Final Exam

Question 1

inventory account balance with discount and return (Gross method vs. Net method)

Answer 1

Gross method - feels like the right way to do it. Reports it in full at the beginning and purchase disc or returns later

Net method - doesn’t journal entry the discount. Just reports inventory at the discounted amount (ex. 10000 would be 9800 at 2%)

Question 2

Ending inventory perpetual vs ending inventory count

Answer 2

Perpetual is when the inventory is updated every time something is sold

Ending inventory count (periodic) is when the inventory is updated at the end of a period

Question 3

Cost assumption methods

Answer 3

LIFO, FIFO, weighted average
- Most commonly used is FIFO (because they get rid of the oldest inventory first like a normal cycle to keep things consistent)

Question 4

Gross method vs net method

Answer 4

Gross method - record it at full price and then discount later

Net method - record it at its discounted price and then if you pay early, you’re all set! If not, then add the extra

Question 5

LCM (Lower of Cost or Market)

Answer 5

Basically report inventory at the lower of two things either:
- The price you paid for it
- The market value of it right now

Question 6

LCNRV (Lower of Cost of Net Realizable Value)

Answer 6

Price inventory at lower of either two things:
- What you paid for it
- The NRV (The market value - what it would cost to prepare to sell the inventory)

Question 7

Finding bond price formulas

Answer 7

Bond price = PV Coupon Payments x PV Face Value
PV Coupon payments = Coupon Payment x [1-(1+r)^-n / r]
PV of Face Value = Face Value x (1+r)^-n