Section 2: 30–40%2C
Inventory
Exam Insight
Inventory is one of the most calculation-heavy MCQ topics in FAR - LIFO, FIFO, weighted average, LCNRV. The AICPA's favorite trick: give you a LIFO liquidation scenario and ask about gross profit. When LIFO layers are liquidated, older (lower) costs hit COGS and inflate gross profit - candidates who don't spot the liquidation get this wrong every time. Also know LCNRV applies item-by-item, not in aggregate.
CPA Exam Lab is an independent study resource and is not affiliated with, endorsed by, or sponsored by the AICPA® or NASBA. Practice questions are original content created for study purposes. “CPA” is a registered trademark of the AICPA.
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