F4 - Inventories

Question 1

Under U.S. GAAP, during periods of INFLATION, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system under which valuation method?

Answer 1

FIFO.

Question 2

Under GAAP, market value is:

Answer 2

The median (middle value) of an inventory item’s replacement cost, its market ceiling, and its market floor.

Question 3

Replacement cost is

Answer 3

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

Question 4

Market ceiling is

Answer 4

an item’s net selling price less costs to complete and dispose (called the Net Realizable Value (NRV)

Question 5

Market floor is:

Answer 5

NRV - Profit margin (based on Selling Price only)

Question 6

Under IFRS, inventory is valued at:

Answer 6

The lower of cost or net realizable value.

Question 7

LIFO reserve is the difference between:

Answer 7

Inventory on the LIFO method versus any other cost method.

Question 8

Which U.S. GAAP inventory costing method would a company that wishes to maximize profits in a period of rising prices use?

Answer 8

FIFO

Question 9

LCM (Lower of Cost OR Market) quick info:

Answer 9

Market = middle value of Replacement Cost, Ceiling, or Floor.

Ceiling = NRV
Floor = NRV - profit margin

Question 10

Cost of Inventory

Answer 10

Include cost of units of product, freight-in, cots of materials and labor to make product saleable, and the insurance costs are all included in the cost of inventory.