Question 1

Similarities between U.S.GAAP and IFRS include which of the following?

Accepted Answer

A) Both U.S.GAAP and IFRS permit the same cost flow assumptions. 
B) Inventory is carried at the lower of cost or net realizable value under both U.S.GAAP and IFRS. 
C) Direct costing is required under both U.S.GAAP and IFRS. 
D) The definition of inventory is similar in both U.S.GAAP and IFRS. 
A) Both U.S.GAAP and IFRS permit the same cost flow assumptions. 
B) Inventory is carried at the lower of cost or net realizable value under both U.S.GAAP and IFRS. 
C) Direct costing is required under both U.S.GAAP and IFRS. 
D) The definition of inventory is similar in both U.S.GAAP and IFRS.

Question 2

IFRS only permit the use of either the FIFO or weighted average cost flow assumption.

Accepted Answer

A) True 
 B)False

Question 3

Beginning inventory plus inventory purchases equals cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 4

In the perpetual inventory system inventory losses must be recorded in the accounts.

Accepted Answer

A) True 
 B)False

Question 5

Analysts must be aware that with the use of absorption costing,as inventory absorbs more fixed costs,reported income tends to decrease.

Accepted Answer

A) True 
 B)False

Question 6

While it is possible to estimate the amount of inventory holding gain (or loss)that is embedded in a company's FIFO earnings number,this approximation only works as long as the total number of inventory units on hand does not fluctuate much during the year and as long as purchases and sales take place frequently.

Accepted Answer

A) True 
 B)False

Question 7

When variable costing is used,fixed production costs are included as part of inventory cost.

Accepted Answer

A) True 
 B)False

Question 8

Konan, Inc. uses the lower of cost or market method to determine inventory value. The following information pertains to the ending inventory:
$\begin{array}{lccccc}\text { Item } & \text { Cost } & \begin{array}{c}
\text { Replacement } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Selling } \
\text { Price }
\end{array} & \begin{array}{c}
\text { Cost of } \
\text { Completion }
\end{array} & \begin{array}{c}
\text { Normal } \
\text { Profit }
\end{array}\
\text { L-19 } & \$ 40 & \$ 38 & \$ 50 & \$ 2 & \$ 11 \
\text { M-23 } & 52 & 40 & 60 & 4 & 14 \
\text { N-05 } & 20 & 24 & 30 & 2 & 6
\end{array}$
-The minimum limit for market value of product M-23 is

Accepted Answer

A) $42. 
B) $46. 
C) $56. 
D) $60. 
A) $42. 
B) $46. 
C) $56. 
D) $60.

Question 9

The following information pertains to the Fan Company's inventory item B1008:
$\begin{array}{rlrr}
\text { March 1 } & \text { Inventory Balance } & 400 \text { units } &@\$ 3.10 \
5 & \text { Purchase } & 1,400 \text { units } &@ \$ 3.20 \
14 & \text { Purchase } & 280 \text { units } &@ \$ 3.25 \
31 & \text { Inventory Balance } & 520 \text { units } &
\end{array}$
-In a periodic inventory system,the ending LIFO inventory is

Accepted Answer

A) $1,624. 
B) $1,655. 
C) $1,678. 
D) $1,733. 
A) $1,624. 
B) $1,655. 
C) $1,678. 
D) $1,733.

Question 10

In an actual business,which of the following inventory accounting issues frequently arise?

Accepted Answer

A) How should physical quantities in inventory be determined? 
B) What items should be included in ending inventory? 
C) What costs should be included in inventory purchases? 
D) All of these are inventory accounting issues that frequently arise. 
A) How should physical quantities in inventory be determined? 
B) What items should be included in ending inventory? 
C) What costs should be included in inventory purchases? 
D) All of these are inventory accounting issues that frequently arise.

Question 11

Although many firms use the LIFO cost flow assumption,no examples exist in which the real physical flow of units sold is also last-in,first-out.

Accepted Answer

A) True 
 B)False

Question 12

Manufacturing costs not considered to be closely associated with production are called

Accepted Answer

A) period costs. 
B) product costs. 
C) absorption costs. 
D) variable costs. 
A) period costs. 
B) product costs. 
C) absorption costs. 
D) variable costs.

Question 13

The carrying cost of inventory should include all of the following costs except

Accepted Answer

A) purchase costs. 
B) sales taxes and transportation costs paid by the purchaser. 
C) general administrative costs associated with the purchase of inventory. 
D) insurance and storage costs. 
A) purchase costs. 
B) sales taxes and transportation costs paid by the purchaser. 
C) general administrative costs associated with the purchase of inventory. 
D) insurance and storage costs.

Question 14

ABC Company has elected to adopt the dollar-value LIFO inventory method when the inventory is valued at $125,000.The adoption takes place as of January 1,2015 when the entire inventory represents a single pool.ABC Company determined that the inventory at December 31,2015 was $144,375 at current year cost and $131,250 at base year cost using a relevant price index of 1.10.The inventory at December 31,2015 under dollar value LIFO is

Accepted Answer

A) $139,438. 
B) $131,875. 
C) $138,125. 
D) $144,375. 
A) $139,438. 
B) $131,875. 
C) $138,125. 
D) $144,375.

