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

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?

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

Costs which are inventoriable include all of the following except

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

Mineral Makers (MM) Company keeps its inventory records using a perpetual system.At December 31, 2015, the unadjusted balance in the inventory account is $64,000.Through a physical count on December 31, 2015, 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, 2015?

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

Valuation of inventories requires the determination of all of the following except

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

The accountant for the Pryor Sales Company is preparing the income statement for 2015 and the statement of financial position at December 31, 2015.Pryor uses the periodic inventory system.The January 1, 2015 merchandise inventory balance will appear

The use of a Purchase Discounts account implies that the recorded cost of a purchased inventory item is its

When using the periodic inventory system, which of the following generally would not be separately accounted for in the computation of cost of goods sold?

If both purchases and ending inventory are overstated by the same amount, net income is not affected.

Computers For You is a retailer specializing in selling computers and related equipment.During 2015, 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?

Why are inventories included in the computation of net income?

Abnormal freight costs are not included on the statement of financial position as part of the cost of inventory.

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?

Feine Co.accepted delivery of merchandise which it purchased on account.As of December 31, Feine had recorded the transaction, but did not include the merchandise in its inventory.The effect of this on its financial statements for December 31 would be

Which of the following is a product cost as it relates to inventory?

The failure to record a purchase of merchandise on account even though the goods are properly included in the physical inventory results in