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Universities » University of Miami (Miami) » ACC - Accounting (ACC) » 211 - Prin Financial Acc » Flash Cards

EXAM 2 - Flashcards

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Class:ACC 211 - Prin Financial Acc
Subject:Accounting (ACC)
University:University of Miami
Term:Fall 2009
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If average total assets increase, but net income, net sales, and average stockholders' equity remain the same, what is the impac Remains the Same (C)
If a company plans to differentiate its products by offering low prices and discounts for item packaged in bulk (like a discount Asset Turnover (B)
If the company reported the following items on its income statement (COGS $5,000, Income Tax Expense $2,000, interest Expense $5 D) 5500
Which of the following is not one of the possible nonrecurring items that must be show in a separate line item below the Income A) Gains and Losses from the sale of fixed assets
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Which of the following reports is filled annually with the SEC B) Form 10-K
Common-size income statements are used for which of the following. A) Comparing the performance of different companies in the sa C) Both A & B
Which of the following is not a normal function of a financial analyst A) issue earnings forecasts. B)Examine the records underl B) Examine the records underlying the financial statements to certify their conformance with GAAP
The classified balance sheet format allows one to ascertain quickly which of the following? A) The most valuable asset of the co C) what liabilities must be paid within the upcoming year
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When companies Issue par value stock for cash, which accounts are normally affected? D) Common Stock, Additional Paid-In Capital, Cash
Net income was $900,000. Beginning and Ending Stockholder's Equity was $8,000,000 and $9,600,000 respectively. What was the retu B) 10.23%
Sales Discounts with terms 2/10, n/30 means: B) 2% discount for payment within 10 days or the full amount within 30
Gross Sales total $250,000, one-half of which were credit sales. Sales returns and allowances of $15,000 apply to the credit sal B) $229,800
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A company has been successful in reducing the costs of its manufacturing process by relocating the factory to another locale. Wh B) The ratio will increase
When a company using the allowance method writes off a specific customer's $100,000 account receivable from the accounting syste D) 1, 2, 3
You have determined that Company X estimates bad debt expense with an aging of accounts receivable schedule. Company X's estimat C) 210
Upon review of the most recent bank statement you discover that you recently received an "insufficient funds check" from a custo C) Balance per books - decrease Balance per Bank - No Change
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Which of the following is not a step towards effective internal control over cash? A) require signatures from a manager and one D) All
When using the allowance method, as bad debt expense is recorded, a) total assets remain the same and stockholders' equity remai B) Total assets derease and stockholders' equity decreases
Which of the following best describes the proper presentation of accounts receivable in the financial statements? A) gross amoun D) gross accounts receivable less the allowance for doubtful accounts in the asset section of the balance sheet
Which of the following is not a component of net sales? A) sales returns and allowances B) Sales Discounts C) Cost of Goods Sold C) Cost of Goods Sold
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Consider the following info: EI $24,000; Sales $250,000; BI $20,000; selling and administrative expenses $70,000; and purchases A) $86,000
The inventory costing method selected by a company will affect, 1) Balance Sheet 2) income statement 3) Statement of Retained Ea D) All
Which of the following is not a componet of the cost of inventory? A) Administrative overhead B)Direct Labor C) Raw Materials D) A) Administrative Overhead
Consider the following info: BI 20 Units @ $20/ Unit; First Purchase 35 Units @$22/ Unit; Second Purchase 40 Units @$24/ unit; 5 B) 1060
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Consider the following information: BI 20 Units @ $20/ Unit; First Purchase 35 Units @$22/ Unit; Second Purchase 40 Units @$24/ C) 1180
An increasing inventory turnover ratio 1) indicates a longer time span between the ordering and receiving of inventory 2) indica c) indicates a shorter time span between the purchase and sale of inventory
if the ending balance in accounts payable decreases from one period to the next, which of the following is true 1) cash payments A) cash payments to suppliers exceeded current period purchases
Which of the following regarding the lower of cost or market rule for inventory are true? 1) the lower of cost or market rule is C) 2 & 3
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Which inventory method provides a better matching of current costs with sales revenue on the income statement and outdated value C) LIFO
Which of the following is false regarding a perpetual inventory system? 1) physical counts are not needed since records are main D) the account "Purchases" is not used as inventory is acquired.
