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- What three inventory cost flow assumptions can be used in perpetual inventory systems?
- What impact does the use of different inventory cost flow assumptions have on financial statements?
- What is meant by the laid-down cost of inventory?
- What is the meaning of the term lower of cost and net realizable value, and how is it calculated?
- How do rising costs affect ending inventory and cost of goods sold values using FIFO and weighted average cost flow assumptions?
- Assume that you are the president of your company and paid a year-end bonus according to the amount of net income earned during the year. When prices are rising, would you choose a FIFO or weighted average cost flow assumption? Explain, using an example to support your answer. Would your choice be the same if prices were falling?
- What inventory cost flow assumptions are permissible under GAAP?
- The ending inventory of CBCA Inc. is overstated by $5,000 at December 31, 2015. What is the effect on 2015 net income? What is the effect on 2016 net income assuming that no other inventory errors have occurred during 2016?
- When should inventory be valued at less than cost?
- What is the primary reason for the use of the LCNRV method of inventory valuation? What does the term net realizable value mean?
- When inventory is valued at LCNRV, what does cost refer to?
- Why is estimating inventory useful?
- How does the estimation of ending inventory differ between the gross profit method and the retail inventory method? Use examples to illustrate.
- When is the use of the gross profit method particularly useful?
- Does the retail inventory method assume any particular inventory cost flow assumption?
- (Appendix) What inventory cost flow assumptions can be used in a periodic inventory system?
- (Appendix) Contrast the journal entries required under the periodic and perpetual inventory systems.
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