Inventory

On Your Test

You will be expected to know the following for multiple-choice concept questions. Almost all questions will relate to these things:

Who has ownership of inventory in-transit

What is included in cost of goods sold

How inventory is valued and reported on the balance sheet

Determine the difference in cost of goods sold and inventory using FIFO, LIFO and Weighted Average methods

Which method gives higher or lower income in times of inflation or deflation
Which method gives inventory value nearest to current fair market value

Why is lower of cost or market applied to inventory value
When should a company write-down of inventory

Identify the differences in the periodic and perpetual methods

The impact inventory errors have on cost of goods sold and inventory

You will be asked to do the following on problems and multiple-choice problems that require calculations. It boils down to this:

Compute cost of goods sold

Compute the value of inventory and cost of goods sold using FIFO, LIFO, W.A.

Apply LCM and determine the write-down to inventory required

Record inventory transactions using the periodic method
Record inventory transactions using the perpetual method

Determine the actual value of inventory owed considering inventory in transit