Information that is accurate, unbiased, and verifiable is called 1) Relevant 2) Reliable 3) Consistent 4) comparable B) Reliable information
Which of the following reports filed with the SEC is an annual report that includes a description of the company's products, pro A) Form 10-K
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A) Inventory - current asset B)Intangible assets - non current asset C) accrued expenses Current D) Bonds - long-term liabilitie D) Line C
which of the following is not one of the tree items classified as "accumulated other comprehensive income" on the income stateme C) Gains and losses on the sale of productive or (long-term) assets
A corporation issued for cash 100,000 shares of its $0.01 par value common stock for $450,000 which of the following is the corr B) Cash, Debit $450,000; common stock credit $1000 Paid-in Capital, Credit $405,000
Which of the following are reported on the income statement as "nonrecurring items?" A) extraordinary items B)discontinued opera D) all of the above
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Which of the following is NOT an operating expense C) Interest Expense
Net income was $450,000 Beginning and ending stockholder's equity was $4,000,000 and $4,800,000 respectively, what was the retur B) 10.23%
Net profit margin is 0.10. Asset turnover is 0.125. Financial leverage is 1.6. Compute the ROE C) 2.0 %
An increase in average total assets, with all else remaining unchanged, will... D) increase financial leverage
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Credit card discounts are reported on the income statement as A) contra revenue
You received an invoice that shows credit terms of 2/10 n/60 what does the term 10 in the credit terms refer to? C) the number of days in the discount period
a customer used a credit card to pay for $400 of services. The credit card company charged 2.5% for its services. How much did t C) $390.00
A customer, who is given credit terms of 2/10, n/60 purchased goods with a retail price of $600. The amount charged to the custo B) 600.00
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The unadjusted credit balance of the Allowance for Doubtful Accounts is $650. Uncollectible accounts are estimated to be $15,600 D) 15,600
The unadjusted debit balance of the allowance for doubtful accounts is $350. Uncollectible accounts are estimated to be $15,800 C) $16,150
When using the indirect method of preparing the "cash flows of operating activities" section of a statement of cash flows, a net B) Be deducted from net income
The following procedure are followed by a company cashier: count money in the cash drawer, compare the cash count with recorded B) are unacceptable, since they do not follow good internal control practicies
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The proper treatment on the bank reconciliation of outstanding checks is to D) Deduct them from the bank balance of cash
the proper treatment on the bank reconciliation of NSH checks returned with the statement is to C) Deduct them from the book balance of cash
Goods in the process of being manufactured, buy not yet completed, are called A) Work in Process Inventory
Consider the following Sales $80,000; BI $10,000 Purchases $45,000; COGS $50,000. Determine the value of the ending merchandise C) $5,000
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Consider the Following: BI: 10U @$10; First Purchase 35 U @$11; Second Purchase 40U @$12; Third purchase 20U @ $13. 83 U were so C) 284
Consider the Following: BI: 10U @$10; First Purchase 35 U @$11; Second Purchase 40U @$12; Third purchase 20U @ $13. 105 were ava A) 993
Which of the following is true during periods of rising prices 1) the use of FIFO will result in smaller net in come than LIFO 2 D) the use of FIFO will result in a higher net income and higher ending inventory than LIFO
Consider: Item A: Units 2000, Cost $5 Market 5.50 Item B: 3,000 Units Cost $4.50 Market $3.00 Use lower of cost or market and d C) $4,500
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Consider the following: BI, $120,000; sales $400,00; COGS $280,000; Operating Expenses $60,000; EI $100,000 Calculate the invent A) 2.55
Inventory at the end of the current period was understated because one bin of inventory not counted or included in the ending in B) net income for the following period will be overstated
A) BI overstated, COGS understated, Net income overstated B) BI understated COGS understated, Net income overstated C) BI overst Line B
the amount of purchases of merchandise inventory during the period is A) only accumulated in a separate account under the period A) only accumulated in a separate account under the periodic inventory system
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The Board of Directors elected by the stockholder's to represent their interests, is responsible for maintaining the integrity of the company's financial reports
