F3 - M3 - Inventory

Question 1

What are the four types of inventory (4)

Answer 1

retail inventory, raw materials inventory, work-in-process inventory, and finished goods inventory.

Question 2

All inventories owned by an entity should be included in the _______account.

Answer 2

inventory account

Question 3

_________ terms can be used to establish when a purchase or sale has occurred.

Answer 3

FOB shipping terms

Question 4

Consigned goods belong to the ___________.

Answer 4

consignor.

Question 5

Inventory account valuations should include all the costs necessary to make the inventory __________

Answer 5

ready for intended use (sale).

Question 6

_________ and ______ are departures from cost basis caused by a decline in the inventory’s utility.

Answer 6

Lower-of-cost-or-market (U.S. GAAP) and Lower-of-cost-or-net-realizable-value

Question 7

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.

Answer 7

U.S. GAAP lower-of-cost-or-market (LCM) method

Question 8

______ is used for inventory that is costed using LIFO or the retail inventory method.

Answer 8

Lower of Cost or Market (LCM) Method

Question 9

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

Answer 9

FRS and U.S. GAAP lower-of-cost-or-net-realizable value method

Question 10

_______ is where the title passes tot he buyer when the seller delivers the goods to a common carrier (USPS)

Answer 10

FOB Shipping point

Question 11

____ is where title is passed to buyer

Answer 11

FOB Destination point

Question 12

Packaging, shipping and handling are cost of the

Answer 12

Seller (Seller Expense)

Question 13

If the seller ships the wrong good the title is reverts to _____ at the rejection and should be included in _______

Answer 13

the seller’s inventory

Question 14

In a _______ the seller (true seller) divers good tot he consignee to hold and sell on the cosigner’s behalf

Answer 14

Consignment Arrangement

Question 15

In a Cosigned goods inventory should be included in the ______ books because title and risk is retained.

Answer 15

Cosigner’s (Original seller)

Question 16

For Cosigned goods, revenue is recognized when _______

Answer 16

Goods are sold to third party

Question 17

Goods stored at a public warehouse and evidence by receipt should be recorded in the inventory of _______

Answer 17

The company holding the warehouse receipt

Question 18

As part of a financing agreement, a seller has a requirement to repurchase goods for the buyer it is considered a _________

Answer 18

Sale with a mandatory buyback

Question 19

For Sales with mandatory buybacks the ______ should include the goods in inventory

Answer 19

Seller

Question 20

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 ___________

Answer 20

Seller, percentage of uncollectible debts cannot be estimated.

Question 21

For installment sales, if it can be estimated the transaction would be accounted for as a sale and ________ would be recorded

Answer 21

Allowance for uncollectible debts

Question 22

Inventory are generally accounted for at ______

Answer 22

Cost

Question 23

____ is defined as the price paid or consideration given to acquire the asset

Answer 23

Cost

Question 24

What are the methods used to determine the cost of inventory (4)

Answer 24

FIFO, LIFO, Average Cost and Retail Inventory

Question 25

For Inventory, IFRS does not permit the method ______ for determining cost for Inventory

Answer 25

LIFO

Question 26

Gold, silver and other precious metal, and meet and some agricultural products are value at _______

Answer 26

Net realizable Value (Sell price less cost to dispose)

Question 27

For agricultural products, when inventory is stated at value in excess of cost, the fact should be _________

Answer 27

Disclosed in the Financial statements

Question 28

The ________ records purchases with a debit to inventory.

Answer 28

perpetual system

Question 29

The _______ system records purchases with a debit to purchases.

Answer 29

periodic system

Question 30

The ________ system records sales of inventory in two journal entries.

Answer 30

perpetual

Question 31

The __________ system only records the receivable and revenue at time of sale.

Answer 31

periodic

Question 32

For the ________system , the inventory account is updated at the end of the period after taking a physical count.

Answer 32

periodic system

Question 33

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.

