Select the following sentences to the inventory cost flow method they describe.
Answers: net income for the year will be overstated, net income for the year will be understated or net income for the year will not be affected.
| 1. Merchandise was purchased FOB shipping point on the last day of the year. The cost of the merchandise purchased was not included in ending inventory. | Select Net income for the current year will be overstated. Net income for the current year will be understated. Net income for the current year will not be affected. Item 1 |
| 2. Merchandise was purchased FOB destination on the last day of the year. The cost of the merchandise purchased was not included in ending inventory. | Select Net income for the current year will be overstated. Net income for the current year will be understated. Net income for the current year will not be affected. Item 2 |
| 3. Merchandise held on consignment was included in the count of ending inventory. | Select Net income for the current year will be overstated. Net income for the current year will be understated. Net income for the current year will not be affected. Item 3 |
| 4. A consignor included merchandise in the hands of the consignee in ending inventory. | Select Net income for the current year will be overstated. Net income for the current year will be understated. Net income for the current year will not be affected. Item 4 |
| 5. Beginning inventory was understated due to an error in last year’s inventory count. | Select Net income for the current year will be overstated. Net income for the current year will be understated. Net income for the current year will not be affected. Item 5 |
| 6. Merchandise that was sold and shipped FOB destination on the last day of the year was not included in the seller’s ending inventory.. | Select Net income for the current year will be overstated. Net income for the current year will be understated. Net income for the current year will not be affected. Item 6 |
| 7. Merchandise that was sold and shipped FOB shipping point on the last day of the year was not included in the seller’s ending inventory. | Select Net income for the current year will be overstated. Net income for the current year will be understated. Net income for the current year will not be affected. Item 7 |
| 8. Last year’s ending inventory was recorded as $10,000. The actual inventory on hand the end of last year was $12,000. |