Question 1

Which application of the lower of cost or market rule will generally result in the lowest valuation for the ending inventory?

Accepted Answer

A) to each item of the inventory 
B) to each major category of inventory 
C) to the total inventory 
D) all of these applications result in the same valuation for inventory 
A) to each item of the inventory 
B) to each major category of inventory 
C) to the total inventory 
D) all of these applications result in the same valuation for inventory

Question 2

The accountant for Leslie Company made the following errors related to merchandise inventory in 2010: 1. The beginming inventory for 2010 was overstated by $ \$ 750 $ due to an error in the physical count. 
2. A $ \$ 1,300 $ purchase of merchandise on credit was not recorded of induded in the ending inventony.
 Assuming a periodic inventory system, Leslie Company's 2010 cost of goods sold will be

Accepted Answer

A) understated by $550 
B) understated by $1, 850 
C) overstated by $1, 850 
D) overstated by $750 
A) understated by $550 
B) understated by $1, 850 
C) overstated by $1, 850 
D) overstated by $750

Question 3

The accountant for the Hilda Company recorded a purchase of merchandise on credit for the current year, but the merchandise was shipped FOB destination and did not arrive until after current year-end.Assuming a periodic inventory system, how would assets, liabilities, and retained earnings be affected on the year-end balance sheet? $\begin{array}{lll}&\text {Asssets }&\text { Liabilities}&\text { Retained Earming}\\hline
I.&\text { No effect } & \text { Understated } & \text { Understated } \
II.&\text { Understated } & \text { Understated } & \text { Understated } \
III.&\text { No effect } & \text { Overstated } & \text { Overstated } \
IV.&\text { No effect } & \text { Overstated } & \text { Understated } 
\end{array}$

Accepted Answer

A) I 
B) II 
C) III 
D) IV 
A) I 
B) II 
C) III 
D) IV

Question 4

For valuation of inventory, the lower of cost or market rule may be applied to

Accepted Answer

A) the total inventory 
B) each item or the total of inventory 
C) each item, the total of inventory, or major categories of inventory 
D) each item 
A) the total inventory 
B) each item or the total of inventory 
C) each item, the total of inventory, or major categories of inventory 
D) each item

Question 5

Marcus Company uses the lower of cost or market rule in valuing its inventory.The floor constraint for one item in the inventory is $58.20.The following is other information concerning this unit: $\begin{array}{ll}
\text { Transpoutation costs } & \$ 4.00 \
\text { Normal profit margin } & 11.70 \
\text { Packaging costs } & 4.20
\end{array}$ The market value for this item is

Accepted Answer

A) $62.20 
B) $66.40 
C) $69.90 
D) $78.10 
A) $62.20 
B) $66.40 
C) $69.90 
D) $78.10

Question 6

The Farmer Company uses the retail inventory method to compute ending inventory.Information for 2010 is as follows:
   Required:
Determine Farmer Company's ending inventory based on the retail lower of average cost or market method.

Accepted Answer

The answer of The Farmer Company uses the retail inventory...

Question 7

Which application of the lower of cost or market rule will generally result in the highest valuation for the ending inventory?

Accepted Answer

A) to each item of the inventory 
B) to each major category of inventory 
C) to the total inventory 
D) all of these applications result in the same valuation for inventory 
A) to each item of the inventory 
B) to each major category of inventory 
C) to the total inventory 
D) all of these applications result in the same valuation for inventory

Question 8

If in the current year a purchase was not recorded but the purchased item was included in ending physical inventory, which one of the following situations occurs for the current year?

Accepted Answer

A) Working capital is understated, and net income is overstated. 
B) Working capital and net income are understated. 
C) Working capital is overstated, and net income is understated. 
D) Working capital and net income are overstated. 
A) Working capital is understated, and net income is overstated. 
B) Working capital and net income are understated. 
C) Working capital is overstated, and net income is understated. 
D) Working capital and net income are overstated.

