1. How do rising costs affect ending inventory and cost of goods sold values using FIFO and weighted average cost flow assumptions?

2. Assume that you are the president of your company and paid a year-end bonus according to the amount of net income earned during the year. When prices are rising, would you choose a FIFO or weighted average cost flow assumption? Explain, using an example to support your answer. Would your choice be the same if prices were falling?

3. The ending inventory of CBCA Inc. is overstated by $5,000 at December 31, 2017. What is the effect on 2017 net income? What is the effect on 2018 net income assuming that no other inventory errors have occurred during 2018?

4. What is meant by the laid-down cost of inventory?

5. When should inventory be valued at less than cost? What does the term net realizable value mean?

6. What is the primary reason for using the LCNRV method of inventory valuation?

7. Why is estimating inventory useful?

8. How does the estimation of ending inventory differ between the gross profit method and the retail inventory method? Use examples to illustrate.