Unqualified (clean) audit option is an auditor's statement that the financial statements are a fair presentation in all material respects in conformity with GAAP
Earnings Forecasts are predictions of earning for future accounting periods
Institution Investors managers of pension, mutual, endowment, and other funds that invest on the behalf of others
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Private Investors individuals who purchase shares in companies
Lenders (creditors) suppliers and financial institutions that lend money to companies
The Cost-Benefit constraint suggests that the benefits of accounting for and reporting information should outweigh the costs
Relevant Information can incluence a decision; it is timely and has predictive and/or feedback value
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Reliable Information accurate, unbiased, and verfiable
Consistent Information can be compared over time because similar accounting methods have been applied
Comparable Information allows comparisons across businesses because similar accounting methods have been applied
Material Amounts amounts that are large enough to influence a user's decision
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Conservatism suggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses
Press Release a written public new announcement normally distributed to major news services
Form 10-K the annual report that publicly traded companies must file with the SEC
Form 10-Q the quarterly report that publicly traded companies must file with the SEC
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Form 8-K used by publicly traded companies to disclose any material event not perviously reported that is important to investors (e.g. auditor changes, mergers)
Par Value a legal amount per share established by the board of directors; it established the minimum amount a stockholders must contribute and has no relationship to the market price of the stock
Additional Paid-In Capital Paid-In Capital, Contributed Capital in Excess of Par is the amount of contributed capital less the par value of the stock
Gross Profit (Gross Margin) is net sales less cost of good sales
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Income from Operations (operating income) equals net sales less cost of goods sold and other operating expenses
Income before income taxes (pretax earnings) is revenues minus all expenses except income tax expense
Earnings Per Share Net Income / Average number of shares of common stock outstanding during the period
Discontinued Operations results from the disposal of a major component of the business and are reported net of income tax effects
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Extraordinary Items gains and losses that are both unusual in nature and infrequent in occurance; they are reported net of tax on the income statement
Credit Card Discount the fee charged by the credit card company for services
Sales Discount (cash discount) is a cash discount offered to encourage prompt payment of an account receivable
Sales Returns and Allowances a reduction of sales revenues for return of or allowances for unsatisfactory goods
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Accounts Receivable (trade receibavles, receivables) open accounts owed to the business by trade customers
Notes Receivable are written promises that require another party ot pay the business under specified conditions (amount, time, interest)
Allowance Method bases bad debt expernse on an estimate of uncollectible accounts
Bad Debt Expense (doubtful accounts expense, uncollectible accounts expense, provision for uncollectible accounts) the expense associated with estimated uncollectible accounts receivable
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Allowance for Doubtful Accounts (allowance for bad debts, allowance for uncollectible accounts) a contra-asset account containing the estimated uncollectable accounts receivables
Percentage of Credit Sales Method bases bad debt expense on the historical percentage of credit sales that result in bad debts
Aging of accounts receivables method estimates uncollectible accounts based on the age of each account receivable
Cash money or any instrument that banks will accept for deposit and immediate credit to a company's account, such as a check, money order, or bank draft
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Cash Equivalents short-term investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change
Internal Controls processes by which a company safeguards its assets and provides reasonable assurance regarding the reliability of the company's financial reporting, the effectiveness and efficiency of its operations, and its compliance with applicable laws and regulations.
