Which of the following financial attributes should not be used to measure inventory?

Which of the following financial attributes should not be used to measure inventory?

A. Historical cost
B. Current replacement cost
C. Net realizable value
D. Present value of future cash flows



Answer: D. Present value of future cash flows

Net realizable value is used to measure which inventory?

Net realizable value is used to measure which inventory?

A. Agricultural inventory
B. Minerals
C. Commodities held by broker-traders
D. All of these are measured at net realizable value



Answer: D. All of these are measured at net realizable value

Net realizable value is the general rule for valuing which inventory?

Net realizable value is the general rule for valuing which inventory?

A. Commodities held by broker-traders
B. Computer components held for sale
C. Invenrories priced on an item by item basis
D. All of these inventories are measured at net realizable value



Answer: A. Commodities held by broker-traders

Commodity broker-traders

Commodity broker-traders

A. Produce commodities such as rice, corn or precious metals
B. Hold inventory primarily to sell in the near term and generate a profit from price fluctuation
C. Measure inventories at the lower of cost and net realizable value
D. All of the choices are correct regarding broker-traders


Answer: B. Hold inventory primarily to sell in the near term and generate a profit from price fluctuation

Commodities of broker-traders are measured at

Commodities of broker-traders are measured at

A. Fair value
B. Fair value less cost of disposal
C. Cost
D. Current replacement cost



Answer: B. Fair value less cost of disposal

An example of an inventory accounting policy that should be disclosed is

An example of an inventory accounting policy that should be disclosed is 

A. Effect of inventory profit caused by inflation
B. Classification of inventory into raw materials, goods in process and finished goods
C. Identification of major suppliers
D. Method used for inventory costing



Answer: D. Method used for inventory costing

When portion of inventory has been pledge as security for s loan

When portion of inventory has been pledge as security for s loan

A. The value of the inventory pledged should be deducted from the debt
B. An equal amount of retained earnings should be appropriated
C. The fact should be disclosed but the amount if current assets shoukd nit be affected
D. The cost of the pledge inventory should be transferred from current asset to noncurrent asset



Answer: C. The fact should be disclosed but the amount if current assets shoukd nit be affected

If a material amount of inventory has been ordered through a formal purchase contract at the end of reporting period for future delivery at firm prices

If a material amount of inventory has been ordered through a formal purchase contract at the end of reporting period for future delivery at firm prices

A. This fact must be disclosed
B. Disclosure is required only if prices have declined since the date of the order
C. Disclosure is required only if prices have since risen substantially
D. An appropriation of the retained earnings is necessary



Answer: A. This fact must be disclosed

The credit balance that arises when a loss on a purchase commitment is recognized should be

The credit balance that arises when a loss on a purchase commitment is recognized should be

A. Presented as a current liability
B. Suntracted from ending inventory
C. Presented as component of other comprehensive income
D. Presented in the income statement


Answer: A. Presented as a current liability

When the cost of goods sold method is used to record inventory at net realizable value

When the cost of goods sold method is used to record inventory at net realizable value

A. There is a direct reduction in the selling price
B. A loss is recorded directly in the inventory account by debiting loss
C. Only the portion of the loss attributable to inventory sold is recorded
D. The net realizable value for ending inventory is substituted for cost and the loss is buried in the cost of goods sold



Answer: D. The net realizable value for ending inventory is substituted for cost and the loss is buried in the cost of goods sold

Which method may be used to record a loss due to a price decline in the value of inventory?

Which method may be used to record a loss due to a price decline in the value of inventory?

A. Loss method
B. Sales method
C. Cost of goods sold method
D. Loss method and cost of goods sold method



Answer: D. Loss method and cost of goods sold method

Lower of cost and net realizable value as it applies to inventory is best describes as the

Lower of cost and net realizable value as it applies to inventory is best describes 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



Answer: A. Reporting of a loss when there is a decrease in the future utility below the original cost

Lower of cost and net realizable value

Lower of cost and net realizable value

A. Gives the lowest valuation if applied to the total inventory
B. Gives the lowest valuation if applied to major group of inventory
C. Gives the lowest valuationif applied to indivudual item of inventory
D. Must be applied to major group



Answer: C. Gives the lowest valuation if applied to individual item of inventory

LCNRV of inventory

LCNRV of inventory

A. Is always either the net realizable value or cost
B. Should always be equal to net ralizable value
C. May sometimes be less than net realizable value
D. Should always be equal to estimated selling price less cost to complete



Answer: A. Is always either the net realizable value or cost

Which of the following statements is true regarding inventory write down and reversal of write down?

Which of the following statements is true regarding inventory write down and reversal of write down?

A. Rversal of inventory writedown is prohibited
B. Separate reporting of reversal of inventory writedown is required
C. Entities are required to record writedown in a separate loss account
D. All of the choices are correct



Answer: B. Separate reporting of reversal of inventory write down is required

Which statement is incorrect regarding LCNRV?

Which statement is incorrect regarding LCNRV?

A. Net realizable value is the selling price kess estimated cost to complete and estimated cost of disposal
B. In most situations, entities measure inventory on a total inventory basis
C. One of two methods may be used to record the income effect of valuing inventory at net realizable value
D. Entities use an allowance account to reduce inventory to net realizable value



Answer: B. In most situations, entities measure inventory on a total inventory basis

Which of the following is not an acceptable method of applying the LCNRV?

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



Answer: A. Inventory location

Inventories are usually written down to net realizable value

Inventories are usually written down to net realizable value

A. Item by item
B. By classification
C. By total
D. By segment



Answer: A. Item by item

Net realizable value is

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



Answer: D. Estimated selling price less estimated cost to complete and estimated cost of disposal

Inventory should be measured at

Inventory should be measured at

A. Lower of cost and fair value
B. Lower of cost and net ralizable value
C. Lower of cost and net selling price
D. All of these are used in measuring inventory



Answer: B. Lower of cost and net realizable value