Inventory (F4)

Question 1

Lower of Cost or Market

Answer 1

Ceiling: NRV = Selling Price - Selling Expenses
Floor: NRV - Normal Gross Profit Margin
Replacement Cost

Middle of 3 numbers = Market
Choose lower of Historical Cost or market from above

*IFRS = Lower of cost or NRV

Question 2

Moving Average

Answer 2

Beg Inv @ Year End = Beg - Issue * Cost
= 3,200 - 1,600 = 1,600 * 8.00 = 12,800
\+ purchases = ending innventory
= 12,800 + (4,800 * 9.60) = 58,880
Ending inventory / ending units = ending cost
= 58,880 / (4,800 + 1,600) = 9.20

Question 3

Dollar Value LIFO

Answer 3

End Inv in Base Year Dollars 525,000
- Beg Inv Basey Year Dollars 500,000
= Increase inventory 25,000
* Price index 1.10
= Increase @ current prices 27,500
+ Beg Inv 500,000
= End Inv DV LIFO 527,500

Question 4

Lost Inventory

Answer 4

Beg Inv
\+ Purchases
- Sales * (1 - G%)
- Inv not damaged
= Cost of Lost Inventory

Beg Inv + Purchases = Sales * (1 - GM%) + End Inv

Question 5

Retail Method

Answer 5

End Inv Retail
= Beg Inv + Purchases + Markups - Markdowns - Sales

Cost to Retail = Purchases @ Cost / (Purchases + Markups @ retail)
*Exclude Markdowns if LCM

End Inv @ Cost = End Inv @ Retail * C/R

COGS = Beg Inv @ Cost + Purchases @ Cost - End Inv @ Cost

Question 6

COGS

Answer 6

Raw materials purchased
\+ Decrease in raw materials
\+ Direct labor
\+ factory overhead
- increase in finished goods
= COGS

Question 7

Perpetual LIFO vs Periodic LIFO

Answer 7

Perpetual: Take sold inventory from most recent purchase

Periodic: Sales come after all purchases regardless of date

Question 8

LIFO Reserve Account

Answer 8

Average Cost Inv     375
- LIFO Inv                  320
= 55
Current LIFO reserve balance = 35
Debit COGS/Credit LIFO reserve 20 each

Question 9

Cash paid to suppliers

Answer 9

COGS
- Decrease Inventory
+ Decrease AP