Exam 8: Valuation of Inventories: a Cost-Basis Approach

Computers For You is a retailer specializing in selling computers and related equipment. During 2019, Computers For You sells €200,000 of merchandise to Sandcastles, Inc. Computers For You incurs €24,000 of freight costs associated with these sales. Which of the following is true regarding how this €24,000 is treated on the financial statements?

The acquisition cost of a certain raw material changes frequently. The book value of the inventory of this material at year end will be the same if perpetual records are kept as it would be under a periodic inventory method only if the book value is computed under the

Companies must allocate the cost of all the goods available for sale (or use) between the income statement and the statement of financial position.

Interest costs incurred to manufacture large quantities of inventory that are produced routinely should be capitalized.

In a period of rising prices, the inventory method which tends to give the highest reported net income is

Which of the following is included in inventory costs?

In a period of declining prices, the inventory method which tends to give the highest reported cost of goods sold is

Which of the following is a period cost?

Green Co. received merchandise on consignment. As of January 31, Green included the goods in inventory, but did not record the transaction. The effect of this on its financial statements for January 31 would be

The International Accounting Standards Board (IASB) requires the specific identification method of inventory costing where individual items of inventory can be identified and costed.

Where should raw materials be classified on the statement of financial position?

What is the effect of a €50,000 overstatement of last year's inventory on current year's ending retained earning balance?

Tang, Inc. sells collectible jewelry on consignment from various manufacturers. Additionally, Tang sells its own line of specialty jewelry manufactured in-house. On December 31, 2019, during Tang, Inc 's annual inventory count, an inexperienced new staff member included in Tang's ending inventory €350,000 worth of inventory held on consignment from Metcalf Associates. Which of the following is correct regarding the impact of this error on Tang's income statement and statement of financial position at December 31, 2019?

What is consigned inventory?

In a period of falling prices which inventory method generally provides the lowest reported inventory?

In a period of rising prices, the inventory method which tends to give the highest reported inventory is

Companies must allocate the cost of all the goods available for sale (or use) between

Which of the following types of interest cost incurred in connection with the purchase or manufacture of inventory should be capitalized as a product cost?

On June 15, 2019, Wynne Corporation accepted delivery of merchandise which it Purchased on account. As of June 30, Wynne had not recorded the transaction or included the merchandise in its inventory. The effect of this on its statement of financial position for June 30, 2019 would be

A manufacturing concern would report the cost of units only partially processed as inventory in the statement of financial position.