Inventory

Question 1

Moving Average Method

Answer 1

1.Take average of total cost (after purchases) and calc an average unit cost rate
2. Continue using that rate for sales

Question 2

Which application results in the lowest inventory amount while applying LCM rule?

Answer 2

Separation of each item

Question 3

Goods should be removed from the seller’s inventory when…

Answer 3

Legal title passes to the purchaser. Ex: Title of goods passes when the purchaser picked up the goods by a common carrier.

Question 4

Gross margin method

Answer 4

1. Assume gross margin % is relatively stable
2. Determine COGS by applying gross margin ration to sales & subtracting this act from sales figures
3. Understand that gross margin method is not considered as GAAP for f/s

Question 5

During periods of inflation, perpetual inv system - which would yield the same dollar amount

Answer 5

FIFO

Question 6

Bill and Hold contract requirements

Answer 6

1. Substantive reason for the bill-and-hold arrangement (e.g., the customer has requested the arrangement)
2. Product must be identified separately as beloning to the customer
3. The product currently must be ready for physical transfer to the customer
4. The entity cannot use the product or direct it to another customer

Question 7

Formula to calc ending inv

Answer 7

BI 35,000.00
Purchases 200,000.00
GAFS 235,000.00
Less: est COGS
sales 250,000.00
less: gross margin
(GP % times sales) 100,000.00 150,000.00
Estimated EI 85,000.00
Less: actual EI per audit (30,000.00)
55,000.00