Question 1

LCNRV of inventory

Accepted Answer

A) is always either the net realizable value or its cost. 
B) should always be equal to net realizable value. 
C) may sometimes be less than net realizable value. 
D) should always be equal to net realizable value less costs to complete. 
A) is always either the net realizable value or its cost. 
B) should always be equal to net realizable value. 
C) may sometimes be less than net realizable value. 
D) should always be equal to net realizable value less costs to complete.

Question 2

The inventory turnover ratio is computed by dividing the cost of goods sold by

Accepted Answer

A) beginning inventory. 
B) ending inventory. 
C) average inventory. 
D) number of days in the year. 
A) beginning inventory. 
B) ending inventory. 
C) average inventory. 
D) number of days in the year.

Question 3

Given the historical cost of product Z is $150, the selling price of product Z is $190, costs to sell product Z are $11, and the cost to complete product Z is $20, what is the amount that should be used to value the inventory under the lower-of-cost-or-net realizable value method?

Accepted Answer

A) $130. 
B) $150. 
C) $159. 
D) $139. 
A) $130. 
B) $150. 
C) $159. 
D) $139.

Question 4

Commodity broker-traders

Accepted Answer

A) Produce or raise commodities such as corn, wheat, or precious metals. 
B) Hold their inventory primarily to sell the commodities in the near term and generate a profit from price fluctuations. 
C) Value their inventories at the lower-of-cost-or-net realizable value (LCNRV). 
D) All of the choices are correct regarding broker-traders. 
A) Produce or raise commodities such as corn, wheat, or precious metals. 
B) Hold their inventory primarily to sell the commodities in the near term and generate a profit from price fluctuations. 
C) Value their inventories at the lower-of-cost-or-net realizable value (LCNRV). 
D) All of the choices are correct regarding broker-traders.

Question 5

The following information is available for October for Barton Company.   A fire destroyed Barton's October 31 inventory, leaving undamaged inventory with a cost of $3,000.Using the gross profit method, the estimated ending inventory destroyed by fire is

Accepted Answer

A) $17,000. 
B) $77,000. 
C) $80,000. 
D) $100,000. 
A) $17,000. 
B) $77,000. 
C) $80,000. 
D) $100,000.

Question 6

Under International Financial Reporting Standards (IFRS), which of the following is true regarding inventory write-downs and\or recovery of a write-down?

Accepted Answer

A) Recovery of inventory write-downs is prohibited under IFRS. 
B) IFRS requires separate reporting of reversals of inventory write-downs. 
C) IFRS requires companies to record write-downs in a separate loss account. 
D) All of the choices are correct regarding IFRS and write-downs and\or recoveries. 
A) Recovery of inventory write-downs is prohibited under IFRS. 
B) IFRS requires separate reporting of reversals of inventory write-downs. 
C) IFRS requires companies to record write-downs in a separate loss account. 
D) All of the choices are correct regarding IFRS and write-downs and\or recoveries.

Question 7

Which of the following statements is correct regarding International Financing Reporting Standards (IFRS) and U.S.GAAP with regard to inventory?

Accepted Answer

A) LIFO (last-in, first-out) is permitted under IFRS but not under U.S.GAAP.. 
B) When applying lower-of-cost-or-market, U.S.GAPP defines market as net realizable value. 
C) IFRS permits valuing inventories at fair value, similar to the accounting for property, plant, and equipment. 
D) Under U.S.GAPP, if inventory is written down under lower-of-cost-or-market, it may not be written back up its original cost in a subsequent period.
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A) LIFO (last-in, first-out) is permitted under IFRS but not under U.S.GAAP.. 
B) When applying lower-of-cost-or-market, U.S.GAPP defines market as net realizable value. 
C) IFRS permits valuing inventories at fair value, similar to the accounting for property, plant, and equipment. 
D) Under U.S.GAPP, if inventory is written down under lower-of-cost-or-market, it may not be written back up its original cost in a subsequent period.
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Question 8

Dub Dairy produces milk to sell to local and national ice cream producers.Dub Dairy began operations on January 1, 2011 by purchasing 840 milk cows for $1,176,000.The company controller had the following information available at year end relating to the cows:   On Dub Dairy's income statement for the year ending December 31, 2011, what amount of unrealized gain on harvested milk will be reported?

