Topics include inventory, capitalization & fixed assets.
1. Under what circumstances would a company need to estimate its inventory? What are the differences between using the gross profit method and retail inventory method for estimating inventory? Which method of estimation, gross profit or retail inventory, is best? Explain your answer.
2. What are the criteria for capitalization of fixed assets? What items are included in the cost of a fixed asset? Should interest be included in the cost of a fixed asset? Why or why not?
3. How do we account for the disposition of fixed assets? What are the differences in how the exchanges of assets are handled, pending on whether they are similar or dissimilar? What is the rationale for these differences? What is the impact to the companies’ financial statements?