Inventory

Question 1

LIFO method

Answer 1

Evaluated at period end & recorded at lower of cost or market.

The market val is the middle val of the following 3 amounts:
1. net realizable val (NRV) (selling price - selling costs)
2. current replacement value
3. net realizable val minus normal profit margin

Also called retail method

Question 2

FIFO method

Answer 2

Evaluated at period end & measured at lower of cost or net realizable value.

Net realizable val (NRV) is the estimated selling price minus reasonably predictable selling costs (costs of completion, disposal & transport)

Question 3

Moving average method

Answer 3

This is average cost method on PERPETUAL basis. Recalculate average cost after each purchase of inventory.

Question 4

Weighted-average method

Answer 4

Determines average cost for all items at the end of the period.

Calc cost of individ items, then divide total cost by total units, then multiply ending inventory amount by avg cost.

Ex. Bought 20 units @ $8 ea, then 10 units @ $11 ea, have 6 units in ending inventory.
* 20x$8=$160
*10x$11=$110
=$270/30=$9 average cost per unit
*6x$9=$54