inventory Flashcards
under IFRS, inventory should be valued at the low of cost or NRV. true or false
true
LIFO reserve
is a valuation account maintaining the difference betwwen the internal computed cost of inventory and the external reported cost of the ending inventory on the balance sheet. To go from one figure to the other total, simply add or subtract the total accumulated difference so far, the amount in the LIFO reserve account. The total difference between the alternative computed inventory totals needs to be updated every period, and the adjustment is added (here) to cost of goods sold.
LIFO reserve balance needed on
December 31, 20X1 ($375,000 - $320,000) $55,000
Existing LIFO reserve balance 35,000
——-
Additional reserve needed $20,000
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In order to increase the LIFO reserve balance to the required $55,000, Drew Co. would need to make the following adjusting entry on December 31, 20X1:
Cost of goods sold 20,000 LIFO reserve 20,000
how are nonomentar exchange recorded ?
the asset received should be recorded at FV of the asset surrendered or the FV of the asset received.
there are exception to this rule, when it lacks commercial substance, the asset received should be recorded at the carryover amount and not any gain or loss.
commercial sustance
a transaction it is expected to change the future cash flows of a business.
The FIFO perpetual inventory method will produce the same ending inventory as the FIFO periodic method. true or false
true, first in units are removed first under both methods.
Could current cost financial statements report holding gains for goods sold during the period and holding gains on inventory at the end of the period?
goods sold, yes, inventory yest. holding gains for COGS are realized, holding gains for inventory on hand at the end of the period are unrealized.
Cost of goods sold = Beginning inventory + Purchases - Ending inventory
formula
cost of merchandise sold at a markup
cost of merchandise = Sales price / Markup + 100%
retail inventory method: lower of average cost or market
Cost Retail Beg Inv 20 35 Purchases 40 80 Net Markups (60/120)=0.5 60 5 120 Net Markdowns -10 Goods available for Sale 60 110 Less Sales -66 Ending Inv at retail 44
Ending invenroty at lower of Cost of Market (0.5*44)=22
lower of cost or market:
market is replacement cost limited to
1. ceiling
2. floor
ceiling: net realizable value (selling price - selling costs and costs to complete
floor: nrv- normal profit
take the middle value of replacement, NRV, NRV-normal profit. cannot exceed NRV because it is the ceiling
inventory errors opposite effect on COGS, same effects on income.
true
AOCI is included in which financial statement section
Shareholder’s equity-Balance sheet
restricted cash does not affect RE
true