Bank Statement is a monthly report from a bank that shows deposits recorded, checks cleared, other debits and credits and a running bank balance
Bank Reconsiliation the process of verifying the accuracy of both the bank statement and the cash accounts of a business
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Inventory tangible property held for sale in the normal course of business or used in producing goods or services for sale
Merchandise Inventory includes goods held for resale in the ordinary course of business
Raw Materials Inventory includes items acquired for the purpose of processing into finished goods
Work In Process Inventory includes goods in the process of being manufactured
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Finished Goods Inventory includes goods that are complete and ready for sale
Direct Labor refers to the earning of employees who work directly on the products being manufactured
Factory Overhead manufacturing costs that are not raw material or direct labor costs
Goods Available for Sale refers to the sum of beginning inventory and purchases (or transfers to finished goods) for the period
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Cost of Goods Sold Equation BI + P - EI = COGS
Specific Identification identifies the cost of the specific itme that was sold
FIFO (first in first out) assumes that the first goods purchased (the first in) are the first goods sold
LIFO (last in first out) assumes that the most recently purchased units (the last in) are first sold
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Average Cost Method used the weighted average unit costs fo the goods available for sale for both cost of goods sold and ending inventory
Lower of Cost or Market (LC) a valuation method departing from the cost principle; it serves to recognize a loss when replacement cost or net realizable value drops below cost
Replacement Cost the current purchase price for identical goods
Net Realizable Value the expected sales price less selling costs (e.g. repair and disposal costs)
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LIFO reserve a contra-asset for the excess of FIFO over LIFO inventory
Perpetual Inventory System a detailed inventory record is maintained, recording each purchase and sale during the accounting period
Periodic Inventory System ending inventory and cost of goods sold are determined at the end of the accounting period based on a physical count
LIFO liquidation a sale of a lower-cost inventory item from beginning LIFO inventory
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Purchase Returns and Allowances a reduction in the cost of purchases associated with unsatisfactory goods
Purchase Discount a cash discount received for prompt payment of an account
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 If average total assets increase, but net income, net sales, and average stockholders' equity remain the same, what is the impacRemains the Same (C)
 If a company plans to differentiate its products by offering low prices and discounts for item packaged in bulk (like a discountAsset Turnover (B)
 If the company reported the following items on its income statement (COGS $5,000, Income Tax Expense $2,000, interest Expense $5D) 5500
 Which of the following is not one of the possible nonrecurring items that must be show in a separate line item below the Income A) Gains and Losses from the sale of fixed assets
 Which of the following reports is filled annually with the SECB) Form 10-K
 Common-size income statements are used for which of the following. A) Comparing the performance of different companies in the saC) Both A & B
 Which of the following is not a normal function of a financial analyst A) issue earnings forecasts. B)Examine the records underlB) Examine the records underlying the financial statements to certify their conformance with GAAP
 The classified balance sheet format allows one to ascertain quickly which of the following? A) The most valuable asset of the coC) what liabilities must be paid within the upcoming year
 When companies Issue par value stock for cash, which accounts are normally affected?D) Common Stock, Additional Paid-In Capital, Cash
 Net income was $900,000. Beginning and Ending Stockholder's Equity was $8,000,000 and $9,600,000 respectively. What was the retuB) 10.23%
 Sales Discounts with terms 2/10, n/30 means:B) 2% discount for payment within 10 days or the full amount within 30
 Gross Sales total $250,000, one-half of which were credit sales. Sales returns and allowances of $15,000 apply to the credit salB) $229,800
 A company has been successful in reducing the costs of its manufacturing process by relocating the factory to another locale. WhB) The ratio will increase
