1. To place the proper valuation on inventory, a business must determine which costs should be included in inventory cost. Getting goods ready to sell should include what items?

[Answer here]

2. If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing—FIFO (First In, First Out), LIFO (Last In, First Out), or weighted average cost—will yield the lowest annual after-tax net income? Which method will yield the highest after-tax net income in a scenario where the price level is steadily declining?

[Answer here]

3. Some circumstances justify departures from the historical cost approaches of FIFO, LIFO, and weighted average cost. Several additional inventory methods may be used when circumstances warrant. Identify each of these alternative methods. Describe each alternative method. Include an example of when each method may be applied.

[Answer here]

4. Given the following information, calculate the inventory turnover for a Company. Evaluate the trend results.

· 2020: Cost of goods sold— $2,168,000; Beginning inventory— $408,000; Ending inventory— $489,000.

· 2021: Cost of goods sold— $945,000; Beginning inventory— $436,000; Ending inventory— $408,000.

[Answer here]

5. Identify which methods could be used to determine whether there has been shrinkage or shortage in the physical inventory.

[Answer here]

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