Question :
59.Reichart Company has four different categories of inventory. Quantity, cost, : 1254435
59.Reichart Company has four different categories of inventory. Quantity, cost, market value for each inventory category is shown below: The company carries inventory at lower-of-cost-or-market applied to the inventory in aggregate. The implementation of the lower-of-cost-or-market rule would:
A. increase assets and equity by $55.50.
B. reduce assets and equity by $101.00.
C. reduce assets and equity by $79.00.
D. None of these.
60.The lower-of-cost-or-market rule can be applied to
A. major classes or categories of inventory.
B. the entire stock of inventory in aggregate.
C. each individual inventory item.
D. any of these.
61.If a firm is using the lower-of-cost-or-market rule and if a write-down entry is required, which of the following effects will apply?
A. Net income will increase.
B. Gross margin will decrease.
C. Assets will be unaffected.
D. Liabilities will increase.
62.What is meant by “market” in lower-of-cost-or-market calculations?
A. The amount of gross margin earned by selling merchandise.
B. The amount the goods were sold for during the period.
C. The amount that would have to be paid to replace the merchandise.
D. The amount originally paid for the merchandise.
63.Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest write-downs of inventory?
A. The entire stock of inventory in aggregate.
B. Average of cost of goods sold for the past three years.
C. Major classes or categories of inventory.
D. Each individual inventory item.
64.Nguyen Corporation is required to record an inventory write-down of $2,342 as a result of using the lower-of-cost-or-market rule. Which of the following answers correctly shows how this entry would affect the financial statements?
A. Option A
B. Option B
C. Option C
D. Option D
65.The Bristol Company was recently required to record an inventory write-down of $5,215 because the market value of its inventory was less than cost. Assuming the amount of the write-down is not material (the total inventory was over $9,750,000), which of the following is the appropriate journal entry?
A. Option A
B. Option B
C. Option C
D. Option D
66.At the end of the 2013 accounting period DeFazio Company determined that the market value of its inventory was $39,900. The historical cost of this inventory was $40,700. DeFazio uses the perpetual inventory method. The entry necessary to reduce the inventory to the lower of cost or market will
A. increase assets and increase liabilities.
B. decrease assets and decrease liabilities.
C. increase assets and increase net income.
D. decrease assets and decrease net income.
67.Wynn Corporation’s 2013 ending inventory was overstated by $20,000; however, ending inventory for 2014 was correct. Which of the following statements is correct?
A. Net income for 2013 is understated.
B. Retained earnings at the end of 2014 is overstated.
C. Cost of goods sold for 2014 is overstated.
D. Cost of goods sold for 2013 is overstated.
68.Phillips Corporation overstated its ending inventory on December 31, 2013. Which of the following answers correctly identifies the effect of the error on 2014 financial statements?
A. Gross margin overstated.
B. Cost of goods sold is overstated.
C. Ending inventory is understated.
D. Net income is overstated.
