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FAR > Concept CH 7 > Flashcards

Concept CH 7 Flashcards

1
Q

Cost of Inv Purchases Include

A

Price paid (net of discounts)
Import duties & unrecovered taxes
handling, freight-in, insurance

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2
Q

Lower of Cost of Market (LCM) LIFO/Retail

A

Market should not exceed ceiling - NRV

Market should not be less than floor - NRV - GP

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3
Q

Net Realizable Value (NRV) FIFO/AVG-COST

A

Sales Price - Cost to Complete/Selling Cost

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4
Q

Inventory Errors

A

Affects

  • Current Assets
  • Working Capital
  • COGS
  • Net Income
  • Equity
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5
Q

Purchase Commitment Loss

A

Loss recognized on non-cancelable unhedged purch if market price < commit price

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6
Q

Ending Inventory Overstated Effects 2 periods CY and next year

A 
CY
COGS understated
NI Overstated
RE Overstated
NY
COGS Overstated
NI Understated
Beg Overstated
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7
Q

Cost of Sales equal

A

beginning inventory, plus purchases, plus additional costs , minus ending inventory

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8
Q

FOB Destination

A

Means title and risk of loss pas to buyer when seller makes tender of delivery at the destination

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9
Q

Consigned goods

A

are included in the consignors inventory

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10
Q

Sales equal

A

Ending AR + Collections - Beginning AR

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11
Q

LIFO assumes

A

Newest inventory sold first

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12
Q

LCM retail method includes

A

markups but not markdowns

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13
Q

GAS

A

BI + PUR = GAS = EI + COGS

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14
Q

Dollar-value LIFO

A

Determines changes in inventory in terms of dollars constant purchasing power.

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15
Q

Inventory Method yielding same inventory measurement and COGS under perpetual or period

A

FIFO

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16
Q

In period of rising prices which method provides best matching of expenses against revenues

A

LIFO

17
Q

Weighted Avg is used for

A

Periodic system

18
Q

Moving Avg is used

A

Perpetual

19
Q

In a period falling prices

A

FIFO will yield the highest COGS

20
Q

Under IFRS inventory is measured at

A

Lower of cost or NRV

21
Q

Reversal of adjustment in subsequent period

A

Allowed under IFRS, not allowed under GAAP

22
Q

Step 1 in Dollar-Value LIFO Measurement

A

Accumulated YE Inventory balances at base-year and current year cost. CY Cost are divided by BY cost to arrive at price index

23
Q

Step 2 In Dollar-Value LIFO Measurement

A

Each layer stated at base year cost is multiplied by price index

24
Q

Cost-retail method

A

includes both markup and markdowns

25
Q

A cost method that adjust inventory layers for price level changes

A

Dollar value LIFO retail

26
Q

Cost-retail ratio based on goods available for sale that includes markups and markdowns

A

Average Cost

27
Q

Cost-retail ratio includes inventories and markups but not markdowns

A

Lower of average cost or market

28
Q

Cost-retail ratio includes markups but excludes inventories and markdowns

A

FIFO lower of cost or market

29
Q

Cost-retail ratio based on adjusted purchases and calculated for each annual layer

A

LIFO retail

30
Q

The retail inventory method includes which of the following in the calculation of both cost and retail amounts of goods available for sale?

A

Purchase Returns

31
Q

Sales revenue is only recognized for

A

the amount of consideration to which the company expects to be entitled. Thus, no sales are recorded to items expected to be returned

32
Q

LCM Measurement NRV and NRV - Gross Profit

A

The maximum is net realizable value, and the minimum is net realizable value - gross profit

33
Q

Overstated inventory

A

Understated COGS overstated income year 1

Overstated COGS and understated income year 2

34
Q

Understated Inventory

A

Overstated COGS understated income year 1

Understated COGS overstated income year 2

35
Q

LCM - Market

A

should not exceed ceiling or be less than floor

36
Q

FIFO Cost

A

Most straight forward computed for ADJ purchases not GAS. Markups added and markdowns subtracted from purchases at retail to determine ratio

37
Q

To find change from FIFO to LIFO

A

(Inv Y1 FIFO - Inv Y2 FIFO) - (Inv Y1 LIFO - Inv Y2 LIFO) = Net change

FAR (22 decks)

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