It is inconsistent because losses are recognized but not gains.
It usually understates assets.
It can increase future income.
All of these.
Selling price will be less than their replacement cost.
Replacement cost will be more than their net realizable value.
Cost will be less than their replacement cost
Future utility will be less than their cost.
Net realizable value
Net realizable value less a normal profit margin
Current replacement cost
Discounted present value
Estimated selling price in the ordinary course of business.
Estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal.
Estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for an approximately normal profit margin.
Estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate reserve for possible future losses.
Is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin.
Should always be equal to net realizable value.
May sometimes exceed net realizable value.
Should always be equal to net realizable value less a normal profit margin.
Is most conservative if applied to the total inventory.
Is most conservative if applied to major categories of inventory.
Is most conservative if applied to individual items of inventory.
Must be applied to major categories for taxes.
The cost of sales of the following year will be understated.
The current year's income is understated.
The closing inventory of the current year is understated.
Income of the following year will be understated.
There is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale.
A loss is recorded directly in the inventory account by crediting inventory and debiting loss on inventory decline.
Only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements.
The market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold.
Drop of future utility below its original cost.
Method of determining cost of goods sold.
Assumption to determine inventory flow
Change in inventory value to market value.
Net realizable value.
Net realizable value less normal profit margin.
Replacement cost.
Selling price less costs of completion and disposal.
Prevents understatement of the inventory value.
Allows for a normal profit to be earned.
Allows for items to be valued at replacement cost.
Prevents overstatement of the value of obsolete or damaged inventories.
To report a loss when there is a decrease in the future utility.
T o be conservative.
To report a loss when there is a decrease in the future utility below the original cost.
To permit future profits to be recognized.
Inventory location.
Categories of inventory items.
Individual item.
Total of the inventory.
Allowance method.
Sales method
Direct method
Both a and c.
When there is a controlled market with a quoted price applicable to all quantities and when there are no significant costs of disposal.
When there are no significant costs of disposal.
When a non-cancellable contract exists to sell the inventory.
When there is a controlled market with a quoted price applicable to all quantities.
The ending inventory is determined by a physical inventory count
A normal profit is not anticipated
There is a controlled market with a quoted price applicable to all quantities.
The internal revenue service is assured that the practice is not used only to distort reported net income.
Sales price
Net realizable value
Historical cost
Net realizable value reduced by a normal profit margin
Acquisition cost plus costs to complete and sell.
Selling price.
Selling price plus costs to complete and sell.
Selling price less costs to complete and sell.
Net realizable value.
Original cost.
Market value.
Net realizable value less a normal profit margin.
There is a controlled market with a quoted price.
There are no significant costs of disposal.
The inventory consists of precious metals or agricultural products
All of these.
This fact must be disclosed.
Disclosure is required only if prices have declined since the date of the order.
Disclosure is required only if prices have since risen substantially.
An appropriation of retained earnings is necessary.
Presented as a current liability.
Subtracted from ending inventory.
Presented as an appropriation of retained earnings.
Presented in the income statement.
As a valuation account to Inventory on the balance sheet.
As a current liability.
As an appropriation of retained earnings.
On the income statement.
Record unrealized gains of $400,000 and disclose the existence of the purchase commitment.
No impact.
Record unrealized losses of $400,000 and disclose the existence of the purchase commitment.
Disclose the existence of the purchase commitment.
Record unrealized gains of $350,000 and disclose the existence of the purchase commitment.
No impact.
Record unrealized losses of $350,000 and disclose the existence of the purchase commitment.
Disclose the existence of the purchase commitment.
Verify the accuracy of the perpetual inventory records.
Verity the accuracy of the physical inventory.
To estimate cost of goods sold.
To provide an inventory value of LIFO inventories.
The beginning inventory plus the purchases equal total goods to be accounted for.
Goods not sold must be on hand.
If the sales, reduced to the cost basis, are deducted from the sum of the opening inventory plus purchases, the result is the amount of inventory on hand.
The total amount of purchases and the total amount of sales remain relatively unchanged from the comparable previous period.
A portion of the inventory is destroyed.
There is a substantial increase in inventory during the year
There is no beginning inventory because it is the first year of operation.
None of these.
It may be used to estimate inventories for interim statements.
It may be used to estimate inventories for annual statements.
It may be used by auditors.
None of these.
Provides reliable results in cases where the distribution of items in the inventory is different from that of items sold during the period.
Hides costs from competitors and customers.
Gives a more accurate statement of inventory costs than other methods.
Provides a method for inventory control and facilitates determination of the periodic inventory for certain types of companies.
Last-in, first-out.
First-in, first-out.
Conventional retail method.
Specific identification.
Final inventory and the total of goods available for sale contain the same proportion of high-cost and low-cost ratio goods.
Ratio of gross margin to sales is approximately the same each period.
Ratio of cost to retail changes at a constant rate.
Proportions of markups and markdowns to selling price are the same.
It may not be used to estimate inventories for interim statements.
It may not be used to estimate inventories for annual statements.
It may not be used by auditors.
None of these.
There may be no markdowns in a given year.
This tends to give a better approximation of the lower of cost or market.
Markups are also ignored.
His tends to result in the showing of a normal profit margin in a period when no markdown goods have been sold.
Include markups but not markdowns.
Include markups and markdowns.
Ignore both markups and markdowns.
Include markdowns but not markups.
if it is the conventional method, the beginning inventory is included and markdowns are deducted.
If it is the LIFO method, the beginning inventory is excluded and markdowns are deducted.
If it is the LIFO method, the beginning inventory is included and markdowns are not deducted
If it is the conventional method, the beginning inventory is excluded and markdowns are not deducted.
All inventory items must be categorized according to the retail markup percentage which reflects the item's selling price.
A record of the total cost and retail value of goods purchased.
A record of the total cost and retail value of the goods available for sale.
T otal sales for the period.
As a control measure in determining inventory shortages
For insurance information
To permit the computation of net income without a physical count of inventory
To defer income tax liability
Retailer keeps a record of the total costs of products sold for the period.
Retailer keeps a record of the total costs and retail value of goods purchased.
Retailer keeps a record of the total costs and retail value of goods available for sale.
Retailer keeps a record of sales for the period.
FIFO.
Lower-of-average-cost-or-market.
Average cost.
LIFO.
Increases the cost-retail ratio.
No effect on the cost-retail ratio.
Depends on the amount of the net markdowns.
Decreases the cost-retail ratio.
Increases the cost-retail ratio.
No effect on the cost-retail ratio.
Depends on the amount of the net markups.
Decreases the cost-retail ratio.
Inventory composition.
Inventory location.
Inventory financing arrangements.
Inventory costing methods employed.
The cost flow assumption need not correspond to the actual physical flow of goods.
The assumption selected may be changed each accounting period.
The FIFO assumption uses the earliest acquired prices to cost the items sold during a period.
The LIFO assumption uses the earliest acquired prices to cost the items on hand at the end of an accounting period.
365 days by the inventory turnover ratio.
The inventory turnover ratio by 365 days.
Net sales by the inventory turnover ratio.
365 days by cost of goods sold.
Beginning inventory.
Ending inventory.
Average inventory.
Number of days in the year.
Last year's cost ratio and this year's index.
This year's cost ratio and this year's index.
Last year's cost ratio and last year's index
This year's cost ratio and last year's index.
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