Question 9

The journal entry to record the existence of a loss on a non-cancellable fixed purchase contract is

Accepted Answer

A) 
$\begin{array}{cc}
\text { Accrued Loss on Purchase Commitments } & \mathrm{XXX} \
\text { Loss on Purchase Commitments } & \mathrm{XXX}
\end{array}$ 
B) 
Loss on Purchase Commitments $ \quad \mathrm{XXX} $ 
Accrued Loss on Purchase Commitments $ \quad \mathrm{XXX} $ 
C) 
$\begin{array}{lr}
\text { Loss on Purchase Commitments } & \text { XXX } \
\text { Accounts Payable } & \mathrm{XXX}
\end{array}$ 
D) 
Loss on Purchase Commitments$\quad$$\quad$ $ \quad \mathrm{XXX} $
Allowance to Reduce Inventory to Lower of Cost or Market$\quad$ XXX 
A) 
$\begin{array}{cc}
\text { Accrued Loss on Purchase Commitments } & \mathrm{XXX} \
\text { Loss on Purchase Commitments } & \mathrm{XXX}
\end{array}$ 
B) 
Loss on Purchase Commitments $ \quad \mathrm{XXX} $ 
Accrued Loss on Purchase Commitments $ \quad \mathrm{XXX} $ 
C) 
$\begin{array}{lr}
\text { Loss on Purchase Commitments } & \text { XXX } \
\text { Accounts Payable } & \mathrm{XXX}
\end{array}$ 
D) 
Loss on Purchase Commitments$\quad$$\quad$ $ \quad \mathrm{XXX} $
Allowance to Reduce Inventory to Lower of Cost or Market$\quad$ XXX

Which application of the lower of cost or market rule will generally result in the lowest valuation for the ending inventory?

For valuation of inventory, the lower of cost or market rule may be applied to

The Farmer Company uses the retail inventory method to compute ending inventory.Information for 2010 is as follows: Required: Determine Farmer Company's ending inventory based on the retail lower of average cost or market method.

Which application of the lower of cost or market rule will generally result in the highest valuation for the ending inventory?

If in the current year a purchase was not recorded but the purchased item was included in ending physical inventory, which one of the following situations occurs for the current year?

The journal entry to record the existence of a loss on a non-cancellable fixed purchase contract is

The Environment of Financial Reporting

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Changes in Stockholders Equity

The Income Statement and the Statement of Cash Flows

Additional Aspects of Financial Reporting and Financial Analysis

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Property, Plant, and Equipment: Acquisition and Disposal

Depreciation and Depletion

Intangibles

Current Liabilities and Contingencies

Long-Term Liabilities and Receivables

Investments

Contributed Capital

Earnings Per Share and Retained Earnings

Income Recognition and Measurement of Net Assets

Accounting for Income Taxes

Accounting for Postemployment Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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Exam 9: Inventories: Special Valuation Issues

Which application of the lower of cost or market rule will generally result in the lowest valuation for the ending inventory?

For valuation of inventory, the lower of cost or market rule may be applied to

The Farmer Company uses the retail inventory method to compute ending inventory.Information for 2010 is as follows: Required: Determine Farmer Company's ending inventory based on the retail lower of average cost or market method.

Which application of the lower of cost or market rule will generally result in the highest valuation for the ending inventory?

If in the current year a purchase was not recorded but the purchased item was included in ending physical inventory, which one of the following situations occurs for the current year?

The journal entry to record the existence of a loss on a non-cancellable fixed purchase contract is

The Environment of Financial Reporting

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Changes in Stockholders Equity

The Income Statement and the Statement of Cash Flows

Additional Aspects of Financial Reporting and Financial Analysis

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Property, Plant, and Equipment: Acquisition and Disposal

Depreciation and Depletion

Intangibles

Current Liabilities and Contingencies

Long-Term Liabilities and Receivables

Investments

Contributed Capital

Earnings Per Share and Retained Earnings

Income Recognition and Measurement of Net Assets

Accounting for Income Taxes

Accounting for Postemployment Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

Filters