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Becker FAR > F3 - M3 - Inventory > Flashcards

F3 - M3 - Inventory Flashcards

1
Q

What are the four types of inventory (4)

A

retail inventory, raw materials inventory, work-in-process inventory, and finished goods inventory.

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2
Q

All inventories owned by an entity should be included in the _______account.

A

inventory account

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3
Q

_________ terms can be used to establish when a purchase or sale has occurred.

A

FOB shipping terms

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4
Q

Consigned goods belong to the ___________.

A

consignor.

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5
Q

Inventory account valuations should include all the costs necessary to make the inventory __________

A

ready for intended use (sale).

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6
Q

_________ and ______ are departures from cost basis caused by a decline in the inventory’s utility.

A

Lower-of-cost-or-market (U.S. GAAP) and Lower-of-cost-or-net-realizable-value

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7
Q

This ____method, is when the inventory’s replacement cost is lower than cost basis, a current period inventory write-down may be indicated based on the relationship between replacement cost and the market ceiling and floor.

A

U.S. GAAP lower-of-cost-or-market (LCM) method

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8
Q

______ is used for inventory that is costed using LIFO or the retail inventory method.

A

Lower of Cost or Market (LCM) Method

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9
Q

under _______ when an inventory’s net realizable value (Net sales price – Costs to complete and dispose) is lower than cost basis, a current period inventory write-down should be recorded

A

FRS and U.S. GAAP lower-of-cost-or-net-realizable value method

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10
Q

_______ is where the title passes tot he buyer when the seller delivers the goods to a common carrier (USPS)

A

FOB Shipping point

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11
Q

____ is where title is passed to buyer

A

FOB Destination point

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12
Q

Packaging, shipping and handling are cost of the

A

Seller (Seller Expense)

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13
Q

If the seller ships the wrong good the title is reverts to _____ at the rejection and should be included in _______

A

the seller’s inventory

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14
Q

In a _______ the seller (true seller) divers good tot he consignee to hold and sell on the cosigner’s behalf

A

Consignment Arrangement

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15
Q

In a Cosigned goods inventory should be included in the ______ books because title and risk is retained.

A

Cosigner’s (Original seller)

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16
Q

For Cosigned goods, revenue is recognized when _______

A

Goods are sold to third party

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17
Q

Goods stored at a public warehouse and evidence by receipt should be recorded in the inventory of _______

A

The company holding the warehouse receipt

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18
Q

As part of a financing agreement, a seller has a requirement to repurchase goods for the buyer it is considered a _________

A

Sale with a mandatory buyback

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19
Q

For Sales with mandatory buybacks the ______ should include the goods in inventory

A

Seller

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20
Q

If the seller sells goods on a installment basis but retain legal title as security for the loan, the goods should be included in the ______ inventory if ___________

A

Seller, percentage of uncollectible debts cannot be estimated.

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21
Q

For installment sales, if it can be estimated the transaction would be accounted for as a sale and ________ would be recorded

A

Allowance for uncollectible debts

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22
Q

Inventory are generally accounted for at ______

A

Cost

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23
Q

____ is defined as the price paid or consideration given to acquire the asset

A

Cost

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24
Q

What are the methods used to determine the cost of inventory (4)

A

FIFO, LIFO, Average Cost and Retail Inventory

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25
Q

For Inventory, IFRS does not permit the method ______ for determining cost for Inventory

A

LIFO

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26
Q

Gold, silver and other precious metal, and meet and some agricultural products are value at _______

A

Net realizable Value (Sell price less cost to dispose)

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27
Q

For agricultural products, when inventory is stated at value in excess of cost, the fact should be _________

A

Disclosed in the Financial statements

28
Q

The ________ records purchases with a debit to inventory.

A

perpetual system

29
Q

The _______ system records purchases with a debit to purchases.

A

periodic system

30
Q

The ________ system records sales of inventory in two journal entries.

A

perpetual

31
Q

The __________ system only records the receivable and revenue at time of sale.

A

periodic

32
Q

For the ________system , the inventory account is updated at the end of the period after taking a physical count.

