I 1 perpetual inventory a legal title passes when

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i 1.Perpetual inventory a.Legal title passes when goods are systemdelivered to common carrier.l 2.Periodic inventory systemb.Goods are transferred to another companybut title remains with transferor.a 3.F.o.b. shipping pointc.Purchase discounts not taken are includedin inventory cost.c 4. Gross methodd.If LIFO is used for taxes, it must be usedfor financial reporting.g 5. Net methode.Items sold are those acquired first.h 6. Cost indexf.Items sold are those acquired last.k 7. F.o.b. destinationg.Purchase discounts not taken areconsidered interest expense.e 8. FIFOh.Used to convert ending inventory at year-end cost to base year cost.f 9. LIFOi.Continuously records changes ininventory.b 10. Consignmentj.Items sold come from a mixture of goodsacquired during the period.j 11. Average costk.Legal title passes when goods arrive atlocation.d 12. IRS conformity rulel.Adjusts inventory at the end of the period.CPA Exam Questions1.d.8-26CPA / CMA REVIEW QUESTIONS
Chapter 08 - Inventories: Measurement2.c.Under the net method, purchases are recorded net of the discount:$3,600 x 98% = $3,5283.b.Average Cost = $4,950 / 140 units = $35.36 per unitEnding Inventory = $35.36 x 5 = $176.794.a.5 units x $30 = $1505. c.5 units x $50 = $250 6.b.If the inventory balance was lower using FIFO than LIFO, then prices during the period were moving downward. By using FIFO during such a period, the higher priced items are sold first with lower-priced goods remaining in the ending inventory.7.b.InventoryLayerLayerat base at baseCostat current EndingDateyear costyear costIndexyear costInventory1/1/11 $100,000 1.00 $100,00012/31/11 120,000 $20,000 1.05 $21,000 121,00012/31/12 128,000 8,000 1.10 8,800 129,8008-27
Chapter 08 - Inventories: MeasurementCMA Exam Questions1. c.The company began March with 3,200 units in inventory at $64.30 each. The March 4 purchase added 3,400 additional units at $64.75 each. Under FIFO, the 3,600 units sold on March 14 were the oldest units. That sale eliminated all of the 3,200 units priced at $64.30 and 400 of the units priced at $64.75, leaving an inventory of 3,000 units at $64.75 prior to the March 25 purchase. On March 25, 3,500 units were acquired at $66. The 3,450 units sold on March 28 were the 3,000 remaining units priced at $64.75 and 450 units priced at $66. The ending inventory consists of 3,050 units at $66 each, or $201,300. The answer would have been the same under the periodic FIFO method.2.a.The ending inventory consists of 3,050 units (beginning inventory plus purchases, minus sales). Under the periodic LIFO method, those units are valued at the oldest prices for the period, which is $64.30 of the beginning inventory. Multiplying $64.30 times 3,050 units produces a total inventory value of $196,115.3.a.Under the perpetual LIFO method, the company begins with 3,200 units at $64.30. Added to this is the March 4 purchase of 3,400 units at $64.75. The March 14 sale uses all of the March 4 purchase and 200 of the original inventory units. Thus, the firm is left with 3,000 units at $64.30. The March 25 purchase of 3,500 at $66 is added to the previous 3,000 units. The March 28 sale of 3,450 units comes entirely from the March 25 purchase, leaving just 50 of those units at $66 each. Thus, at the end of the

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