A physical inventory is performed by comparing the control account with the subsidiary ledger.

The periodic inventory system or method uses a purchases account.

The perpetual inventory system or method normally uses a purchases account.

Merchandise or goods shipped FOB Shipping Point should not be included in the buyer's inventory if they have not yet arrived.

The inventory system or method that does not make an entry to cost of goods sold at the time of a sale is the perpetual method.

The average cost method used with the perpetual inventory method calculates a new average cost at the time of each sale.

A method used to estimate the value of ending inventory is the gross profit method.

Net purchases is gross purchases less purchase returns and allowances.

The accounting rule associated with the lower of cost or market inventory rule is the conservatism rule or principle.

A physical count of inventory is absolutely necessary to determine the cost of goods sold when using the perpetual inventory system.

When prices are rising, FIFO results in a higher ending inventory value than LIFO.

The LIFO inventory system or method can only be used when we know that our newest purchases are actually being sold first.

The FIFO and LIFO inventory methods assume a flow of costs out of inventory.

If beginning inventory is understated when using a periodic inventory system, net income is overstated or net loss is understated.

The Lower of Cost or Market Rule defines market as current replacement cost subject to a ceiling and floor amount.

A entry is made to cost of goods sold at the time of each sale when the periodic inventory system or method is used

A merchandiser generally has a balance sheet similar to a service business except that merchandise inventory is an additional current asset.

The ending inventory cost is obtained by taking a physical inventory and assigning cost to the quantities when using the periodic inventory system.

A manufacturer's inventory is usually classified as raw materials, work-in-process, and finished goods.

When using the periodic method, beginning inventory plus purchases equals the cost of goods available for sale.

The average cost method assumes that the goods available for sale are identical.

During rising prices, FIFO produces the highest net income, LIFO the lowest, and average an amount in the middle.

Using different inventory methods does not affect the net income or loss for a period.

Using the FIFO method results in the matching of current inventory costs with current sales revenues.

A physical inventory should be taken at least annually to verify the goods on hand.