F3: Assets and Related Topics

Question 1

Items reported as part of inventory

Answer 1

Duplication of computer software
Packaging products

Question 2

FOB Shipping Point
FOB Destination

Answer 2

Shipping Point recognized in an inventory right the way
Destination recognized when received

Question 3

Lower of Cost or Market

Cost $18.00
Replacement $17.00
Est cost to sell $5.00
Selling Price $30.00
Profit margin - 25%

Answer 3

3 components
Replacement Cost - 17.00
Floor - NRV-(Selling Price x Profit Margin) or 25-(30*25%)= 17.50
Ceiling NRV - (Selling Price - Est Cost to Sell) or 30-5=25

Pick the one in the middle. In this case it is $17.50

Question 4

Lower of Cost and Net Realizable Value

Cost $18.00
Replacement $17.00
Est cost to sell $5.00
Selling Price $30.00
Profit margin - 25%

Answer 4

3 components

Cost - 18.00
Replacement Cost - 17.00
NRV - 25.00 (30-5) or Selling price - Cost to Sell