A

periodic system

33
Q

Because _____ values inventory at most recent costs, it will generally result in the highest ending inventory, the lowest cost of goods sold, and the highest net income than other methods in a period of rising prices.

A

FIFO

34
Q

_______generally results in the lowest ending inventory, the highest cost of goods sold, and the lowest net income than other methods in a period of rising prices.

A

LIFO

35
Q

Weighted average is called “moving average” in a _________ inventory system.

A

perpetual

36
Q

The ________ inventory methods attempt to estimate ending inventory based on the historical gross profit or cost complement percentage.

A

gross profit and retail inventory

37
Q

___________ require current loss recognition if the contracted price exceeds the market price

A

Firm purchase commitments

38
Q

________ prohibits reversals of inventory write-downs

A

U.S GAAP

39
Q

_______ Allows reversal up to the amount of the original write down and the reduction of total inventory cost on the I/S in the period of Reversal

A

IFRS

40
Q

Under _________ the lower of cost and net realizable value method is used for all inventory that not costs using _________ or __________

A

LIFO or retail inventory method

41
Q

Lower of Costs and Net realizable value is required for all inventory under _______

A

IFRS

42
Q

How do you calculate Net Realizable Value?

A

selling price - (cost to complete and disposal of)

43
Q

Under _________, the lower cost or market method is used when inventory is costs using LIFO or the retail inventory method

A

GAAP

44
Q

What is the Market Value

A

The middle value from Replacement Cost, Market Celing and Market Floor

45
Q

What is replacement cost

A

the cost to purchase the item of inventory as of the valuation date.

46
Q

What is the Market Ceiling

A

NRV (net realizable value) - Net selling price less the costs to compile and disposal of inventory

47
Q

What is Market Floor?

A

NPV - Normal Profit ( Net selling price less cost to complete and dispose of inventory) - Normal Profit

48
Q

Lower of cost or Market is used by ________ for which methods

A

U.S GAAP, LIFO or Retail

49
Q

Lower of cost and net realizable value is used by ___________ or _______ for which inventory

A

U.S GAAP and IFRS, U.S GAAP (FIFO and WA), and IFRS (All methods)

50
Q

Small losses from a decline in value are included in

A

COGS

51
Q

Any change in method should be _______ and if material ______________

A

disclosed of the nature and change and if material the effects on IS

52
Q

With ______ system the quantity of inventory is determined only by physical count, usually at-least annually

A

Periodic Inventory System

53
Q

What is the calculation of Determining COGS for Periodic Inventory System

A

BI + P - Ending = COGS

54
Q

With _____ inventory system, the inventory record of each item of inventory is updated for each purchase and each sale as they occur

A

Perpetual inventory system

55
Q

Under the _____ method, the cost of each item in inventory is uniquely identified to that item.

A

Specific identification method

56
Q

In periods of high rising prices, the ____ method results in highest ending inventory, the lowest COGS, Higher Net income

A

FIFO

57
Q

What is the calculation for weight average cost after each purchase

A

Total Cost of inventory available after each purchase/ Total Units available after each purchase

58
Q

The _______ inventory system is necessary for moving average method

A

Perpetual Inventory system

59
Q

Under regular LIFO, inventory is measured in units and the price at unit price, under ____ method, the inventory is measured in dollar and is adjusted for changing price levels.

A

Dollar-Value LIFO Method

60
Q

What is the calculation for Price Index for Dollar LIFO

A

Price Index = Ending Inventory at current year cost/ Ending inventory at base year cost

61
Q

What are the steps to calculate LIFO layer added at dollar-value LIFO

A

Base year cost is multiplied by the internally generated price index.

62
Q

The _____ is used for interim financial statements as a periodic inventor system

A

Gross Profit Method

63
Q

Which method is most closely the current cost for COGS and Ending Inventory

A

LIFO, FIFO

64
Q

In rising prices environment for LIFO how would Ending Inventory, COGS and Net income be effected

A

EI = Low, COGS = High, Income = Low

65
Q

In rising prices environment for FIFO how would Ending Inventory, COGS and Net income be effected

A

EI = High, COGS = Low, Income - High

Becker FAR (72 decks)

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