Inventory

Question 1

what is method of lower cost or market?

Answer 1

lower cost or market is the middle value of cost, market ceiling (NRV), and market floor

Question 2

what is method of lower cost or net realizable value?

Answer 2

it is the lower value between cost or NRV

Question 3

what is market ceiling?

Answer 3

market ceiling = selling price - cost to complete and dispose

Question 4

what is market floor?

Answer 4

market floor = market ceiling (NRV) - normal profit margin (% of selling price)

Question 5

what is periodic inventory system?

Answer 5

it’s a plug of COSG after counting ending inventory at year end. Inventory shortage and stolen cannot be discovered.

Question 6

what is perpetual inventory system?

Answer 6

record each purchase and COGS and update inventory per each sale. later count inventory to compare with the tracking records. this process is good but complicated

Question 7

what is freight out?

Answer 7

freight out is a selling expense

Question 8

which method makes perpetual = periodic?

Answer 8

FIFO