Accepted Answer

A) No gain is reported until the milk is sold. 
B) $12,000 
C) $54,000 
D) $311,000 
A) No gain is reported until the milk is sold. 
B) $12,000 
C) $54,000 
D) $311,000

Question 9

Braum Dairy produces milk to sell to local and national ice cream producers.Braum Dairy began operations on January 1, 2011 by purchasing 650 milk cows for $780,000.The company controller had the following information available at year end relating to the cows:   On Braum Dairy's income statement for the year ending December 31, 2011, what amount of unrealized gain on harvest milk will be reported?

Accepted Answer

A) No gain is reported until the milk is sold. 
B) $8,200 
C) $36,200 
D) $205,800. 
A) No gain is reported until the milk is sold. 
B) $8,200 
C) $36,200 
D) $205,800.

Question 10

Drake Corporation had the following amounts, all at retail:   What is Drake's ending inventory at retail?

Accepted Answer

A) $54,400. 
B) $56,000. 
C) $57,600. 
D) $58,400 
A) $54,400. 
B) $56,000. 
C) $57,600. 
D) $58,400

Question 11

Dicer uses the conventional retail method to determine its ending inventory at cost.Assume the beginning inventory at cost (retail) were $130,000 ($198,000), purchases during the current year at cost (retail) were $685,000 ($1,100,000), freight-in on these purchases totaled $43,000, sales during the current year totaled $1,050,000, and net markups (markdowns) were $24,000 ($36,000).What is the ending inventory value at cost?

Accepted Answer

A) $153,164. 
B) $156,165. 
C) $157,412. 
D) $236,000. 
A) $153,164. 
B) $156,165. 
C) $157,412. 
D) $236,000.

Question 12

Reyes Company had a gross profit of $360,000, total purchases of $420,000, and an ending inventory of $240,000 in its first year of operations as a retailer.Reyes's sales in its first year must have been

Accepted Answer

A) $540,000. 
B) $660,000. 
C) $180,000. 
D) $600,000. 
A) $540,000. 
B) $660,000. 
C) $180,000. 
D) $600,000.

Question 13

Net realizable value is

Accepted Answer

A) fair value plus estimated costs to complete and make a sale. 
B) selling price. 
C) selling price plus estimated costs to complete and make a sale. 
D) selling price less estimated costs to complete and make a sale. 
A) fair value plus estimated costs to complete and make a sale. 
B) selling price. 
C) selling price plus estimated costs to complete and make a sale. 
D) selling price less estimated costs to complete and make a sale.

Question 14

On October 31, a fire destroyed PH Inc.'s entire retail inventory.The inventory on hand as of January 1 totaled $680,000.From January 1 through the time of the fire, the company made purchases of $165,000 and had sales of $360,000.Assuming the rate of gross profit to selling price is 40%, what is the approximate value of the inventory that was destroyed?

Accepted Answer

A) $680,000. 
B) $673,000. 
C) $485,000. 
D) $629,000. 
A) $680,000. 
B) $673,000. 
C) $485,000. 
D) $629,000.

Question 15

What method yields results that are essentially the same as those of the conventional retail method?

Accepted Answer

A) FIFO. 
B) Lower-of-average-cost-or-net realizable value. 
C) Average cost. 
D) LIFO. 
A) FIFO. 
B) Lower-of-average-cost-or-net realizable value. 
C) Average cost. 
D) LIFO.

Question 16

What is the effect of freight-in on the cost-retail ratio when using the conventional retail method?

Accepted Answer

A) Increases the cost-retail ratio. 
B) No effect on the cost-retail ratio. 
C) Depends on the amount of the net markups. 
D) Decreases the cost-retail ratio. 
A) Increases the cost-retail ratio. 
B) No effect on the cost-retail ratio. 
C) Depends on the amount of the net markups. 
D) Decreases the cost-retail ratio.

Question 17

During 2010, Larue Co., a manufacturer of chocolate candies, contracted to purchase 100,000 pounds of cocoa beans at $4.00 per pound, delivery to be made in the spring of 2011.Because a record harvest is predicted for 2011, the price per pound for cocoa beans had fallen to $3.10 by December 31, 2010.
Of the following journal entries, the one which would properly reflect in 2010 the effect of the commitment of Larue Co.to purchase the 100,000 pounds of cocoa is

Accepted Answer

The answer of During 2010, Larue Co., a manufacturer of...

Question 18

When inventory declines in value below original (historical) cost what is the maximum amount that the inventory can be valued at?

