Wiley CPAexcel Exam Review 2014 Study Guide, Financial Accounting and Reporting

Module 10: Inventory

Overview

Inventory is defined as tangible personal property

(1) held for sale in the ordinary course of business, (2) in the process of production for such sale, or (3) to be used currently in the production of items for sale.

A. Determining Inventory and Cost of Goods Sold

B. Inventory Valuation and Cost-Flow Methods

C. Items to Include in Inventory

D. Consignments

E. Ratios

F. Long-Term Construction Contracts

G. Research Component—Accounting Standards Codification

H. International Financial Reporting Standards (IFRS)

Key Terms

Multiple-Choice Questions

Multiple-Choice Answers and Explanations

Simulations

Simulation Solutions

Inventory is tested on the Financial Accounting and Reporting section of the exam. The primary topics covered by questions on the exam are

1. Ownership of goods: The determination of which items are to be included in inventory taking into account items such as shipping terms and consignments.

2.Cost: The determination of which costs are to be assigned to inventory such as freight and overhead.

3. Cost flow assumptions: The determination of costs assigned to cost of goods sold and inventory under the various cost flow methods such as LIFO and FIFO.

4. Valuation: The determination of how and when inventories should reflect their market values using rules such as LCM.

A. Determining Inventory and Cost of Goods Sold

1. The primary basis of accounting for inventories is cost, which includes the cash or other fair value of consideration ...