Two important steps are necessary in the reporting of inventory. What are they?

What are two common characteristics of inventory at a merchandising company?

Identify and describe the three classifications of inventory within a manufacturing environment. What insights can be learned from analyzing that data?

Describe the concept of just-in-time inventory methods. What benefits does it offer companies?

Why is it necessary for a company using a perpetual inventory system to perform a physical inventory count?

A company using a periodic inventory system performs a physical inventory count for two reasons, what are they?

During a physical inventory count some inventory may be in transit. When does ownership transfer in FOB shipping point? FOB destination?

The cost of inventory includes _________________________.

How does a company compute the total cost of inventory and the cost of goods sold?

For a company to use the specific identification method of inventory costing what must it be able to do?

Does the cost flow assumption need to be consistent with the physical movement of inventory?

What are the three cost flow assumptions? Why is the word assumption used? How does the specific identification differ from a cost flow assumption?

What is the Cost of Goods Sold formula in a periodic system?

Using illustration 6-5 answer the following questions:

How are the total units (goods) available for sales computed?

Where does the number for ending units in inventory come from?

How are units sold computed? Write out the formula based upon the illustration.

What does the value assigned to ending inventory depend upon?

The sum of ___________ plus the cost of __________ must equal _________.

What does FIFO assume?

Identify and describe the two steps in determining Ending Inventory?

Under FIFO, companies obtain the cost of ending inventory by

What does LIFO assume?

Under LIFO, the cost of the latest (newest) good purchased are ___________.

Under LIFO, ending inventory is based on ________________ purchased.

Describe the formula used in the average cost method.

Which cost flow method is most used by U.S. companies? Why do you think this method is used most often?

Describe the consistency concept. Why do you think this is a concept in GAAP?

What is meant by the term lower-of-cost-or-market (LCM)? Why would a company apply this treatment rather than using the cost principle?

Describe the accounting convention called conservatism?

Under the LCM basis, market is defined as __________________________.