UARK Exam 4 Int. Acc. Rowe

How do you determine the cost of inventory using the relative sales value method

(Beginning inventory + Inventory purchases) - Ending inventory Allocate joint costs based on the prices at which products will be sold

How is "Goods available for sale" calculated

Adding the beginning inventory and the amount of goods that have been purchased or manufactured.

What costs are considered period costs

All other indirect costs that are incurred in production. Overhead and sales and marketing expenses are common examples

Where is inventory reported in the financial statements

Balance Sheet

What is an inventory cost flow assumption

Cost of an inventory item changes from when it is acquired or built and when it is sold

How do you determine inventory turnover

Dividing the cost of goods by average inventory for the same period

How do you determine the cost of ending inventory and cost of goods sold under LIFO

Ending Inventory = Beginning Inventory + Purchases -Cost of Goods Sold (COGS) Determine the cost of your most recent inventory. Multiply it by the amount of inventory sold

How do you determine the cost of ending inventory and cost of goods sold under FIFO

Ending Inventory = Beginning Inventory + Purchases -Cost of Goods Sold (COGS) The inventory and cost of goods sold would be the same at the end of the month, whether a perpetual or periodic system is used.

How do you determine the cost of ending inventory and cost of goods sold under weighted average

Ending Inventory = Beginning Inventory + Purchases -Cost of Goods Sold (COGS) To find the cost of goods available for sale, you will need the total amount of beginning inventory and recent purchases

What conditions must be present for the capitalization period of interest to begin and when does it end

Expenditures for the capital asset have been made. Activities necessary to get the capital asset ready for its intended use are in progress. Interest costs are being incurred.

What are the different measures/amounts that can be used to value inventory

FIFO, LIFO, and Weighted Average Cost

What are the different inventory costing methods

FIFO, LIFO, and weighted average cost

Under what conditions does a company recognize a gain or a loss on the sale of fixed assets

If the cash or trade-in allowance received is greater than the book value of the asset A loss results from the disposal of a fixed asset if the cash or trade-in allowance received is less than the book value of the asset

Why might management use the gross profit method for inventory costing, and how is it performed

If you don't have to actually physically count the inventory, so it is less complicated and takes less time -Process: Beginning inventory + purchases - sales at cost(sales at selling price - gross profit) = ending inventory cost -Determine Gross Profit Percentage you want the gross profit on selling price

How do you account for long-term noncancellable purchase commitments

In the form of a purchase order; on which is stated a specific number of units that a supplier is authorized to ship, along with the price the buyer is authorized to pay and the date by which the buyer expects delivery.

What is the Lower-of-cost or net realizable value, how is it applied to inventory, and how is it determined

Inventory should be reported at the lower of its cost or the amount at which it can be sold

What is a LIFO reserve

Measures the difference between the (FIFO) and (LIFO) cost of inventory for bookkeeping purposes.

What problem does Dollar-value LIFO seeks to alleviate, and how does it do it

Method of determining cost by using "base-year" costs expressed in total dollars rather than the quantity and price of specific goods as the unit of measurement

What is LIFO liquidation

Occurs when a company that uses LIFO inventory costing method liquidates its older LIFO inventory

What land, Buildings and Equipment costs are capitalized

Original contract or purchase price. Brokers' commissions. Closing fees, such as title search and legal fees. Real estate surveys. Grading, filling, draining, clearing. A capitalized cost is an expense added to the cost basis of a fixed asset on a company's balance sheet

What costs are considered product costs

Product costs are those directly related to the production of a product or service intended for sale Direct material, direct labor, and manufacturing overhead are common examples.

What costs are capitalized for self-constructed assets

Production costs of property produced

What land, Buildings and Equipment costs are expenses

Purchase price Sales taxes Transportation fees Insurance paid to cover the item during shipment Assembly Interest payments Real estate commissions Legal fees Bank fees Title search fees

What are the characteristics of a perpetual inventory system

Purchases of merchandise are debited to Inventory. Freight-in is debited to Inventory. Purchase returns and allowances and purchase discounts are credited to Inventory. Cost of goods sold is debited and Inventory is credited for each sale. Subsidiary records show quantity and cost of each type of inventory on hand.

What are the different categories of inventory that all get reported as inventory

Raw Materials, Work-In-Process, Finished Goods, and Maintenance, Repair, and Overhaul

What are the common disclosures for inventories

Raw materials Work-in-process Finished goods Manufacturing supplies Packaging supplies

Under what conditions can a gain or loss be realized on a nonmonetary exchange of plant assets

Should be recognized, unless the transaction results in a gain and has no commercial substance

How does an error/misstatement of inventory effect net income that period and future periods

The ending inventory is overstated, cost of goods sold is understated, resulting in an overstatement of gross margin and net income

What is the net book value of an asset

The historical cost of an asset, less any amounts recorded for depreciation, amortization, or depletion

How should plant assets purchased on long-term credit/financing contracts be accounted for

The present value of the future payments

How do you calculate weighted average accumulated expenditures

The product of expenditure and per unit capitalization period

What are the major characteristics of a plant asset

They are used directly in operations or revenue generation. They have a useful life longer than one year. They are tangible, meaning they have a physical presence

What does the concept of "avoidable interest" mean

To estimate the amount of interest that theoretically could have been avoided if expenditures had not been made on qualifying assets

What impact does inventory costing have on the balance sheet and income statement when prices are increasing/decreasing

When prices are rising, you prefer LIFO because it gives you the highest cost of goods sold and the lowest taxable income. When prices are falling ending inventory under LIFO will be higher than ending inventory under FIFO; Cost of goods sold will be less under LIFO compared to FIFO; and therefore, profits under LIFO will be higher than FIFO.

What is "Goods available for sale"

When the cost of goods purchased is added to the beginning inventory