Question

Inventory - ASC 330

Instructions- fill in the blanks by searching the answer in thestandard, or answer the question (MC or TF)

Inventory
Tangible personal property of the following:
1. held for sale --> merchandise, finished goods
2. in the course of production --> work in process
3. to be consumed in the production --> raw materials

1. Initial measurement
Inventories are measured at _______ when first recognized

2. Cost flow assumptions
One of the following assumptions is made to determine the cost ofinventory:
1. First-in First-out (FIFO): Items that came in first are soldfirst
2. Last-in First-out (LIFO): Items that came in last are soldfirst
3. Average method: Weighted average cost is applied as unitcost

T

F


3. Subsequent measurement
If the market is lower than the cost
--> inventory is measured at the market
--> "Lower of Cost or Market" (LCM)

T

F

4. Market
a. The market refers to current replacement cost
b. If net realizable value (NRV) is lower that current replacementcost
--> NRV is ___________

c. If current replacement cost is lower than (a)
--> (a) is the __________

5. Lower of Cost or Market (LCM) summary
(a) current replacement cost
(b) net realizable value
(c) net realizable value - normal profit margin

If (c) < (a) < (b) --> market = (_a)
If (c) < (b) < (a) --> market = (_b)
If (a) < (c) < (b) --> market = (_c)