2. Inventories

Question 1

Under GAAP, how do you find the market value of inventory?

Answer 1

the median (middle value) of an inventory items replacement cost, market celing, or market floor.

Question 2

How do you find an inventory items market ceiling?

Answer 2

Selling price - costs to complete = NRV (ceiling)

Question 3

How do you find an inventory items market floor?

Answer 3

NRV (ceiling) - profit = floor

profit:
- sometimes will be given profit margin % (if so take that % and multiply by SP = profit)
- to find profit margin %, take Profit/SP

Question 4

Under GAAP how is inventory valued?

Under IFRS how is inventory valued?

Answer 4

The lower of cost or market value.

The lower of cost or NRV (ceiling)

Question 5

To find EI and COGS using the FIFO method, what inventory system, periodic or perpetual, would you use?

Answer 5

pg 27. Periodic. EI and COGS are the SAME whether periodic or perpetual inventory system is used. periodic is faster.

Question 6

For dollar-value LIFO, how do you find the price index if not given?

Answer 6

EI at current year cost/EI at base year cost = Price index

Question 7

How is COGS calculated?

Answer 7

Beg inv
+ purchases (=COGAFS)
- EI (physical count)
= COGS (plug)

Question 8

Under IFRS, what method to acct for inventory should be used?

Answer 8

FIFO: should be based on the order in which products are sold relative to when they were put in inventory (pg26). LIFO IS PROHIBITIED under IFRS.

Question 9

What are consigned goods?

Who should count them in their inventory?

Answer 9

seller/consignor, delivers goods to an agent/consignee, to hold and sell on consignors behalf.

Consignor should include consigned goods in its inv, and retains title and risk.

ps: inv cost includes shipping cost to consignee as part of inv.
Payable by consignee is not recorded until the goods are sold.
Rev is recognized by consignor when the goods are sold to a third party. Until the sale, goods remain in consignors inv.

Question 10

Using the average pricing method, how do you find the weighted average purchase price per unit?

How do u find COGS?
EI cost?

Answer 10

$total cost of inventory avail for sale/#total units of inv avail for sale = avrg cost per unit.

COGS= #of units sold x weight avrg cost per unit (calc above)

EI= #of units in EI x weight avrg cost per unit