Title: Question 1
QA_Ori:
(a) FIFO: The cost of the first (earliest) items purchased in inventory flow to cost
(b) LIFO: The cost of the last (most recent) items purchased in inventory flow to cost
Title: Question 2
QA_Ori:
Merchandise inventory is disclosed on the balance sheet as a current asset. It
Title: Question 3
QA_Ori:
Incidental costs sometimes are ignored in computing the cost of inventory
because the expense of tracking such costs on a precise basis can outweigh the
Title: Question 4
QA_Ori:
LIFO will result in the lower cost of goods sold when costs are declining
QA_Ori:
The full-disclosure principle requires that the nature of the accounting change,
Title: Question 6
QA_Ori:
Title: Question 7
QA_Ori:
No; the consistency concept does not preclude changes in accounting methods
Title: Question 8
QA_Ori:
Many people make important business decisions based on period-to-period
fluctuations in a company’s financial numbers, including gross profit and net income.
Title: Question 9
QA_Ori:
An inventory error that causes an understatement (or overstatement) for net
income in one accounting period, if not corrected, will cause an overstatement (or
Title: Question 10
QA_Ori:
Market usually means replacement cost of inventory when applied in the LCM.
Title: Question 11
QA_Ori:
The accounting constraint of conservatism guides preparers of accounting
Title: Question 12
QA_Ori:
Title: Question 13
QA_Ori:
QA_Ori:
Title: Question 14
QA_Ori:
Title: Question 15
QA_Ori:
Cost of goods available for sale equals ending inventory plus cost of sales. As
of March 31, 2011, this is computed as ($ thousands):
Title: Question 16
QA_Ori:
Cost of goods available for sale equals ending inventory plus cost of sales. As
Title: Question 17
QA_Ori:
Merchandise inventory (EUR thousands) comprises 46.5% (236,988 / 509,708)
Title: Quick Study 6-1
QA_Ori:
FIFO—Perpetual
Date Goods
Purchased
Cost of Goods Sold Inventory Balance
1/1 320 @ $3.00 = $ 960.00
1/26 320 @ $3.00 =$
Alternate solution format
FIFO: 100 @ $3.34 = $ 334.00
Title: Quick Study 6-2
QA_Ori:
LIFO—Perpetual
Date Goods
Purchased
Cost of Goods Sold Inventory Balance
1/1 320 @ $3.00 = $ 960.00
1/26 100 @ $3.34 =$
334.00
Alternate solution format
Title: Quick Study 6-3
Weighted Average—Perpetual
QA_Ori:
Date Goods Purchased Cost of Goods Sold Inventory Balance
1/1 320 @ $3.00 = $ 960.00
1/25 100 @ $3.34 320 @ $3.00
Alternate solution format
Weighted average:
320 @ $3.00 = $ 960.00
Title: Quick Study 6-4A
QA_Ori:
Ending Cost of
FIFO—Periodic Inventory Goods Sold
FIFO
Title: Quick Study 6-5A
QA_Ori:
Ending Cost of
LIFO—Periodic Inventory Goods Sold
LIFO
Title: Quick Study 6-6A
QA_Ori:
Ending Cost of
Weighted Average—Periodic Inventory Goods Sold
Weighted Average ($1,550/ 500 = $3.10 cost per
unit)
Title: Quick Study 6-7
QA_Ori:
Beginning inventory 10 units @ $60 $ 600
Plus
Title: Quick Study 6-8
QA_Ori:
FIFO—Perpetual
Date Goods
Purchased
Cost of Goods Sold Inventory Balance
Title: Quick Study 6-9
QA_Ori:
LIFO—Perpetual
Date Goods
Purchased
Cost of Goods
Sold
Inventory Balance
12/7 10 @ $ 6 = $ 60 10 @ $ 6 = $ 60
12/14 20 @ $12 = $240 10 @ $ 6 = $300
20 @ $12
Title: Quick Study 6-10
Weighted Average—Perpetual
QA_Ori:
Date Goods
Purchased
Cost of Goods
Sold
Inventory Balance
12/7 10 @ $6 = $60 10 @ $6 = $ 60
Title: Quick Study 6-11
QA_Ori:
Specific Identification— Perpetual
Ending inventory under specific identification:
Title: Quick Study 6-12A
QA_Ori:
Ending Cost of
FIFO— Periodic Inventory Goods Sold
FIFO
Title: Quick Study 6-13A
QA_Ori:
Ending Cost of
LIFO—Periodic Inventory Goods Sold
LIFO
Title: Quick Study 6-14A
QA_Ori:
Ending Cost of
Weighted Average—Periodic Inventory Goods Sold
unit)*
*If unit cost is not rounded, then ending inventory is $340 and goods sold is $170.
Title: Quick Study 6-15A
QA_Ori:
Ending Cost of
Specific Identification—Periodic Inventory Goods Sold
Specific Identification
Title: Quick Study 6-16
QA_Ori:
1. LIFO
Title: Quick Study 6-17
QA_Ori:
Units in ending inventory
Units stored in basement 1,300 units
Title: Quick Study 6-18
QA_Ori:
Cost $14,000
Plus
The $150 advertising cost and the $1,250 cost for sales staff salaries are included in
Title: Quick Study 6-19
QA_Ori:
Per Unit Total Total LCM – Items
Inventory Items Unit
s
Cost Marke
t
Cost Market
Title: Quick Study 6-20
QA_Ori:
a.Overstates 2013 cost of goods sold.
b.Understates 2013 gross profit.
Title: Quick Study 6-21
QA_Ori:
Inventory turnover = Cost of goods sold/Average merchandise inventory
Days’ sales in inventory = Ending Inventory/Costs of goods sold x 365
Title: Quick Study 6-22B
QA_Ori:
Goods available for sale
Inventory, January 1 $190,000
Title: Quick Study 6-23
QA_Ori:
a. Both IFRS and U.S. GAAP provide broad and similar guidance on the
accounting for items and costs making up merchandise inventory. Specifically,
b. Yes, companies reporting under IFRS can apply cost flow assumptions in
c. U.S. GAAP prohibits any later increase in the recorded value of inventory that