Question 15

Analysts must recognize that the use of the specific identification method to value inventory has a serious deficiency because it

Accepted Answer

A) allows manipulation of net income. 
B) allows manipulation of period costs. 
C) allows manipulation of selling expenses. 
D) allows manipulation of administrative expenses. 
A) allows manipulation of net income. 
B) allows manipulation of period costs. 
C) allows manipulation of selling expenses. 
D) allows manipulation of administrative expenses.

Question 16

The Wheat Company has used the LIFO method for inventory valuation since the start of business 15 years ago.The current year ending inventory is $375,000.If the FIFO method of inventory had been used,the inventory would be $450,000.If Wheat Company had used the FIFO inventory method,income before income taxes would have been

Accepted Answer

A) $75,000 higher over the 15 year period. 
B) $75,000 lower over the 15 year period. 
C) $75,000 higher in the current year. 
D) $75,000 lower in the current year. 
A) $75,000 higher over the 15 year period. 
B) $75,000 lower over the 15 year period. 
C) $75,000 higher in the current year. 
D) $75,000 lower in the current year.

Question 17

LIFO's tax advantage is that it provides a lower net income than FIFO during periods of rising prices and decreasing inventory quantities.

Accepted Answer

A) True 
 B)False

Question 18

Examples of variable costs include all of the following except

Accepted Answer

A) raw materials costs. 
B) the plant manager's salary. 
C) direct labor costs. 
D) electricity used in running production machinery. 
A) raw materials costs. 
B) the plant manager's salary. 
C) direct labor costs. 
D) electricity used in running production machinery.

Question 19

As a firm liquidates old LIFO layers of inventory,the lower costs of the LIFO layers are matched against current sales dollars resulting in a profit margin that is

Accepted Answer

A) inflated. 
B) deflated. 
C) lower than normal. 
D) always the same as under FIFO. 
A) inflated. 
B) deflated. 
C) lower than normal. 
D) always the same as under FIFO.

Question 20

As LIFO layers are liquidated,inventory holding gains that were previously ignored are recognized in the period of liquidation.

Accepted Answer

A) True 
 B)False

Similarities between U.S.GAAP and IFRS include which of the following?

IFRS only permit the use of either the FIFO or weighted average cost flow assumption.

Beginning inventory plus inventory purchases equals cost of goods sold.

In the perpetual inventory system inventory losses must be recorded in the accounts.

Analysts must be aware that with the use of absorption costing,as inventory absorbs more fixed costs,reported income tends to decrease.

When variable costing is used,fixed production costs are included as part of inventory cost.

The following information pertains to the Fan Company's inventory item B1008: March 1 Inventory Balance 400 units @\ 3.10 5 Purchase 1,400 units @\ 3.20 14 Purchase 280 units @\ 3.25 31 Inventory Balance 520 units -In a periodic inventory system,the ending LIFO inventory is

In an actual business,which of the following inventory accounting issues frequently arise?

Although many firms use the LIFO cost flow assumption,no examples exist in which the real physical flow of units sold is also last-in,first-out.

Manufacturing costs not considered to be closely associated with production are called

The carrying cost of inventory should include all of the following costs except

Analysts must recognize that the use of the specific identification method to value inventory has a serious deficiency because it

LIFO's tax advantage is that it provides a lower net income than FIFO during periods of rising prices and decreasing inventory quantities.

Examples of variable costs include all of the following except

As a firm liquidates old LIFO layers of inventory,the lower costs of the LIFO layers are matched against current sales dollars resulting in a profit margin that is

As LIFO layers are liquidated,inventory holding gains that were previously ignored are recognized in the period of liquidation.

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and Income Determination

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Receivables

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Pensions and Postretirement Benefits

Financial Reporting for Owners Equity

Intercorporate Equity Investments

Statement of Cash Flows

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Exam 9: Inventories

Similarities between U.S.GAAP and IFRS include which of the following?

IFRS only permit the use of either the FIFO or weighted average cost flow assumption.

Beginning inventory plus inventory purchases equals cost of goods sold.

In the perpetual inventory system inventory losses must be recorded in the accounts.

Analysts must be aware that with the use of absorption costing,as inventory absorbs more fixed costs,reported income tends to decrease.

When variable costing is used,fixed production costs are included as part of inventory cost.

The following information pertains to the Fan Company's inventory item B1008: March 1 Inventory Balance 400 units @\ 3.10 5 Purchase 1,400 units @\ 3.20 14 Purchase 280 units @\ 3.25 31 Inventory Balance 520 units -In a periodic inventory system,the ending LIFO inventory is

In an actual business,which of the following inventory accounting issues frequently arise?

Although many firms use the LIFO cost flow assumption,no examples exist in which the real physical flow of units sold is also last-in,first-out.

Manufacturing costs not considered to be closely associated with production are called

The carrying cost of inventory should include all of the following costs except

Analysts must recognize that the use of the specific identification method to value inventory has a serious deficiency because it

LIFO's tax advantage is that it provides a lower net income than FIFO during periods of rising prices and decreasing inventory quantities.

Examples of variable costs include all of the following except

As a firm liquidates old LIFO layers of inventory,the lower costs of the LIFO layers are matched against current sales dollars resulting in a profit margin that is

As LIFO layers are liquidated,inventory holding gains that were previously ignored are recognized in the period of liquidation.

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and Income Determination

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Receivables

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Pensions and Postretirement Benefits

Financial Reporting for Owners Equity

Intercorporate Equity Investments

Statement of Cash Flows

Filters