FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
Publisher: MCG
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12.Which of the following statements is correct regarding the direct method of accounting for any write down of inventories to its net realizable value (NRV)?
a. An Allowance to Reduce Inventory to Net Realizable Value account is used to record inventory at the lower of cost and NRV.
b. The beginning and ending inventories are measured at the lower of cost and NRV when determining the cost of goods sold for the period.
c. The beginning and ending inventories are measured at cost when determining the cost of goods sold for the period.
d. The decline in NRV of inventory is reported as an other expense while recovery in NRV of inventory is reported as an other income.
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- H7. For the same transactions, why does the weighted-average cost method provide different value for ending inventory and COGS depending on whether the periodic or perpetual inventory system is used? Select one: a. Perpetual inventory calculates and assigns costs as items are sold, while periodic inventory calculates and assigns costs at the end of the period. b. Perpetual inventory calculates and assigns costs at the end of the period, while periodic inventory calculates and assigns costs as items are sold. c. Perpetual inventory counts all the purchases for the month first before calculating the average cost, while periodic calculates the average cost after every transaction. d. Perpetual inventory and periodic inventory will not provide different values using Explain also wrong options and explain with detailsarrow_forwardWhich of the three methods of inventory costing— FIFO, LIFO, or weighted average cost—will in general yield an inventory cost most nearlyapproximating current replacement cost?arrow_forwardIn some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases, under the lower-of-cost-or-market rule. Cases 00100 00200 00300 00400 00500 Cost $15.90 $16.10 $15.90 $15.90 $15.90 Net realizable value 14.50 19.20 15.20 10.40 16.40 Net realizable value less normal profit 12.80 17.60 13.75 8.80 14.80 Market (replacement cost) 14.80 17.20 12.80 9.70 16.80arrow_forward
- 31. When determining gross profit, only the following items must be taken into consideration: A. Opening inventory, closing inventory, transport costs and purchases. B. Transport costs, opening inventory, receipts and payments, and purchases. C. Sales, opening inventory, purchases, transport costs and closing inventory. D. Sales, opening inventory, closing inventory, income and expensearrow_forwardSheffield Corp. markets CDs of numerous performing artists. At the beginning of March, Sheffield had in beginning inventory 2,500 CDs with a unit cost of $8. During March, Sheffield made the following purchases of CDs. March 5. March 13 1,900 @ 3,500 @ $9 $10 March 21 March 26 5,200 @ $11 $12 1,900 @ During March 11,500 units were sold. Sheffield uses a periodic inventory system.arrow_forward26. Which of the following statements is true regarding how cost of goods sold is determined under the perpetual inventory system using LIFO? a. The units sold are multiplied by the first costs in inventory. b. The units sold are multiplied by the last costs in inventory. c. Multiply the units in ending inventory by the last costs in inventory. This amount is subtracted from cost of goods available for sale. d. The cost of goods available for sale is divided by total units to get an average cost which is multiplied by units sold.arrow_forward
- what is correct answer?arrow_forwardIdentify each item as describing the FIFO method, LIFO method, or average cost method of inventory valuation. A. Involves calculating the total number of units in the warehouse FIFO LIFO Average cost B. To determine cost of goods sold, begin with the earliest goods acquired FIFO LIFO Average cost C. To determine merchandise inventory balance, begin with the earliest goods acquired FIFO LIFO Average costarrow_forwardIn some instances, accounting principles require a departurefrom valuing inventories at cost alone. Determinethe proper unit inventory price in the following cases,under the lower-of-cost-or-market rule.arrow_forward
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