Inventory Flashcards
What are inventoriable costs
Purchases net of discounts
Freight-in
Warehouse expenditures
Freight-out is considered selling cost
What are non-inventoriable costs
Sales commissions
Interests on liabilities to vendors
Shipping expense to customers
How are discounts applied
Applied consecutively
Example: 20% and 10% = {Price}{.9}{.8}
Record inventory at discounted price
In periods of rising prices, what costing method results in the same inventory under periodic and perpetual
FIFO
What are the two types of inventory accounting systems
Period and Perpetual
How do you calculate inventory turnover
COGS / Average Inventory
What is the effect of COGS being over/understated on net income
EI over = COGS under = NI over
EI under = COGS over = NI under
What is Cost of Goods Available for Sale
Beginning Inventory + Net Purchases
How do you calculate ending inventory
Beginning Inventory + Net Purchases - COGS = Ending
Which methods do you use for measuring inventory costs under FIFO/WA and LIFO/Retail
FIFO/WA = Lower of Cost or Net Realizable Value
LIFO/Retail = Lower of cost or Market
How do you calculate the lower of cost or NRV approach
Market ceiling is Net Realizable value
NRV = Selling price - Selling costs
How do you calculate Lower of Cost or Market
Market Ceiling (NRV) = Selling price selling costs
Inventory Replacement Cost
Market Floor = (NRV - Profit Margin)
Middle number is market
Take the lower of Cost or Market as valuation