Accepted Answer

A) Sales price 
B) Net realizable value 
C) Historical cost 
D) Sales price reduced by estimated costs to sell 
A) Sales price 
B) Net realizable value 
C) Historical cost 
D) Sales price reduced by estimated costs to sell

Question 19

Which statement is not true about the gross profit method of inventory valuation?

Accepted Answer

A) It may be used to estimate inventories for interim statements. 
B) It may be used to estimate inventories for annual statements. 
C) It may be used by auditors. 
D) None of these. 
A) It may be used to estimate inventories for interim statements. 
B) It may be used to estimate inventories for annual statements. 
C) It may be used by auditors. 
D) None of these.

Question 20

If a material amount of inventory has been ordered through a formal purchase contract at the statement of financial position date for future delivery at firm prices,

Accepted Answer

A) this fact must be disclosed. 
B) disclosure is required only if prices have declined since the date of the order. 
C) disclosure is required only if prices have since risen substantially. 
D) an appropriation of retained earnings is necessary. 
A) this fact must be disclosed. 
B) disclosure is required only if prices have declined since the date of the order. 
C) disclosure is required only if prices have since risen substantially. 
D) an appropriation of retained earnings is necessary.

LCNRV of inventory

The inventory turnover ratio is computed by dividing the cost of goods sold by

Given the historical cost of product Z is $150, the selling price of product Z is $190, costs to sell product Z are $11, and the cost to complete product Z is $20, what is the amount that should be used to value the inventory under the lower-of-cost-or-net realizable value method?

Commodity broker-traders

The following information is available for October for Barton Company. A fire destroyed Barton's October 31 inventory, leaving undamaged inventory with a cost of $3,000.Using the gross profit method, the estimated ending inventory destroyed by fire is

Under International Financial Reporting Standards (IFRS), which of the following is true regarding inventory write-downs and\or recovery of a write-down?

Which of the following statements is correct regarding International Financing Reporting Standards (IFRS) and U.S.GAAP with regard to inventory?

Drake Corporation had the following amounts, all at retail: What is Drake's ending inventory at retail?

Reyes Company had a gross profit of $360,000, total purchases of $420,000, and an ending inventory of $240,000 in its first year of operations as a retailer.Reyes's sales in its first year must have been

Net realizable value is

What method yields results that are essentially the same as those of the conventional retail method?

What is the effect of freight-in on the cost-retail ratio when using the conventional retail method?

When inventory declines in value below original (historical) cost what is the maximum amount that the inventory can be valued at?

Which statement is not true about the gross profit method of inventory valuation?

If a material amount of inventory has been ordered through a formal purchase contract at the statement of financial position date for future delivery at firm prices,

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities, Provisions, and Contingencies

Non-Current Liabilities

Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Presentation and Disclosure in Financial Reporting

Filters

Exam 9: Inventories: Additional Valuation Issues

LCNRV of inventory

The inventory turnover ratio is computed by dividing the cost of goods sold by

Given the historical cost of product Z is $150, the selling price of product Z is $190, costs to sell product Z are $11, and the cost to complete product Z is $20, what is the amount that should be used to value the inventory under the lower-of-cost-or-net realizable value method?

Commodity broker-traders

The following information is available for October for Barton Company. A fire destroyed Barton's October 31 inventory, leaving undamaged inventory with a cost of $3,000.Using the gross profit method, the estimated ending inventory destroyed by fire is

Under International Financial Reporting Standards (IFRS), which of the following is true regarding inventory write-downs and\or recovery of a write-down?

Which of the following statements is correct regarding International Financing Reporting Standards (IFRS) and U.S.GAAP with regard to inventory?

Drake Corporation had the following amounts, all at retail: What is Drake's ending inventory at retail?

Reyes Company had a gross profit of $360,000, total purchases of $420,000, and an ending inventory of $240,000 in its first year of operations as a retailer.Reyes's sales in its first year must have been

Net realizable value is

What method yields results that are essentially the same as those of the conventional retail method?

What is the effect of freight-in on the cost-retail ratio when using the conventional retail method?

When inventory declines in value below original (historical) cost what is the maximum amount that the inventory can be valued at?

Which statement is not true about the gross profit method of inventory valuation?

If a material amount of inventory has been ordered through a formal purchase contract at the statement of financial position date for future delivery at firm prices,

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities, Provisions, and Contingencies

Non-Current Liabilities

Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Presentation and Disclosure in Financial Reporting

Filters