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Flashcards in INVENTORY Deck (67)
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1

List some examples of natural resources.

Items such as gravel pits, coal mines, tracts of timber land, and oil wells.

2

List the requirements for inclusion in plant assets.

Currently used in operations; Have a useful life extending beyond one year; Have physical substance.

3

How do land improvements differ from land?

This asset differs from land in that it has a finite useful life and is depreciated.

4

List the two steps of Dollar Valued (DV) Last In First Out (LIFO) Retail.

Apply DV LIFO; Multiply by the cost ratio.

5

What is in the cost/retail numerator?

Net purchases at cost.

6

What is in the cost/retail denominator?

Net purchases at retail plus additional markups minus additional markdowns.

7

Define "base-year dollars".

Price level for the pool at the beginning of the year Dollar Valued (DV) Last In First Out (LIFO) adopted.

8

List the steps in applying Dollar Valued (DV) Last In First Out (LIFO retail method.

DV LIFO is applied to inventory at retail; FIFO retail method cost/retail ratio is applied to retail layer; Cost layer is added to beginning inventory at DV LIFO cost.

9

List the Dollar Valued (DV) Last In First Out (LIFO) conversion index formula.

Ending Inventory in Current-Year Dollars / Ending Inventory in Base-Year Dollars.

10

List the advantages of Dollar Valued (DV) Last In First Out (LIFO).

Reduces the effect of the liquidation; Allows companies to use FIFO internally; Reduces clerical costs.

11

How does the double-extension method affect ending inventory?

The ending inventory is extended at both base year cost and ending current year cost.

12

Why would an entity utilize Dollar Valued (DV) Last In First Out (LIFO)?

Reduces the effect of the LIFO liquidation.

13

List the attributes of Last In First Out (LIFO).

Matching of revenues and expenses is significantly improved over FIFO; Income tax advantages associated with LIFO; Balance sheet presentation is less than ideal

14

What effect does using Last In First Out (LIFO) have on the income statement?

Matching of revenues and expenses on the income statement become significantly improved.

15

List the attributes of First In First Out (FIFO).

Most closely approximates actual physical flow of goods for most companies; Balance sheet valuation of inventory is at more desired current cost; Matching of revenues and expenses on income statement is not ideal.

16

List some reasons to avoid Last In First Out (LIFO) liquidation.

Increases taxes; Does not match current period expenses and revenues.

17

What does Ending Inventory reflect in First In First Out (FIFO)?

Reflects the latest costs.

18

List the reasons for a Last In First Out (LIFO) liquidation.

Poor planning; Lack of supply.

19

What is the main reason for using Last In First Out (LIFO) in periods of rising costs?

Tax minimization.

20

What elements affect fixed overhead rates?

Subject to estimation errors and affected by the choice of denominator measure and the budgeting horizon reflected in the denominator.

21

What does inventory for a typical business entity include?

Includes property held for resale, property in the process of production, and property consumed in the process of production.

22

Is fixed overhead one of the four manufacturing input costs?

Yes, this is one of the input costs.

23

How is the ownership of goods shipped Free On Board (FOB) destination determined?

The seller owns the goods until they reach destination.

24

What merchandise is included in ending inventory?

All owned inventory, regardless of location.

25

What inventory costs are required to be capitalized?

All costs necessary to bring the item of inventory to salable condition.

26

Who is the owner of consigned goods?

The consignor (firm that shipped the inventory to consignee).

27

When is inventory reassessed under International Financial Reporting Standards (IFRS)?

At the end of each financial reporting period.

28

What is the net realizable value as defined by International Financial Reporting Standards (IFRS)?

The estimated selling price in the ordinary course of business less the estimated costs of completion and the estimate costs necessary to make the sale.

29

Can a company following International Financial Reporting Standards (IFRS) standards use Last In First Out (LIFO) cash flow assumptions?

No, the company cannot use Last In First Out (LIFO) cash flow assumptions.

30

Under International Financial Reporting Standards (IFRS), is inventory reported at lower of cost or market OR at lower of cost or net realizable value?

Lower of cost or net realizable value.