Inventory

Question 1

What is included in the costs of inventory?

Answer 1

All costs getting ready for its intended use:
1. Warehousing costs
2. Insurance, repackaging, modifications
3. Freight-in paid by buyer
4. Transportation costs paid by seller on consignment arrangements
NOT INCLUDED: abnormal costs for idle factory expense, unallocated fixed overhead costs, excessive spoilage, double freight, rehandling costs - expense immediately

Question 2

How is inventory treated for consignor?

Answer 2

Consignor = seller of goods
Includes inventory on B/S
Has ownership but not possession
Costs incurred by consignor transferring goods to consignee = inventory costs

Question 3

How is inventory treated for consignee?

Answer 3

Consignee = buyer of goods
Does not include inventory on B/S
Has possession but not ownership

Question 4

What are the steps to apply Dollar Value LIFO?

Answer 4

1. EI @ Current $ / Price Level Index = EI @ Base $
2. Base Year Difference = Additional Layer
3. Additional Layer x Price Level Index

Question 5

How is the Conventional Retail Inventory Method applied?

Answer 5

Cost Retail
BI
+ Purchases x x
+ Freight in x x
+ Net markups = x
Goods available for sale x x = C/R%
- Net markdowns = x
Sales price of goods available for sale x
- Losses x
- Sales @ retail = x
EI @ Retail x
Multiply EI @ Retail x C/R% =
EI @ Cost x

Question 6

How is the LIFO Retail Inventory Method applied?

Answer 6

Both net markups and net markdowns are included in calculation of C/R %
BI NOT INCLUDED in calculation of C/R %