Reporting

File: ch06, Chapter 6: Reporting and Analyzing Inventory

Multiple Choice

1. When is a physical inventory usually taken?

a) When the company has its greatest amount of inventory.

b) When goods are not being sold or received.

c) At the end of the company’s fiscal year.

d) Both b) and c).

Ans: d

Response A: A physical inventory count is usually taken at the end of the company’s fiscal year, not when the company has the greatest amount of inventory (Determining Inventory Quantities).

Response B: When a physical inventory count is taken, the company usually shuts down operations for a short time. During this time, goods are usually neither sold nor received. However, d is a better answer (Determining Inventory Quantities).

Response C: A physical inventory count is usually taken at the end of the company’s fiscal year, but d is a better answer (Determining Inventory Quantities).

Response D: Correct!

2. Which of the following should not be included in the physical inventory of a company?

a) Goods held on consignment from another company.

b) Goods shipped on consignment to another company.

c) Goods in transit from another company shipped FOB shipping point.

d) All of the above should be included.

Ans: a

Response A: Correct!

Response B: Goods shipped on consignment to another company should be included in the physical inventory of the firm that shipped the consigned goods (Consigned Goods).

Response C: Goods in transit from another company shipped FOB shipping point should be included in the physical inventory of the firm to whom the goods are being shipped because the title passes when the goods leave the seller’s place of business (Illustration 6-1).

Response D: Because answer a is correct, this answer cannot be correct.

3. Kam Company has the following units and costs:

Units Unit Cost

Inventory, Jan. 1 8,000 $11

Purchase, June 19 13,000 12

Purchase, Nov. 8 5,000 13

If 9,000 units are on hand...