- What does the term "inventory" mean?
- A manufacturing firm would have what type(s) of inventory(ies)?
- A merchandising firm would have what type(s) of invetory(ies)?
- What is the objective of accounting for inventories?
- What is the primary basis of accounting for inventories?
- Explain the various cost flow assumptions for inventory.
- What should be the primary concern in selecting a cost flow assumption for inventories?
- When is a departure from the cost basis required in accounting for inventories?
- Explain the lower of cost or market approach to valuing inventory?
- What does the term "market" mean?
- What are the limits on the "market" number? What is the ceiling? what is the floor? How are they calculated? Why are a floor and ceiling limit imposed?
- Lower of cost or market may be applied either directly to each item, to major categories, or to the total of the inventory. Which approach provides the most conservative valuation of the inventory and why?
- When can inventories properly be stated above cost? What impact does valuing inventories above cost have on the financial statements?
- If a company has a firm purchase commitment, and the value of the items subject to that commitment have materially decreased at the end of the year, how should the resulting loss on the firm purchase commitment be accounted for?
- Identify two major differences between GAAP and IFRS with regard to inventory accounting.
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