Question 1

A company uses the FIFO inventory method. At year-end, Product A has a cost of $50, a selling price of $60, costs to sell of $5, and a replacement cost of $48. What is the per-unit carrying amount of Product A in the balance sheet?

Accepted Answer

Identify Inventory Method (FIFO). Rule: Lower of Cost or Net Realizable Value (NRV). NRV = Selling Price - Costs to Sell. Compare Cost vs NRV.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using Replacement Cost (Market) which applies to LIFO; confusing NRV with Market.

A company uses the FIFO inventory method. At year-end, Product A has a cost of $50, a selling price of $60, costs to sell of $5, and a replacement cost of $48. What is the per-unit carrying amount of Product A in the balance sheet?

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 4

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