6-Inventory

Question 1

Periodic inventory system

Answer 1

Inventory is determined by a physical count

Question 2

Perpetual inventory system

Answer 2

Ongoing real time count

Question 3

Perpetual and periodic inventory systems are the same under ____

Answer 3

FIFO

Question 4

Perpetual and periodic inventory systems are different under ____

Answer 4

LIFO

Question 5

LIFO conformity rule

Answer 5

If lifo is used for tax purposes it must also be used for financial reporting purposes

Question 6

Cogs understated
NI overstated
Ending inventory—ok
Balance sheet—ok
I/S—not ok

Answer 6

FIFO

Question 7

Cogs—ok
Profits—ok 
Ending inventory understated
Income statement ok
Balance sheet not ok

Answer 7

LIFO

Question 8

Steps to dollar value lifo

Answer 8

1. Inventory at year end $ X price level index = end inventory at base year $
2. End inv at base year $ - previous year end inv at base year $ = additional layer
3. Additional layer X price level index = dollar value lifo inventory for year

Question 9

Lower of cost or market

Answer 9

Market is the middle of 3 numbers: ceiling, floor, replacement cost
Applies only to lifo and retail inventory methods

Question 10

Ceiling

Answer 10

NRV= selling price - disposal costs

Question 11

Floor

Answer 11

NRV - normal profit margin

Question 12

Lower of cost or NRV

Answer 12

All inventory other than lifo and retail inventory methods are reported on the b/s at lower of cost or NRV

Question 13

Conventional retail inventory method

Answer 13

Beginning inv
\+purchases
\+freight in
\+net markups 
=goods afs (cost/retail=c/r%)
-net markdowns 
=sales price of goods afs
-losses
-sales @retail
=end inv @ retail
X c/r %
= end inv at cost

Question 14

Ifrs does not allow ____

Answer 14

LIFO