The document contains 20 multiple choice questions about inventory valuation methods and accounting principles. It asks about the effects of overstating or understating ending inventory on net income and cost of goods sold. It also asks about inventory cost flow assumptions and measurement methods under FIFO and weighted average, as well as the definition of net realizable value. The questions cover the lower of cost or net realizable value method and its application to inventory valuation.
The document contains 20 multiple choice questions about inventory valuation methods and accounting principles. It asks about the effects of overstating or understating ending inventory on net income and cost of goods sold. It also asks about inventory cost flow assumptions and measurement methods under FIFO and weighted average, as well as the definition of net realizable value. The questions cover the lower of cost or net realizable value method and its application to inventory valuation.
The document contains 20 multiple choice questions about inventory valuation methods and accounting principles. It asks about the effects of overstating or understating ending inventory on net income and cost of goods sold. It also asks about inventory cost flow assumptions and measurement methods under FIFO and weighted average, as well as the definition of net realizable value. The questions cover the lower of cost or net realizable value method and its application to inventory valuation.
The document contains 20 multiple choice questions about inventory valuation methods and accounting principles. It asks about the effects of overstating or understating ending inventory on net income and cost of goods sold. It also asks about inventory cost flow assumptions and measurement methods under FIFO and weighted average, as well as the definition of net realizable value. The questions cover the lower of cost or net realizable value method and its application to inventory valuation.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 2
INVENTORIES QUESTIONS
EDPALINA & ISIDRO
1. Overstating ending inventory in the current year causes net income in the current year to be overstated. True False
2. Using the weighted-average cost method, the average cost of inventory is calculated as the average unit cost of inventory purchased during the year. True False 3. Understating ending inventory in the current year causes cost of goods sold in the current year to be understated. True False 4. Using the first-in, first-out method (FIFO), the first units purchased are assumed to be the first ones sold. True False 5. At the time inventory is sold, cost of goods sold is recorded under the perpetual inventory system. True False 6. All goods to which the entity has TITLE shall be included in the inventory, regardless of location. True False 7. Under which method of cost flows is the inventory assumed to be composed of the most recent costs? a) average cost b) first-in, first-out c) last-in, first-out d) weighted average
8. Which statement is correct relating inventories?
a. Held for sale in the ordinary course of business
b. In the process of production for such sale c. In the form of materials or supplies to be consumed in the production process or in the rendering of services d. All of the above
9. What is excluded in determining the cost of an inventory?
a. Rebates b. Selling costs c. Handling costs attributable to the acquisition d. Direct labor
10. A new weighted average unit cost must be computed after every purchase and purchase return.
a. Weighted average periodic
b. Weighted average perpetual c. FIFO periodic d. FIFO perpetual
11. Inventory should be measured at
a. Lower of cost and fair value b. Lower of cost and net realizable value c. Lower of cost and selling price d. All of these are used in measuring inventory
12. Net Realizable value is:
a. Current replacement cost b. Estimated Selling Price c. Estimated selling price less estimated cost to complete d. Estimated selling price less estimated cost to complete and estimated cost of disposal 13. Inventories are usually written down to net realizable value: a. Item by item b. By classification c. By total d. By segment
14. Which of the following is not an acceptable method of applying the LCNRV? a. Inventory location b. Group Method c. Individual item d. Total inventory
15. Which statement is incorrect regarding LCNRV?
a. Net realizable value is selling price less estimated cost t complete and estimated cost of disposal b. In most situations, entities measure inventory on a total inventory basis. c. One of two methods maybe used to record the income effect of valuing inventory at net realizable value. d. Entities use an allowance account to reduced inventory to net realizable value
16. Which of the following statements is true regarding inventory writes down and reversal of write down? a. Reversal of inventory write down is prohibited b. Separate reporting of reversal of inventory write down is required c. Entities are required to record write down in a separate loss account d. All of the choices are correct
17. LCNRV of inventory
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
18. Lower-of-cost-or-net realizable value
a. gives the lowest valuation if applied to the total inventory b. gives the lowest valuation if applied to major groups of inventory c. gives the lowest valuation if applied to individual items of inventory d. must be applied to major groups for taxes
19. Lower-of-cost0or-net realizable value as it applies to inventory is best described as the
a. reporting of a loss when there is a decrease in the future utility below the original cost b. method of determining cost of goods sold c. assumption to determine inventory flow d. change in inventory value to net realizable value
20. Why are inventories stated at lower-of-cost-or-net realizable value?
a. To report a loss when there is a decrease in the future utility. b. To be conservative. c. To report a loss when there is a decrease in the future utility below the original cost. d. To permit future profits to be recognized.
