CHAPTER 6
Reporting and Analyzing Inventory
Study Objectives
1. Describe the steps in determining inventory quantities.
2. Explain the basis of accounting for inventories and apply the inventory cost flow methods under a periodic inventory system.
3. Explain the financial statement and tax effects of each of the inventory cost flow assumptions.
4. Explain the lower of cost or market basis of accounting for inventories.
5. Compute and interpret the inventory turnover ratio.
6. Describe the LIFO reserve and explain its importance for comparing results of different companies.

Summary of Questions by Study Objectives and Bloom’s Taxonomy
Item

SO

BT

Item

SO

BT

Item

SO

BT

Item

SO

BT

Item

SO

BT

Questions
1.

1

C

6.

2

AP

11.

2

K

16.

4

AP

21.

6

C

2.

1

K

7.

2

C

12.

3

C

17.

4

K

22.

7

C

3.

1

K

8.

2

C

13.

3

C

18.

2

K

23.

7

C

4.

1

C

9.

2

K

14.

3

C

19.

3

C

24.

8

AN

5.

1

C

10.

2

C

15.

4

C

20.

5

AN

Brief Exercises
1.

1

C

3.

2

AP

5.

3

AP

7.

5

AP

9.

7

AP

2.

2

AP

4.

3

C

6.

4

AP

8.

6

C

10.

8

AN

Exercises
1.

1

AN

4.

2

AN

7.

2, 3

AP

10.

5, 6

AP

13.

8

AN

2.

1

AN

5.

2

AP

8.

5

AP

11.

7

AP

14.

8

AN

3.

1

K

6.

2, 3

AN

9.

4

AP

12.

7

AP

9.

3, 7

AP

9.

3, 7

AP

Problems: Set A
1.

1

AN

3.

2, 3

AP

5.

2, 3

AP

7.

5, 6

AP

2.

2, 3

AP

4.

2, 3

AN

6.

2, 3

AP

8.

3, 7

AP

Problems: Set B
1.

1

AN

3.

2, 3

AP

5.

2, 3