Inventories

Question 1

what are product costs? captialized or expensed? what statement do they appear on?

Answer 1

costs included to create inventory are capitalized on balanced sheet

Question 2

what are period costs? capitalized or expensed?

Answer 2

period costs are expensed in period incurred

Question 3

Advantages of FIFO

Answer 3

ENDING inventory based on most recent purchases, therefore better approximation of current cost

Question 4

Disadvantage of FIFO

Answer 4

COGS is based on first early purchase costs, so in rising environment, COGS is understated and earnings overstated

Question 5

LIFO advantages

Answer 5

COGS is more accurate

Question 6

LIFO Disadvantages

Answer 6

IFRS does not allow, ending inventory understated

Question 7

Periodic inventory system - when are values and COGS determined?

Answer 7

at end of accounting period

Question 8

perpetual inventory system -when are values and COGS determined?

Answer 8

updated continuously (there will be no purchases account)