2. What does the Codification say about consistency
regarding the application of the chosen inventory valuation method? (Provide
the Codification reference for your answer)

3. If the company were to choose one inventory valuation
method in the current year, and then decide in the following year to change
inventory valuation methods to a method that better approximates the company’s
actual costs: (Provide the Codification references for your answers)

a. Would this be accounted for as a change in accounting
estimate or a change in accounting principle?

b. Where is the Example provided in the Codification that
illustrates the guidance for the retrospective application of a change from
LIFO to FIFO (assuming it is practicable to determine the cumulative effect of
the change for all prior years)?

4. As New Beginnings is a start-up company, it is still
determining how much inventory to manufacture and through the budgeting process
it has been determined that over- or under-producing inventory relative to
demand will have a significant negative impact on the company’s net income. As
such, New Beginnings has entered into an agreement with Mature Corporation
whereby each manufacturer will buy and sell inventory from the other on an
as-needed basis at market prices. The agreement is not predicated on the
understanding that the companies will purchase certain quantities from one
another (i.e., there is no requirement that Mature Corporation will purchase
from New Beginnings at all, or vice versa). All transactions that do occur will
be gross-cash settled at market prices. (Provide the Codification references
for your answers)

a. Based on this information, how would New Beginnings
account for these purchases and sales of inventory with the same counterparty:
As a single exchange between counterparties or as separate monetary
transactions?

b. Where is an Example of this type of transaction provided
in the Codification?

5. Based on the criteria in the Codification (include
references), explain why each of the following items would or would not be
included in Inventory Cost.

a. Expenses incurred for marketing to sell New Beginnings’
inventory

b. General & administrative expenses incurred by New
Beginnings that are not clearly related to production

c. Freight charges paid by New Beginnings to its suppliers
for inventory items purchased

d. Shipping & handling costs incurred on the sale of
inventory from New Beginnings to a customer