Question : 101. Which of the following is/are correct regarding the valuation of : 1246011

101. Which of the following is/are correct regarding the valuation of inventory? 
A. GAAP require firms to record inventories at acquisition cost
B. GAAP does not permit firms to revalue inventories above acquisition cost
C. GAAP require firms to write down inventories when their replacement cost, or market value, declines below acquisition cost
D. all of the above
E. none of the above

102. The lower-of-cost-or-market basis for inventory valuation is a conservative accounting policy because 
A. it recognizes losses from decreases in market value before the firm sells goods.
B. it does not record gains from increases in market value before a sale takes place.
C. it reports inventories on the balance sheet at amounts that are never greater, but may be less than acquisition cost.
D. all of the above
E. none of the above

103. The lower-of-cost-or-market basis results in reporting 
A. unrealized holding losses on inventory items currently through lower net income amounts.
B. delays reporting unrealized holding gains until the firm sells the goods.
C. unrealized holding gains on inventory items currently through higher net income amounts.
D. a and b
E. none of the above

104. (CMA adapted, Jun 96 #3) An item of inventory purchased in Year 5 for $25.00 has been incorrectly written down to a current replacement cost of $17.50. The item is currently selling in Year 6 for $50.00, its normal selling price. Which one of the following statements is correct? 
A. The income for Year 5 is overstated.
B. The cost of sales for Year 6 will be overstated.
C. The income for Year 6 will be overstated.
D. The closing inventory of Year 5 is overstated.
E. none of the above

105. Bargain Inc.’s beginning inventory is $20,000 and purchases for the year are $80,000. A physical inventory shows that $15,000 of the inventory remains at year end. How much is recorded as cost of goods sold for the year? 
A. $75,000
B. $80,000
C. $85,000
D. $95,000
E. $105,000

106. (CMA adapted, Dec 95 #27) Somali Inc. is a profitable company with the goal to maximize cash flow. A valid reason for Somali not to adopt the last-in, first-out (LIFO) method of inventory valuation is the 
A. prices are rising.
B. prices are falling.
C. company has high administrative costs.
D. reduction effect on inventory.
E. difficulty in segregating goods in the warehouse.

107. In a period of rising prices, use of the FIFO rather than LIFO inventory cost flow assumption results in 
A. a lower cost of goods sold and a lower ending inventory.
B. a lower beginning inventory and a lower ending inventory.
C. a higher cost of goods sold.
D. a lower cost of goods sold and a higher ending inventory.
E. none of the above

108. Inventory by specific identification would not be practical for 
A. a large-volume automobile dealer.
B. a rare coin dealer.
C. a TV and stereo superstore.
D. a high cost jeweler.
E. all of the above.

109. Which inventory cost flow assumption emphasizes the income statement as opposed to the balance sheet? 
A. LIFO method
B. FIFO method
C. weighted-average method
D. acquisition cost
E. specific identification method

110. Which inventory cost flow assumption emphasizes the balance sheet as opposed to the income statement? 
A. LIFO method
B. FIFO method
C. weighted-average method
D. acquisition cost
E. specific identification method