Inventory Valuation Methods Quiz

What is the value assigned to ending inventory if Planter’s uses a periodic LIFO system?

What is the value assigned to ending inventory if Planter’s uses a periodic average system?

What is the value assigned to cost of goods sold if Planter’s uses a periodic FIFO system?

When calculating net income, what must be considered to ensure accurate forecasting of future performance?

What is true regarding dollar-value LIFO?

What is required when using the gross profit method to estimate ending inventory?

What qualitative characteristic is important for analyzing net income's ability to forecast future performance?

In the research and development costs for Edwards Corporation, what is noted to be non-recoverable?

Inventory Valuation Methods (Questions 1-4)

Planter's Home-grown Ice Cream Farm has beginning inventory, purchases, and ending inventory figures
Unit and price information is available for each inventory item for the relevant period
LIFO (Last-In, First-Out): Ending Inventory valuation is $6,525.00
Average Cost Method: Ending Inventory valuation is $6,701.90
FIFO (First-In, First-Out): Cost of goods sold is $33,855.50
Perpetual FIFO: Cost of goods sold is $33,388.60

Dollar-Value LIFO (Question 5)

Starts with ending inventory at current costs
Creates LIFO layers for inventory costs.
Increases record-keeping costs for LIFO.
Not allowed for financial reporting under US GAAP

Gross Profit Method (Question 6)

To estimate ending inventory using the gross profit method, you need to know net sales and cost of goods sold

Net Income Forecasting (Question 7)

Net income is powerful for forecasting future profitability.
Be mindful that items like discontinued operations have limited value in predicting future financial performance.
This relates to the qualitative characteristic of relevance in financial accounting.

Research and Development Costs (Question 8)

Edwards Corporation incurred R&D costs in 2015 related to a future product launch in 2016.
Costs include materials, equipment, personnel, and indirect costs.
Estimated recoupment date is December 31, 2018.
Equipment is non-recoverable outside of this project.

Test your knowledge on various inventory valuation methods such as LIFO, FIFO, and the Gross Profit Method. This quiz covers key concepts, calculations, and implications of each method. Strengthen your understanding of how inventory valuation affects financial statements.