Exam 9: Inventories

The use of the lower of cost or market method to value inventory for reporting purposes employs the accounting principle of

International accounting standards permit the use of either the FIFO or weighted average cost flow assumption,but prohibit the use of LIFO.

International Accounting Standard 2 does not permit which of the following cost flow assumptions?

Periodic inventory systems provide a greater degree of management control over inventory.

Inventory turnover distortion under LIFO inventory costing may be adjusted by

In the lower of cost or market determination,the ceiling is the inventory's net realizable value.

Errors in computing inventory are fairly commonplace.

The formula to convert the cost of goods sold under LIFO to an estimate of the cost of goods sold under FIFO is: Cost of goods sold LIFO - increase in LIFO reserve = cost of goods sold FIFO.

LIFO layers are more likely to be liquidated when inventory records are kept on

If the cost of inventory never changed,all three cost flow assumptions (i.e.,LIFO,FIFO and weighted average)would yield the same financial statement result.

The time at which initial adoption of dollar-value LIFO takes place is called the past period.

GAAP prescribes a standardized format for disclosing the LIFO reserve.

To avoid providing an incentive for managers to engage in intentional LIFO liquidation,bonus contracts should subtract out LIFO liquidation profits.

Variable costing includes only variable costs of production in inventory.

A periodic system of inventory is used when inventory volumes are low and per unit costs are high.

IFRS requires the use of direct costing for inventories.

For the year 2015,the gross profit of Alpha Company was $80,000;the cost of goods manufactured as $400,000;the beginning inventories of goods in process and finished goods were $28,000 and $50,000,respectively;and the ending inventories of goods in process and finished goods were $38,000 and $75,000,respectively. Required: What is the dollar amount of Alpha's sales for 2015?

FIFO charges the newest costs against revenues on the income statement thus matching the current cost of replacing the units with current revenues.

In a periodic inventory system the ending inventory must be determined by physical count.

The use of the lower of cost or market method to value inventory for reporting purposes is a departure from the accounting principle of