Answer 33

FIFO

Question 34

_______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.

Answer 34

LIFO

Question 35

Weighted average is called "moving average" in a _________ inventory system.

Answer 35

perpetual

Question 36

The ________ inventory methods attempt to estimate ending inventory based on the historical gross profit or cost complement percentage.

Answer 36

gross profit and retail inventory

Question 37

___________ require current loss recognition if the contracted price exceeds the market price

Answer 37

Firm purchase commitments

Question 38

________ prohibits reversals of inventory write-downs

Answer 38

U.S GAAP

Question 39

_______ 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

Answer 39

IFRS

Question 40

Under _________ the lower of cost and net realizable value method is used for all inventory that not costs using _________ or __________

Answer 40

LIFO or retail inventory method

Question 41

Lower of Costs and Net realizable value is required for all inventory under _______

Answer 41

IFRS

Question 42

How do you calculate Net Realizable Value?

Answer 42

selling price - (cost to complete and disposal of)

Question 43

Under _________, the lower cost or market method is used when inventory is costs using LIFO or the retail inventory method

Answer 43

GAAP

Question 44

What is the Market Value

Answer 44

The middle value from Replacement Cost, Market Celing and Market Floor

Question 45

What is replacement cost

Answer 45

the cost to purchase the item of inventory as of the valuation date.

Question 46

What is the Market Ceiling

Answer 46

NRV (net realizable value) - Net selling price less the costs to compile and disposal of inventory

Question 47

What is Market Floor?

Answer 47

NPV - Normal Profit ( Net selling price less cost to complete and dispose of inventory) - Normal Profit

Question 48

Lower of cost or Market is used by ________ for which methods

Answer 48

U.S GAAP, LIFO or Retail

Question 49

Lower of cost and net realizable value is used by ___________ or _______ for which inventory

Answer 49

U.S GAAP and IFRS, U.S GAAP (FIFO and WA), and IFRS (All methods)

Question 50

Small losses from a decline in value are included in

Answer 50

COGS

Question 51

Any change in method should be _______ and if material ______________

Answer 51

disclosed of the nature and change and if material the effects on IS

Question 52

With ______ system the quantity of inventory is determined only by physical count, usually at-least annually

Answer 52

Periodic Inventory System

Question 53

What is the calculation of Determining COGS for Periodic Inventory System

Answer 53

BI + P - Ending = COGS

Question 54

With _____ inventory system, the inventory record of each item of inventory is updated for each purchase and each sale as they occur

Answer 54

Perpetual inventory system

Question 55

Under the _____ method, the cost of each item in inventory is uniquely identified to that item.

Answer 55

Specific identification method

Question 56

In periods of high rising prices, the ____ method results in highest ending inventory, the lowest COGS, Higher Net income

Answer 56

FIFO

Question 57

What is the calculation for weight average cost after each purchase

Answer 57

Total Cost of inventory available after each purchase/ Total Units available after each purchase

Question 58

The _______ inventory system is necessary for moving average method

Answer 58

Perpetual Inventory system

Question 59

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.

Answer 59

Dollar-Value LIFO Method

Question 60

What is the calculation for Price Index for Dollar LIFO

Answer 60

Price Index = Ending Inventory at current year cost/ Ending inventory at base year cost

Question 61

What are the steps to calculate LIFO layer added at dollar-value LIFO

Answer 61

Base year cost is multiplied by the internally generated price index.

Question 62

The _____ is used for interim financial statements as a periodic inventor system

Answer 62

Gross Profit Method

Question 63

Which method is most closely the current cost for COGS and Ending Inventory

Answer 63

LIFO, FIFO

Question 64

In rising prices environment for LIFO how would Ending Inventory, COGS and Net income be effected

Answer 64

EI = Low, COGS = High, Income = Low

Question 65

In rising prices environment for FIFO how would Ending Inventory, COGS and Net income be effected

Answer 65

EI = High, COGS = Low, Income - High