 When a company using the allowance method writes off a specific customer's $100,000 account receivable from the accounting systeD) 1, 2, 3
 You have determined that Company X estimates bad debt expense with an aging of accounts receivable schedule. Company X's estimatC) 210
 Upon review of the most recent bank statement you discover that you recently received an "insufficient funds check" from a custoC) Balance per books - decrease Balance per Bank - No Change
 Which of the following is not a step towards effective internal control over cash? A) require signatures from a manager and one D) All
 When using the allowance method, as bad debt expense is recorded, a) total assets remain the same and stockholders' equity remaiB) Total assets derease and stockholders' equity decreases
 Which of the following best describes the proper presentation of accounts receivable in the financial statements? A) gross amounD) gross accounts receivable less the allowance for doubtful accounts in the asset section of the balance sheet
 Which of the following is not a component of net sales? A) sales returns and allowances B) Sales Discounts C) Cost of Goods SoldC) Cost of Goods Sold
 Consider the following info: EI $24,000; Sales $250,000; BI $20,000; selling and administrative expenses $70,000; and purchases A) $86,000
 The inventory costing method selected by a company will affect, 1) Balance Sheet 2) income statement 3) Statement of Retained EaD) All
 Which of the following is not a componet of the cost of inventory? A) Administrative overhead B)Direct Labor C) Raw Materials D)A) Administrative Overhead
 Consider the following info: BI 20 Units @ $20/ Unit; First Purchase 35 Units @$22/ Unit; Second Purchase 40 Units @$24/ unit; 5B) 1060
 Consider the following information: BI 20 Units @ $20/ Unit; First Purchase 35 Units @$22/ Unit; Second Purchase 40 Units @$24/ C) 1180
 An increasing inventory turnover ratio 1) indicates a longer time span between the ordering and receiving of inventory 2) indicac) indicates a shorter time span between the purchase and sale of inventory
 if the ending balance in accounts payable decreases from one period to the next, which of the following is true 1) cash paymentsA) cash payments to suppliers exceeded current period purchases
 Which of the following regarding the lower of cost or market rule for inventory are true? 1) the lower of cost or market rule isC) 2 & 3
 Which inventory method provides a better matching of current costs with sales revenue on the income statement and outdated valueC) LIFO
 Which of the following is false regarding a perpetual inventory system? 1) physical counts are not needed since records are mainD) the account "Purchases" is not used as inventory is acquired.
 Information that is accurate, unbiased, and verifiable is called 1) Relevant 2) Reliable 3) Consistent 4) comparableB) Reliable information
 Which of the following reports filed with the SEC is an annual report that includes a description of the company's products, proA) Form 10-K
 A) Inventory - current asset B)Intangible assets - non current asset C) accrued expenses Current D) Bonds - long-term liabilitieD) Line C
 which of the following is not one of the tree items classified as "accumulated other comprehensive income" on the income statemeC) Gains and losses on the sale of productive or (long-term) assets
 A corporation issued for cash 100,000 shares of its $0.01 par value common stock for $450,000 which of the following is the corrB) Cash, Debit $450,000; common stock credit $1000 Paid-in Capital, Credit $405,000
 Which of the following are reported on the income statement as "nonrecurring items?" A) extraordinary items B)discontinued operaD) all of the above
 Which of the following is NOT an operating expenseC) Interest Expense
 Net income was $450,000 Beginning and ending stockholder's equity was $4,000,000 and $4,800,000 respectively, what was the returB) 10.23%
 Net profit margin is 0.10. Asset turnover is 0.125. Financial leverage is 1.6. Compute the ROEC) 2.0 %
 An increase in average total assets, with all else remaining unchanged, will...D) increase financial leverage
 Credit card discounts are reported on the income statement asA) contra revenue
 You received an invoice that shows credit terms of 2/10 n/60 what does the term 10 in the credit terms refer to?C) the number of days in the discount period
 a customer used a credit card to pay for $400 of services. The credit card company charged 2.5% for its services. How much did tC) $390.00
 A customer, who is given credit terms of 2/10, n/60 purchased goods with a retail price of $600. The amount charged to the custoB) 600.00
