What to know
Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.
Financial Statement Analysis
Analysis of Inventories practice questions
Analysis of Inventories is part of CFA Level I Financial Statement Analysis. Financial Statement Analysis questions require careful reading of accounting choices, ratios, cash flow classification, inventories, taxes, leases, and reporting quality. Use this page to review the controlling ideas, then work through 9 questions with answer explanations and common traps.
Review the worked explanations before moving into adaptive practice. The app version can mix this topic with due reviews and weak related concepts.
Practice this topicHow to practice
Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.
Review signal
Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.
Financial Statement Analysis
Analysis of Inventories
During a period of rising inventory purchase prices and stable inventory quantities, a company using the weighted average cost method most likely reports cost of goods sold that is:
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Analysis of Inventories
Under US GAAP, Halvern Industrial reports inventory using LIFO. At year-end, the LIFO reserve is $140 million and the tax rate is 25%. When Daniel Kim restates the balance sheet to a FIFO basis, shareholders' equity increases by an amount closest to:
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Analysis of Inventories
Under US GAAP, Quenton Mills values its LIFO inventory at the lower of cost or market. A product line has cost of $200, estimated selling price of $215, costs to complete and sell of $25, a normal profit margin of $20, and replacement cost of $184. The required writedown is closest to:
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Analysis of Inventories
Under IFRS, inventories are measured at:
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Analysis of Inventories
During a period of rising purchase prices, compared with FIFO, LIFO most likely reports:
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Analysis of Inventories
A company using LIFO reports COGS of 1,000. The LIFO reserve increased from 120 to 150. COGS under FIFO is closest to:
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Analysis of Inventories
Average inventory is 250, cost of goods sold is 1,000, and sales are 1,200. Days of inventory on hand, using a 365-day year, is closest to:
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Analysis of Inventories
A company using LIFO during rising prices sells more units than it purchases, causing old inventory layers to be included in COGS. The most likely effect is:
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Analysis of Inventories
An IFRS reporter writes inventory down from cost of 100 to NRV of 82. In the next period, NRV recovers to 95. The carrying amount after reversal is closest to:
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