Deck 11: Inventory Costing: The Accountants World of Make-Believe

Question 1

What equation describes the periodic inventory system?

Answer 1

Beginning Inventory + Units Purchased - Units Sold = Ending Inventory

Question 2

Assume your organization has the following inventory changes during the fiscal year:
Beginning Inventory 1,000 units valued at $10 each
April purchases 600 units at $15 each
August purchases 2,100 units at $17 each
Total Units Remaining 500
Calculate the value of the ending inventory and the value of the inventory used (the inventory expense) for the year using both the FIFO and the LIFO method of cost-flow.

Answer 2

FIFO:
3,200 Units Used
1,000 units @ $10 each = $10,000
600 units @ $15 each = $19,000
1,600 units @ $17 each = $27,200
Inventory Expense $56,200
Remaining Inventory
Value of ending inventory = 500 @ $17 each
Value of ending inventory = $8,500
LIFO:
3,200 Units Used
2,100 units @ $17 each = $35,700
600 units @ $15 each = $ 9,000
500 units @ $10 each = $ 5,000
Inventory Expense $49,700
Remaining Inventory
Value of ending inventory = 500 @ $10 each
Value of ending inventory = $5,000

Question 3

Match the inventory valuation methods with their descriptions.

-__ specific identification

A) Assumes that newest inventory is used prior to previously acquired inventory.
B) Assumes inventory is commingled and value is based on mean costs.
C) Inventory is matched with items of inventory with its specific cost.
D) Assumes oldest inventory is used before newer inventory.

Answer 3

Inventory is matched with items of inventory with its specific cost.

Question 4

Match the inventory valuation methods with their descriptions.

-__ first-in-first out (FIFO)

A) Assumes that newest inventory is used prior to previously acquired inventory.
B) Assumes inventory is commingled and value is based on mean costs.
C) Inventory is matched with items of inventory with its specific cost.
D) Assumes oldest inventory is used before newer inventory.

Question 5

Match the inventory valuation methods with their descriptions.

-__ last-in-first-out (LIFO)

A) Assumes that newest inventory is used prior to previously acquired inventory.
B) Assumes inventory is commingled and value is based on mean costs.
C) Inventory is matched with items of inventory with its specific cost.
D) Assumes oldest inventory is used before newer inventory.

Question 6

Match the inventory valuation methods with their descriptions.

-__ weighted average

A) Assumes that newest inventory is used prior to previously acquired inventory.
B) Assumes inventory is commingled and value is based on mean costs.
C) Inventory is matched with items of inventory with its specific cost.
D) Assumes oldest inventory is used before newer inventory.