 The unadjusted credit balance of the Allowance for Doubtful Accounts is $650. Uncollectible accounts are estimated to be $15,600D) 15,600
 The unadjusted debit balance of the allowance for doubtful accounts is $350. Uncollectible accounts are estimated to be $15,800 C) $16,150
 When using the indirect method of preparing the "cash flows of operating activities" section of a statement of cash flows, a netB) Be deducted from net income
 The following procedure are followed by a company cashier: count money in the cash drawer, compare the cash count with recorded B) are unacceptable, since they do not follow good internal control practicies
 The proper treatment on the bank reconciliation of outstanding checks is toD) Deduct them from the bank balance of cash
 the proper treatment on the bank reconciliation of NSH checks returned with the statement is toC) Deduct them from the book balance of cash
 Goods in the process of being manufactured, buy not yet completed, are calledA) Work in Process Inventory
 Consider the following Sales $80,000; BI $10,000 Purchases $45,000; COGS $50,000. Determine the value of the ending merchandise C) $5,000
 Consider the Following: BI: 10U @$10; First Purchase 35 U @$11; Second Purchase 40U @$12; Third purchase 20U @ $13. 83 U were soC) 284
 Consider the Following: BI: 10U @$10; First Purchase 35 U @$11; Second Purchase 40U @$12; Third purchase 20U @ $13. 105 were avaA) 993
 Which of the following is true during periods of rising prices 1) the use of FIFO will result in smaller net in come than LIFO 2D) the use of FIFO will result in a higher net income and higher ending inventory than LIFO
 Consider: Item A: Units 2000, Cost $5 Market 5.50 Item B: 3,000 Units Cost $4.50 Market $3.00 Use lower of cost or market and dC) $4,500
 Consider the following: BI, $120,000; sales $400,00; COGS $280,000; Operating Expenses $60,000; EI $100,000 Calculate the inventA) 2.55
 Inventory at the end of the current period was understated because one bin of inventory not counted or included in the ending inB) net income for the following period will be overstated
 A) BI overstated, COGS understated, Net income overstated B) BI understated COGS understated, Net income overstated C) BI overstLine B
 the amount of purchases of merchandise inventory during the period is A) only accumulated in a separate account under the periodA) only accumulated in a separate account under the periodic inventory system
 The Board of Directorselected by the stockholder's to represent their interests, is responsible for maintaining the integrity of the company's financial reports
 Unqualified (clean) audit optionis an auditor's statement that the financial statements are a fair presentation in all material respects in conformity with GAAP
 Earnings Forecastsare predictions of earning for future accounting periods
 Institution Investorsmanagers of pension, mutual, endowment, and other funds that invest on the behalf of others
 Private Investorsindividuals who purchase shares in companies
 Lenders (creditors)suppliers and financial institutions that lend money to companies
 The Cost-Benefit constraintsuggests that the benefits of accounting for and reporting information should outweigh the costs
 Relevant Informationcan incluence a decision; it is timely and has predictive and/or feedback value
 Reliable Informationaccurate, unbiased, and verfiable
 Consistent Informationcan be compared over time because similar accounting methods have been applied
 Comparable Informationallows comparisons across businesses because similar accounting methods have been applied
 Material Amountsamounts that are large enough to influence a user's decision
 Conservatismsuggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses
 Press Releasea written public new announcement normally distributed to major news services
 Form 10-Kthe annual report that publicly traded companies must file with the SEC
 Form 10-Qthe quarterly report that publicly traded companies must file with the SEC
 Form 8-Kused by publicly traded companies to disclose any material event not perviously reported that is important to investors (e.g. auditor changes, mergers)
 Par Valuea legal amount per share established by the board of directors; it established the minimum amount a stockholders must contribute and has no relationship to the market price of the stock
 Additional Paid-In CapitalPaid-In Capital, Contributed Capital in Excess of Par is the amount of contributed capital less the par value of the stock
 Gross Profit (Gross Margin)is net sales less cost of good sales
 Income from Operations (operating income)equals net sales less cost of goods sold and other operating expenses
