Question

1.

Which statement concerning lower-of-cost-or-net-realizable-value (LCNRV) is incorrect?

LCNRV is an example of a company choosing the accounting method that will be least likely to overstate assets and income.

The LCNRV basis is justified because of a decline in the selling price of the inventory item.

LCNRV is applied after one of the cost flow assumptions has been applied.

Under the LCNRV basis, market does not apply because assets are always recorded and maintained at cost.

2.

Ayayai Corp. sells six different products. The following information is available on December 31:

Inventory item		Units		Cost per unit		Net Realizable Value per unit		Estimated selling price
Tin		55		$470		$475		$485
Titanium		20		4700		4650		4790
Stainless steel		75		1880		1800		1860
Aluminum		75		330		270		275
Iron		40		380		390		400
Fiberglass		40		280		275		275

When applying the lower-of-cost-or-net-realizable-value rule to each item, what will Ayayai total ending inventory balance be?

$312000

$300975

$300700

$300300

3. Use the following information regarding Skysong, Inc. and Kingbird, Inc. to answer the question “Which amount is equal to Skysong, Inc.'s "days in inventory" for 2022 (to the closest decimal place)?” (Use 365 days for calculation.)

*	Year	Inventory Turnover	Ending Inventory
Skysong, Inc.	2020	*	$26800
*	2021	10.6	$31400
*	2022	10.2	$32400
*
Kingbird, Inc.	2020	*	$26340
*	2021	8.5	$25230
*	2022	9.2	$23010

35.8 days

34.4 days

39.7 days

42.9 days

4.

Use the following information regarding Cullumber Company and Oriole Company to answer the question “Which of the following is Cullumber Company's "cost of goods sold" for 2021 (to the closest dollar)?”

*	Year	Inventory Turnover	Ending Inventory
Cullumber Company	2020	*	$26450
*	2021	8.8	$29900
*	2022	8.2	$30260
*
Oriole Company	2020	*	$25860
*	2021	6.3	$24900
*	2022	7.4	$22510

$264034

$263120

$248132

$247940

5.

Use the following information regarding Crane Company and Cullumber to answer the question “Which of the following is Cullumber's "cost of goods sold" for 2022 (to the closest dollar)?”

*	Year	Inventory Turnover	Ending Inventory
Crane Company	2020	*	$26500
*	2021	8.7	$29990
*	2022	8.4	$30380
*
Cullumber	2020	*	$25700
*	2021	7.4	$24790
*	2022	7.2	$23160

$260913

$240100

$172620

$240100

6.

The difference between ending inventory using LIFO and ending inventory using FIFO is referred to as the

inventory reserve.

LIFO reserve.

FIFO reserve.

periodic reserve.

7.

The LIFO reserve is

the amount used to adjust inventory to historical cost.

the difference between the value of the inventory under LIFO and the value under average cost.

the difference between the value of the inventory under LIFO and the value under FIFO.

an amount used to adjust inventory to the lower of cost or market.

8.

Ayayai Corp. reported ending inventory at December 31, 2022 of $984000 under LIFO. It also reported a LIFO reserve of $172000 at January 1, 2022, and $246000 at December 31, 2022. Cost of goods sold for 2022 was $4018000. If Ayayai Corp. had used FIFO during 2022, its cost of goods sold for 2022 would have been

$4092000.

$4264000.

$3772000.

$3944000.

Answer 1

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Answer 1

Under the LCNRV basis, market does not apply because assets are always recorded and maintained at cost.

Answer 2
Ayayai Corp.
Inventory item	Units	Cost per Unit	Net Realizable Value per unit	Lower of cost or NRV	Total amount $
Tin	55.00	470.00	475.00	470.00	25,850.00
Titanium	20.00	4,700.00	4,650.00	4,650.00	93,000.00
Stainless Steel	75.00	1,880.00	1,800.00	1,800.00	135,000.00
Aluminum	75.00	330.00	270.00	270.00	20,250.00
Iron	40.00	380.00	390.00	380.00	15,200.00
Fiberglass	40.00	280.00	275.00	275.00	11,000.00
					300,300.00

So Ayayai total ending inventory balance is $ 300,300. Option D.

Answer 3
Days in inventory=	365/Inventory Turnover
Days in inventory=	365/10.2
Days in inventory=	35.8
Answer is Option A.

Answer 4
Cost of goods sold=	Inventory Turnover* Average Inventory
Average Inventory for 2021=	(Ending Inventory 2020+ Ending Inventory 2021)/2
Average Inventory for 2021=	(26450+29900)/2
Average Inventory for 2021=	28,175.00
Cost of goods sold=	8.8* 28175
Cost of goods sold=	247,940.00
Answer is Option D.

Answer 5
Cost of goods sold=	Inventory Turnover* Average Inventory
Average Inventory for 2022=	(Ending Inventory 2021+ Ending Inventory 2022)/2
Average Inventory for 2021=	(24790+23160)/2
Average Inventory for 2021=	23,975.00
Cost of goods sold=	7.2* 23975
Cost of goods sold=	172,620.00
Answer is Option C.

Answer 6

LIFO reserve.

Answer 7

the difference between the value of the inventory under LIFO and the value under FIFO.

Answer 8
Ayayai Corp.
Cost of goods sold- LIFO	4,018,000.00
Less: Ending LIFO reserve	246,000.00
Add: Opening LIFO reserve	172,000.00
Cost of goods sold- FIFO	3,944,000.00
Answer is Option D.