Inventory Cost Flow Assumptions

In periods of rising prices, which inventory cost flow assumption generally results in the highest reported net income?

For tax purposes during periods of inflation, which inventory costing method would a company most likely use and why?

A company uses FIFO. In a period of falling prices, which of the following is true?

Which inventory costing method is most likely to align with the actual physical flow of goods for a beverage company like Coca-Cola, assuming they want to minimize spoilage?

What is the primary objective of the lower of cost or market (LCM) rule?

If the market value of a company's inventory is higher than its cost, according to GAAP, at what value should the inventory be reported on the balance sheet?

A retailer has Halloween candy that cost them $1 per bag but plans to sell it for $0.50 per bag after Halloween. Under the lower of cost or market (LCM) rule, at what value should the retailer list this inventory?

A company's inventory includes 50 units with a cost of $20 each and a market value of $15 each, and 30 units with a cost of $25 each and a market value of $30 each. What is the total value of the inventory using the lower of cost or market (LCM) rule?

In the context of financial statements, where would a company's inventory valuation method (e.g., FIFO, weighted average) typically be disclosed?

Coca-Cola uses average cost and FIFO for inventory valuation. Why might Coca-Cola choose to use these methods rather than specific identification?

Why might specific identification not be a suitable inventory valuation method for a beverage company like Coca-Cola?

What is the difference between the cost flow assumption and the physical flow of inventory?

If a company overstates its ending inventory in Year 1, what is the effect on cost of goods sold (COGS) in Year 1?

A company mistakenly overstates its ending inventory in Year 1. What is the impact on net income in Year 2?

If a company understates its ending inventory in Year 1 due to a counting error, what is the effect on retained earnings at the end of Year 1?

A company's ending inventory in Year 1 is overstated by $10,000 due to a counting error. Assuming the error is not corrected, what will be the effect on the company's retained earnings at the end of Year 2?

Calculate the Cost of Goods Available for Sale: Beginning inventory of 10 units at $5 each, purchase of 20 units at $6 each, and another purchase of 15 units at $7 each.

A company has a beginning inventory of 50 units. During the period, they purchased 150 units and sold 175 units. How many units are in the ending inventory?

A company starts with 50 units at $10 each. It purchases 100 units at $12 each, then sells 75 units. Under FIFO, what is the cost of goods sold?

Inventory: Beginning 20 units @ $3. Purchase 30 units @ $3.5. Sale of 35 units. Under FIFO, what is the value of the ending inventory?

A company has a beginning inventory of 100 units at a cost of $10 each. They purchase 50 units at $12 each. If they sell 75 units, what is the cost of goods sold (COGS) under LIFO?

Consider the following: Beginning inventory 10 units @ $3. Purchased 5 units @ $4. Sold 12 units. LIFO cost of goods sold?

A company begins with 20 units at $5 each. It purchases 30 units at $6 each. Then, it sells 40 units. Under the weighted average method, what is the cost of goods sold?

Beginning inventory 30 @ $2 and purchased40 @ $3. Sold 50 at $5 each. Weighted Average.

A company has certain units specifically identified as costing $10 each. Due to obsolescence, the market value of these units declines to $8 each. Which of the following statements is true?

Why is specific identification often impractical for companies dealing with homogenous goods?

Given a beginning inventory of 50 units and purchases of 150, if 175 units are sold, what determines the final count?

What is the initial effect on the balance sheet and income statement if ending inventory at the end of Year 1 is overstated?

A company uses drones to count its inventory, but due to technical issues, the count is inaccurate. Which part of the accounting process is impacted?

In a period of rising prices, which inventory method would typically show the highest value for ending inventory on the balance sheet?

Why do companies use different cost flow assumptions for inventory, like LIFO or FIFO?

Which of the following is an advantage of using the weighted-average cost method for inventory valuation?

Which of the following best describes the term "net realizable value"?

A company that historically used the LIFO method decides to switch to FIFO. How should this change be reflected in the financial statements?

Company A sells high-end, custom-made furniture, while Company B operates a large supermarket. Which inventory valuation method would be most appropriate for each company?

What is the likely result on the income statement if a company fails to adhere to the lower of cost or market principle when valuing its inventory?

Which situation would suggest a company should use the lower of cost or market rule for its inventory?

What happens if an auditor discovers that their client overstated their ending inventory?