 Income before income taxes (pretax earnings)is revenues minus all expenses except income tax expense
 Earnings Per ShareNet Income / Average number of shares of common stock outstanding during the period
 Discontinued Operationsresults from the disposal of a major component of the business and are reported net of income tax effects
 Extraordinary Itemsgains and losses that are both unusual in nature and infrequent in occurance; they are reported net of tax on the income statement
 Credit Card Discountthe fee charged by the credit card company for services
 Sales Discount (cash discount)is a cash discount offered to encourage prompt payment of an account receivable
 Sales Returns and Allowancesa reduction of sales revenues for return of or allowances for unsatisfactory goods
 Accounts Receivable (trade receibavles, receivables)open accounts owed to the business by trade customers
 Notes Receivableare written promises that require another party ot pay the business under specified conditions (amount, time, interest)
 Allowance Methodbases bad debt expernse on an estimate of uncollectible accounts
 Bad Debt Expense (doubtful accounts expense, uncollectible accounts expense, provision for uncollectible accounts)the expense associated with estimated uncollectible accounts receivable
 Allowance for Doubtful Accounts (allowance for bad debts, allowance for uncollectible accounts)a contra-asset account containing the estimated uncollectable accounts receivables
 Percentage of Credit Sales Methodbases bad debt expense on the historical percentage of credit sales that result in bad debts
 Aging of accounts receivables methodestimates uncollectible accounts based on the age of each account receivable
 Cashmoney or any instrument that banks will accept for deposit and immediate credit to a company's account, such as a check, money order, or bank draft
 Cash Equivalentsshort-term investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change
 Internal Controlsprocesses by which a company safeguards its assets and provides reasonable assurance regarding the reliability of the company's financial reporting, the effectiveness and efficiency of its operations, and its compliance with applicable laws and regulations.
 Bank Statementis a monthly report from a bank that shows deposits recorded, checks cleared, other debits and credits and a running bank balance
 Bank Reconsiliationthe process of verifying the accuracy of both the bank statement and the cash accounts of a business
 Inventorytangible property held for sale in the normal course of business or used in producing goods or services for sale
 Merchandise Inventoryincludes goods held for resale in the ordinary course of business
 Raw Materials Inventoryincludes items acquired for the purpose of processing into finished goods
 Work In Process Inventoryincludes goods in the process of being manufactured
 Finished Goods Inventoryincludes goods that are complete and ready for sale
 Direct Laborrefers to the earning of employees who work directly on the products being manufactured
 Factory Overheadmanufacturing costs that are not raw material or direct labor costs
 Goods Available for Salerefers to the sum of beginning inventory and purchases (or transfers to finished goods) for the period
 Cost of Goods Sold EquationBI + P - EI = COGS
 Specific Identificationidentifies the cost of the specific itme that was sold
 FIFO (first in first out)assumes that the first goods purchased (the first in) are the first goods sold
 LIFO (last in first out)assumes that the most recently purchased units (the last in) are first sold
 Average Cost Methodused the weighted average unit costs fo the goods available for sale for both cost of goods sold and ending inventory
 Lower of Cost or Market (LC)a valuation method departing from the cost principle; it serves to recognize a loss when replacement cost or net realizable value drops below cost
 Replacement Costthe current purchase price for identical goods
 Net Realizable Valuethe expected sales price less selling costs (e.g. repair and disposal costs)
 LIFO reservea contra-asset for the excess of FIFO over LIFO inventory
 Perpetual Inventory Systema detailed inventory record is maintained, recording each purchase and sale during the accounting period
 Periodic Inventory Systemending inventory and cost of goods sold are determined at the end of the accounting period based on a physical count
 LIFO liquidationa sale of a lower-cost inventory item from beginning LIFO inventory
 Purchase Returns and Allowancesa reduction in the cost of purchases associated with unsatisfactory goods
 Purchase Discounta cash discount received for prompt payment of an account
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