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Finance (600) Chapter 7-Inventories

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Sandra Watson
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Chapter 7–Inventories

1. One of the two internal control procedures over inventory is to properly report inventory on the financial
statements.

2. A purchase order establishes an initial record of the receipt of the inventory.

3. A perpetual inventory system is an effective means of control over inventory.

4. A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

5. Safeguarding inventory and proper reporting of the inventory in the books are the reasons for controlling the
inventory.

6. Inventory controls start when the merchandise is shelved in the store area.

7. A physical inventory should be taken at the end of every month.

8. The specific identification inventory method should be used when the inventory consists of identical, low
cost units that are purchased and sold frequently.

9. The selection of an inventory costing method has no significant impact on the financial statements.

10. Of the three widely used inventory costing methods (FIFO, LIFO, and average cost), the LIFO method of
costing inventory assumes costs are charged based on the most recent purchases first.

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Finance (600) Chapter 7-Inventories

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