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

Jarvis, Inc. manufactures cruise ships for sale. Each ship costs approximately €25,000,000 to build and takes 3 years to fully construct. During the time it takes to construct one cruise ship, Jarvis incurs €2,400,000 in interest cost related to the construction. The interest cost is incurred evenly throughout the construction period. During the first year of construction, Jarvis builds a shell that can be customized for any purchaser according to specifications; construction during the final 2 years is all based on client specification. The International Accounting Standards Board requires that Jarvis account for this interest cost as

Goods in transit which are shipped F.o.b. shipping point should be

Culver Company purchases the majority of its inventory from three primary suppliers for re-sale to customers around the world. Culver Company's statement of financial position will include

When using a perpetual inventory system,

Mineral Makers (MM) Company keeps its inventory records using a perpetual system. At December 31, 2019, the unadjusted balance in the inventory account is €64,000. Through a physical count on December 31, 2019, MM determines that its actual merchandise inventory at year-end is €62,500. Which of the following is true regarding the statement of financial position and the income statement of MM at December 31, 2019?

Margo, Inc. purchased goods from Fairlane Industries. If Margo's accounts show a Purchase Discount account related to this purchase, which of the following is true?

Which of the following costs should not be included on the statement of financial position as part of the cost of inventory?

Which method of inventory pricing best approximates specific identification of the actual flow of costs and units in most manufacturing situations?

The pricing of issues from inventory must be deferred until the end of the accounting period under the following method of inventory valuation

The International Accounting Standards Board requires the specific identification method when unit price is low, inventory turnover is high, and inventory quantities are large.

Freight costs incurred by the seller to ship merchandise to the purchaser are accounted for by the seller as part of inventory on the statement of financial position.

If a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier delivers the goods to the common carrier.

In a period of falling prices, which inventory method generally provides the lowest amount of net income?

Oats and Honey Company produces healthy snacks for sale throughout the United States and Europe. The International Accounting Standards Board (IASB) prohibits Oats and Honey from using which of the following cost flow assumptions for its inventory?

The cost flow assumption adopted must be consistent with the physical movement of the goods.

Which of the following is a reason why the specific identification method may be considered ideal for assigning costs to inventory and cost of goods sold?

Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the average cost method?

Purchase Discounts Lost is a financial expense and is reported in the "other income and expense" section of the income statement.

Dolan Co. received merchandise on consignment. As of March 31, Dolan had recorded the transaction as a purchase and included the goods in inventory. The effect of this on its financial statements for March 31 would be

The International Accounting Standards Board requires the specific identification method in certain circumstances. Which of the following is likely to be a circumstance where the specific identification criteria can be met?