Question :
71. IFRS specifies that, in the context of inventories, market means : 1246036
71. IFRS specifies that, in the context of inventories, market means
A. replacement cost, only.
B. net realizable value, only.
C. replacement cost, except that market may not exceed net realizable value and may not be less than net realizable value reduced by a normal profit margin.
D. replacement cost, except that market may not exceed net realizable value and may not be less than present value of future cash flows.
E. replacement cost, except that market may not exceed net realizable value and may not be less than the total amount of undiscounted future cash flows.
72. Flower Company had beginning inventory of $19,000, purchases were $100,000, and ending inventory had a cost of $25,000 and a market value of $20,000. Which of the following is/are not true?
A. Cost of Goods Sold is $5,000 larger when the firm records ending inventory at lower of cost or market than when it records the inventory at acquisition cost.
B. The loss of $5,000 increases Cost of Goods Sold by $5,000 and therefore reduces net income by $5,000, compared to the acquisition cost basis.
C. The firm should disclose the existence of large write-downs included in Cost of Goods Sold in the notes so that users of financial statements understand the components of the Cost of Goods Sold account.
D. The firm should disclose the existence of large write-downs included in Cost of Goods Sold in Managements’ Discussion and Analysis so that users of financial statements understand the scope of the asset impairment.
E. none of the above
73. Forgone Company had beginning inventory of $19,000, purchases were $100,000, and ending inventory had a cost of $25,000 and a market value of $20,000. The same inventory increased $3,000 in market value in the subsequent period. Which of the following is/are not true?
A. Under U.S. GAAP, the firm would continue to record the inventory at $20,000, the lower of cost or market.
B. Under IFRS, the firm would reverse a portion of its previous impairment.
C. If Forgone Company is in an industry that frequently experience inventory price fluctuations, the firm may use an allowance account to record lower-of-cost-or-market adjustments.
D. The firm should disclose the existence of large inventory write-ups in Managements’ Discussion and Analysis so that users of financial statements understand the reversal of the previous asset impairment.
E. none of the above
74. The lower-of-cost-or-market basis for inventory valuation
A. is a conservative accounting policy.
B. recognizes losses from decreases in market value before a sale occurs.
C. recognizes gains from increases in market value above original acquisition cost only when a sale occurs.
D. reports inventories on the balance sheet at amounts that are never greater, but may be less, than acquisition cost.
E. all of the above
75. Which of the following is not true regarding the lower-of-cost-or-market basis for inventory valuation?
A. It is a conservative accounting policy.
B. It recognizes losses from decreases in market value before a sale occurs.
C. It recognizes gains from increases in market value above original acquisition cost only when a sale occurs.
D. It reports inventories on the balance sheet at amounts that are never greater, but may be less, than acquisition cost.
E. It reports inventories on the balance sheet at amounts that are equal to the acquisition cost less a normal profit margin.
76. Mystical Duds estimates that unsold women’s clothing with a carrying value of $500 million has minimal market value given a change in fashion. To reflect the minimal market value of the merchandise, Mystical Duds
A. would record an impairment loss of $500 million, reducing the carrying value of this inventory to zero.
B. would recognize zero cost of goods sold and a gross margin of $100 million on the sale, for a net margin of -$400 (=-$500 + $100) million over the two periods, if the firm sells the clothes for $100 million in a subsequent accounting period.
C. would record an impairment loss of $400 million, reducing the carrying value of this inventory to $100 million.
D. would recognize $100 million of cost of goods sold and a gross margin of zero on the sale, for a net margin of -$400 (=-$500 + $100) million over the two periods, if the firm sells the clothes for $100 million in a subsequent accounting period, if the firm sells the clothes for $100 million in a subsequent accounting period.
E. would record/recognize choices a and b.
77. City Bicycle
City Bicycle , a cycling store has a beginning inventory of one bi-level touring bicycle 1, for which it paid $2,500. Suppose that during the period the store purchases bi-level touring bicycle 2 for $2,900 and bi-level touring bicycle 3 for $3,000, and that it sells one bicycle for $5,500. The three bicycles are physically identical; the store acquired them at different times as their acquisition costs changed, so only their costs differ.
Using the City Bicycle example, suppose the cycling store uses the specific identification system, and uses serial numbers or product bar codes to identify bi-level touring bicycle 2 as the unit sold. The cost of goods sold is _____, and the ending inventory is _____.
A. $2,900; $5,500
B. $2,500; $5,900
C. $3,000; $5,400
D. $2,800; $5,600
E. cannot be determined with the information given
78. City Bicycle
City Bicycle , a cycling store has a beginning inventory of one bi-level touring bicycle 1, for which it paid $2,500. Suppose that during the period the store purchases bi-level touring bicycle 2 for $2,900 and bi-level touring bicycle 3 for $3,000, and that it sells one bicycle for $5,500. The three bicycles are physically identical; the store acquired them at different times as their acquisition costs changed, so only their costs differ.
Using the City Bicycle example, suppose the cycling store uses the weighted-average cost-flow assumption. The cost of goods sold is _____, and the ending inventory is _____.
A. $2,900; $5,500
B. $2,500; $5,900
C. $3,000; $5,400
D. $2,800; $5,600
E. cannot be determined with the information given
79. City Bicycle
City Bicycle , a cycling store has a beginning inventory of one bi-level touring bicycle 1, for which it paid $2,500. Suppose that during the period the store purchases bi-level touring bicycle 2 for $2,900 and bi-level touring bicycle 3 for $3,000, and that it sells one bicycle for $5,500. The three bicycles are physically identical; the store acquired them at different times as their acquisition costs changed, so only their costs differ.
Using the City Bicycle example, suppose the cycling store uses the FIFO cost-flow assumption. The cost of goods sold is _____, and the ending inventory is _____.
A. $2,900; $5,500
B. $2,500; $5,900
C. $3,000; $5,400
D. $2,800; $5,600
E. cannot be determined with the information given
80. City Bicycle
City Bicycle , a cycling store has a beginning inventory of one bi-level touring bicycle 1, for which it paid $2,500. Suppose that during the period the store purchases bi-level touring bicycle 2 for $2,900 and bi-level touring bicycle 3 for $3,000, and that it sells one bicycle for $5,500. The three bicycles are physically identical; the store acquired them at different times as their acquisition costs changed, so only their costs differ.
Suppose the cycling store uses the LIFO cost-flow assumption. The cost of goods sold is _____, and the ending inventory is _____.
A. $2,900; $5,500
B. $2,500; $5,900
C. $3,000; $5,400
D. $2,800; $5,600
E. cannot be determined with the information given
