Question 1

If net realizable value of the inventory is lower than its cost, the total assets on the statement of financial position and profit on the income statement will be reduced.

Accepted Answer

A) True 
 B)False

Question 2

Cost of goods available for sale consists of the

Accepted Answer

A) cost of beginning inventory plus the cost of ending inventory. 
B) cost of ending inventory plus the cost of goods purchased during the year. 
C) cost of beginning inventory plus the cost of goods purchased during the year. 
D) difference between the cost of goods purchased and the cost of goods sold during the year.

Question 3

The managers of Winning Ways Ltd.receive performance bonuses based on the company's profit.Which inventory cost formula are they likely to favour in periods of declining prices?

Accepted Answer

A) FIFO 
B) average cost 
C) They would have no preference. 
D) Need more information to answer.

Question 4

A high inventory turnover ratio indicates that minimal funds are tied up in inventory.

Accepted Answer

A) True 
 B)False

Exam 6: Reporting and Analyzing Inventory

If net realizable value of the inventory is lower than its cost, the total assets on the statement of financial position and profit on the income statement will be reduced.

Cost of goods available for sale consists of the

The managers of Winning Ways Ltd.receive performance bonuses based on the company's profit.Which inventory cost formula are they likely to favour in periods of declining prices?

A high inventory turnover ratio indicates that minimal funds are tied up in inventory.