Unit Test Review: Unit 4: Short-Term Assets and Unit 5: Inventory Procedures

Resources:  

• Text, chapters 6 (inventory) & 9 (short-term assets)

• Lessons 26: The periodic inventory system.

• Lesson 27: The perpetual inventory system.

• Lesson 28: Methods of inventory valuation, including average cost; first-in, first-out; last-in, first-out; and specific identification.
  

• Lesson 29: The effects of each method of inventory valuation on financial statements.
  

• Lesson 30: The effects of an error in valuing inventory on financial statements.

Practice:

• Inventory Mastery Quiz (Sign in to Blackboard before clicking this link.)

Requirements:

• record transactions associated with the following forms of payment:
  • sales on account:
    • the accounts receivable subsidiary ledger,
    • the accounts receivable control account,
  • credit card sales:
    • bank credit cards (ex; CIBC Visa; treated as cash because the bank immediately places the cash in the retailer's account)
    • non-bank credit cards (ex. American Express; treated as credit sale because retailer must wait for the credit card company to transfer the funds to the bank account)
  • debit card sales.

   

• calculate estimated bad debts expense under both the balance sheet focus and the income statement focus;

• record adjustments for estimated bad debts expense under both the balance sheet focus and the income statement focus;

• write off an account under the allowance method;

• re-establish an account that had previously been written off;

• record transactions and adjustments associated with Note Receivables. Transactions will include: 

• issuing the notes,
• receiving payment on the note, and 
• dealing with a dishonoured note. 

• calculate and charge interest on a Note Payable for various periods of time;

• perform the adjusting entry for interest earned on a Note Receivable at the end of an accounting period.

Short-term assets quiz covers up to here.

Inventory quiz covers the material from this point forward.

• Define the following terms:
  • Perpetual Inventory
  • Periodic Inventory
  • Purchases
  • Cost of Goods Sold (under both periodic and perpetual systems)
  • Merchandise (under both periodic and perpetual systems)
  • Sales
  • Freight-In (under both periodic and perpetual systems)
  • Free-on-Board Shipping Point
  • Free-on-Board Destination
     
• analyze merchandising transactions within both the periodic and perpetual inventory systems;

• explain and account for freight costs under both the periodic and perpetual systems;

   

• explain and differentiate between four specific methods of valuing inventory under the periodic inventory system, including:
  • actual physical flow:
    • specific identification
  • assumed cost flow:
    • first-in, first out (FIFO)
    • last-in, first out (LIFO)
    • average cost

     

• calculate ending inventory and cost of goods sold utilizing all of the above inventory valuation methods;

• analyze the effects that the various methods of valuing inventory have on the financial statements.
  • actual physical flow:
    • specific identification
  • assumed cost flow:
    • first-in, first out (FIFO)
    • last-in, first out (LIFO)
    • average cost

     

• analyze the effects that various inventory errors will have on the financial statements. Specifically, Income Statement effects and Balance Sheet effects;