lcm / lcnrv / perpetual / periodic

what is the difference between the periodic and perpetual system

perpetual: inventory is updated each time a sale is made

periodic: updated at the end of the period to reflect accurate inventory

what is the equation for the periodic system? of how to calculate cogs

beg invent + net purch - end inv = COGS

which one uses temporary accounts? periodic or perpetual?

periodic

when inventory loses value, what are the two valuation methods you can use?

Lower of Cost or Market (LCM) or Lower of Cost or Net Realizable Value (LCNRV)

when using LIFO or Retail systems, and then inventory loses value, which valuation methods do you have to use? LCM or LCNRV?

LCM

when using FIFO or Avg cost systems, and then inventory loses value, which valuation methods do you have to use? LCM or LCNRV?

LCNRV

steps of the “Lower or Cost or Net realizable value valuation method”

1. determine historical cost

2. determine NRV (Selling price less normal selling cost)

3. Like lower of cost or NRV

4. Make journal entry, if necessary

What is the journal entry for an inventory write down

COGS xx

Inventory xx

OR

Loss inventory write-down xx

Inventory xx

both are approved by GAAP

what are the steps for the Lower of Cost or Market (LCM) used for LIFO and retail inv. valuation method?

1. determine historical cost

2. determine market (replacement cost - subject to ceiling and floor value)

3. select lower of cost or market

4. make journal entry, if necessary

which one is more conservative? LCM or LCNRV

LCM

how do you determine the market price?