CAT CAT Inventory & Asset Management

Question 1

Under US GAAP, which inventory costing method assumes the most recently purchased items are sold first?

Accepted Answer

LIFO (Last-In, First-Out)

Answer

FIFO (First-In, First-Out)

Answer

Weighted Average Cost

Answer

Specific Identification

Question 2

Which inventory costing method is NOT permitted under IFRS but is allowed under US GAAP?

Accepted Answer

LIFO

Answer

FIFO

Answer

Weighted Average Cost

Answer

Specific Identification

Question 3

What does 'lower of cost or net realizable value' (LCNRV) require for inventory reporting?

Accepted Answer

Inventory must be written down if its net realizable value falls below its cost

Answer

Inventory is always recorded at purchase price

Answer

Inventory is written up to market value when prices rise

Answer

Net realizable value is used only for raw materials

Question 4

Which term describes the difference between a company's book inventory quantity and its actual physical count?

Accepted Answer

Inventory shrinkage

Answer

Obsolescence

Answer

Inventory turnover

Answer

Write-down

Question 5

How is inventory turnover ratio calculated?

Accepted Answer

Cost of Goods Sold ÷ Average Inventory

Answer

Net Sales ÷ Ending Inventory

Answer

Gross Profit ÷ Average Inventory

Answer

Total Assets ÷ Cost of Goods Sold

Question 6

What is the purpose of a perpetual inventory system?

Accepted Answer

To continuously update inventory records with every purchase and sale transaction

Answer

To count inventory once per year for the annual report

Answer

To record inventory purchases only at year-end

Answer

To calculate COGS at the end of each quarter