CAT Inventory & Asset Management Flashcards
6 cards from real CAT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CAT Inventory & Asset Management flashcards as text
Under US GAAP, which inventory costing method assumes the most recently purchased items are sold first?
Answer: LIFO (Last-In, First-Out)
LIFO assumes the last units purchased are the first units sold, often resulting in higher cost of goods sold in a rising price environment.
Which inventory costing method is NOT permitted under IFRS but is allowed under US GAAP?
Answer: LIFO
IFRS prohibits LIFO because it can produce outdated balance sheet values and is considered less representative of actual inventory flow.
What does 'lower of cost or net realizable value' (LCNRV) require for inventory reporting?
Answer: Inventory must be written down if its net realizable value falls below its cost
LCNRV requires recognizing a loss when inventory's expected selling price minus completion costs is lower than its recorded cost.
Which term describes the difference between a company's book inventory quantity and its actual physical count?
Answer: Inventory shrinkage
Inventory shrinkage refers to losses from theft, damage, or administrative errors that reduce actual stock below recorded levels.
How is inventory turnover ratio calculated?
Answer: Cost of Goods Sold ÷ Average Inventory
Inventory turnover measures how many times inventory is sold and replaced in a period, using COGS divided by average inventory.
What is the purpose of a perpetual inventory system?
Answer: To continuously update inventory records with every purchase and sale transaction
A perpetual system maintains real-time inventory balances by recording each transaction immediately, improving accuracy and control.