the balance sheet will be overstated.
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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.
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A consignee agrees to care for goods and attempt to sell the goods, but does not count the goods in its inventory.
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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.
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The gross profit method of estimating inventory assumes that a relationship exists between net sales and gross profit.
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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.
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The unit of measurement concept states that the unit price should be used to record inventory cost when merchandise is purchased.
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