Section 2: 30–40%2C
Inventory
Exam insight
Inventory is one of the most calculation-heavy MCQ topics in FAR: FIFO, LIFO, weighted average, and LCNRV. The AICPA's favorite trick is a LIFO liquidation that asks about gross profit. When LIFO layers run out, older (lower) costs flow to COGS and push gross profit up, and candidates who miss this get it wrong every time. One more thing to lock in: LCNRV is applied item by item, not to the inventory as a whole.
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What AICPA wants you to know
- 1Calculate ending inventory and COGS under FIFO, LIFO, and weighted-average
- 2Apply the lower of cost or net realizable value (LCNRV) rule
- 3Analyze the impact of inventory errors on net income and retained earnings
- 4Identify what costs are included in inventory (product costs vs. period costs)
- 5Understand the LIFO reserve and LIFO liquidation