F3 - M3 - Inventory Flashcards
What are the four types of inventory (4)
retail inventory, raw materials inventory, work-in-process inventory, and finished goods inventory.
All inventories owned by an entity should be included in the _______account.
inventory account
_________ terms can be used to establish when a purchase or sale has occurred.
FOB shipping terms
Consigned goods belong to the ___________.
consignor.
Inventory account valuations should include all the costs necessary to make the inventory __________
ready for intended use (sale).
_________ and ______ are departures from cost basis caused by a decline in the inventory’s utility.
Lower-of-cost-or-market (U.S. GAAP) and Lower-of-cost-or-net-realizable-value
This ____method, is when the inventory’s replacement cost is lower than cost basis, a current period inventory write-down may be indicated based on the relationship between replacement cost and the market ceiling and floor.
U.S. GAAP lower-of-cost-or-market (LCM) method
______ is used for inventory that is costed using LIFO or the retail inventory method.
Lower of Cost or Market (LCM) Method
under _______ when an inventory’s net realizable value (Net sales price – Costs to complete and dispose) is lower than cost basis, a current period inventory write-down should be recorded
FRS and U.S. GAAP lower-of-cost-or-net-realizable value method
_______ is where the title passes tot he buyer when the seller delivers the goods to a common carrier (USPS)
FOB Shipping point
____ is where title is passed to buyer
FOB Destination point
Packaging, shipping and handling are cost of the
Seller (Seller Expense)
If the seller ships the wrong good the title is reverts to _____ at the rejection and should be included in _______
the seller’s inventory
In a _______ the seller (true seller) divers good tot he consignee to hold and sell on the cosigner’s behalf
Consignment Arrangement
In a Cosigned goods inventory should be included in the ______ books because title and risk is retained.
Cosigner’s (Original seller)
For Cosigned goods, revenue is recognized when _______
Goods are sold to third party
Goods stored at a public warehouse and evidence by receipt should be recorded in the inventory of _______
The company holding the warehouse receipt
As part of a financing agreement, a seller has a requirement to repurchase goods for the buyer it is considered a _________
Sale with a mandatory buyback
For Sales with mandatory buybacks the ______ should include the goods in inventory
Seller
If the seller sells goods on a installment basis but retain legal title as security for the loan, the goods should be included in the ______ inventory if ___________
Seller, percentage of uncollectible debts cannot be estimated.
For installment sales, if it can be estimated the transaction would be accounted for as a sale and ________ would be recorded
Allowance for uncollectible debts
Inventory are generally accounted for at ______
Cost
____ is defined as the price paid or consideration given to acquire the asset
Cost
What are the methods used to determine the cost of inventory (4)
FIFO, LIFO, Average Cost and Retail Inventory
For Inventory, IFRS does not permit the method ______ for determining cost for Inventory
LIFO
Gold, silver and other precious metal, and meet and some agricultural products are value at _______
Net realizable Value (Sell price less cost to dispose)
For agricultural products, when inventory is stated at value in excess of cost, the fact should be _________
Disclosed in the Financial statements
The ________ records purchases with a debit to inventory.
perpetual system
The _______ system records purchases with a debit to purchases.
periodic system
The ________ system records sales of inventory in two journal entries.
perpetual
The __________ system only records the receivable and revenue at time of sale.
periodic
For the ________system , the inventory account is updated at the end of the period after taking a physical count.
periodic system
Because _____ values inventory at most recent costs, it will generally result in the highest ending inventory, the lowest cost of goods sold, and the highest net income than other methods in a period of rising prices.
FIFO
_______generally results in the lowest ending inventory, the highest cost of goods sold, and the lowest net income than other methods in a period of rising prices.
LIFO
Weighted average is called “moving average” in a _________ inventory system.
perpetual
The ________ inventory methods attempt to estimate ending inventory based on the historical gross profit or cost complement percentage.
gross profit and retail inventory
___________ require current loss recognition if the contracted price exceeds the market price
Firm purchase commitments
________ prohibits reversals of inventory write-downs
U.S GAAP
_______ Allows reversal up to the amount of the original write down and the reduction of total inventory cost on the I/S in the period of Reversal
IFRS
Under _________ the lower of cost and net realizable value method is used for all inventory that not costs using _________ or __________
LIFO or retail inventory method
Lower of Costs and Net realizable value is required for all inventory under _______
IFRS
How do you calculate Net Realizable Value?
selling price - (cost to complete and disposal of)
Under _________, the lower cost or market method is used when inventory is costs using LIFO or the retail inventory method
GAAP
What is the Market Value
The middle value from Replacement Cost, Market Celing and Market Floor
What is replacement cost
the cost to purchase the item of inventory as of the valuation date.
What is the Market Ceiling
NRV (net realizable value) - Net selling price less the costs to compile and disposal of inventory
What is Market Floor?
NPV - Normal Profit ( Net selling price less cost to complete and dispose of inventory) - Normal Profit
Lower of cost or Market is used by ________ for which methods
U.S GAAP, LIFO or Retail
Lower of cost and net realizable value is used by ___________ or _______ for which inventory
U.S GAAP and IFRS, U.S GAAP (FIFO and WA), and IFRS (All methods)
Small losses from a decline in value are included in
COGS
Any change in method should be _______ and if material ______________
disclosed of the nature and change and if material the effects on IS
With ______ system the quantity of inventory is determined only by physical count, usually at-least annually
Periodic Inventory System
What is the calculation of Determining COGS for Periodic Inventory System
BI + P - Ending = COGS
With _____ inventory system, the inventory record of each item of inventory is updated for each purchase and each sale as they occur
Perpetual inventory system
Under the _____ method, the cost of each item in inventory is uniquely identified to that item.
Specific identification method
In periods of high rising prices, the ____ method results in highest ending inventory, the lowest COGS, Higher Net income
FIFO
What is the calculation for weight average cost after each purchase
Total Cost of inventory available after each purchase/ Total Units available after each purchase
The _______ inventory system is necessary for moving average method
Perpetual Inventory system
Under regular LIFO, inventory is measured in units and the price at unit price, under ____ method, the inventory is measured in dollar and is adjusted for changing price levels.
Dollar-Value LIFO Method
What is the calculation for Price Index for Dollar LIFO
Price Index = Ending Inventory at current year cost/ Ending inventory at base year cost
What are the steps to calculate LIFO layer added at dollar-value LIFO
Base year cost is multiplied by the internally generated price index.
The _____ is used for interim financial statements as a periodic inventor system
Gross Profit Method
Which method is most closely the current cost for COGS and Ending Inventory
LIFO, FIFO
In rising prices environment for LIFO how would Ending Inventory, COGS and Net income be effected
EI = Low, COGS = High, Income = Low
In rising prices environment for FIFO how would Ending Inventory, COGS and Net income be effected
EI = High, COGS = Low, Income - High
