Question : 1) The lower-of-cost-and-net-realizable-value rule a good example of conservatism in : 1212657

1) The lower-of-cost-and-net-realizable-value rule is a good example of conservatism in accounting.

2) When applying the lower-of-cost-and-net-realizable-value rule to ending inventory valuation, net realizable value generally refers to the company’s expected selling price for its inventory net of any selling costs.

3) When the sales value of the inventory subsequently increases after a write down to net-realizable-value the reported value may be increased to the the limit of the original cost.

4) Using the lower-of-cost-and-net-realizable-value rule of valuing inventory allows the accountant to attain:

A) consistency.

B) conservatism.

C) matching.

D) full disclosure.

5) If the cost of an item of inventory is $80 and the current selling price is $75, the amount shown in inventory on the balance sheet under the lower-of-cost-and-net realizable-value rule is:

A) $75.

B) $80.

C) $100.

D) $75 or $80.

6) Ending inventory for Commodity X consists of 20 units. Under the FIFO method, the cost of the 20 units is $5 each. Current net realizable value is $4.75 per unit. Using the lower-of-cost-and-net -realizable-value rule to value inventory, the balance sheet would show ending inventory of:

A) $5.00.

B) $4.75.

C) $95.00.

D) $100.00.

7) Piggly Wiggly Sales had six CD players in inventory on December 31. They were purchased in November for $170 each. A quoted price received from the supplier on December 31 shows the CD players now cost $175 each. Piggly Wiggly has marked each player to sell for $320. Using the lower-of-cost-and-net-realizable-value rule, the ending inventory of CD players should be shown at:

A) $1,050.

B) $1,920.

C) $1,020.

D) $900.

8) Piggly Wiggly Sales had six CD players in inventory on December 31. The players were purchased in November for $170. Price lists from Piggly Wiggly Sales’ supplier indicate that the same CD player would now cost the company $168. The current sales price for each of the CD players is $320. Using the lower-of-cost-and-net-realizable-value rule, the ending inventory of CD players should be shown at:

A) $1,008.

B) $1,035.

C) $1,020.

D) $1,920.

9) For the current year, Heedy’s Department Store reported the following data:

Goods available for sale

$1,074,450

December 31, inventory balance

85,430

The current net realizable value of the inventory on the balance sheet date is $91,730. Using the lower-of-cost-and-net-realizable-value rule, what is cost of goods sold for Heedy’s Department Store?

A) $989,020

B) $982,720

C) $897,290

D) $1,080,750

10) Given the following data:

Ending inventory at cost

$23,600

Ending inventory at net realizable value

24,000

Cost of goods sold (before consideration of the

lower-of-cost-and-net-realizable-value rule)

37,000

Which of the following depicts the proper account balance after the application of the lower-of-cost-and-net-realizable-value rule?

A) Ending inventory will be $24,000.

B) Cost of goods sold will be $36,400.

C) Cost of goods sold will be $37,400.

D) Ending inventory will be $23,600.

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11) Net income appears on the worksheet:

A) only in the balance sheet credit column.

B) only in the income statement credit column

C) in the income statement debit column and balance sheet debit column

D) in the income statement debit column and balance sheet credit column

12) Net loss appears on the worksheet:

A) in the income statement credit column and balance sheet debit column.

B) only in the income statement credit column.

C) in the income statement debit column and balance sheet credit column.

D) only in the balance sheet debit column.

13) The prepaid rent account has a balance that is $400 less in the worksheet's balance sheet debit column than in the worksheet's trial balance debit column. This would be the result of a:

A) $400 entry to prepaid rent in the worksheet's adjustments debit column.

B) $400 entry to prepaid rent in the worksheet's adjustments credit column.

C) $400 entry to rent expense in the worksheet's adjustments credit column.

D) mistake in cross-adding the worksheet.

14) Salary expense has a balance of $65,400 in the trial balance debit column of a worksheet. The adjustments credit column contains a $500 credit to salary payable. The adjusted trial balance column will show:

A) salary expense with a debit balance of $64,900.

B) salary expense with a debit balance of $6,500.

C) salary expense with a debit balance of $65,900.

D) salary payable with a credit balance of $65,900.

15) Interest expense on a worksheet's trial balance debit column has a $3,400 balance and a $4,000 balance on the worksheet's income statement debit column. The difference is due to:

A) an entry in the adjustments credit column for $600 to interest expense.

B) an entry in the adjustments debit column for $4,000 to interest expense.

C) an entry in the adjustments credit column for $4,000 to interest expense.

D) an entry in the adjustments credit column for $600 to interest payable.

16) On a worksheet, the income statement debit column equals $190,800 and the income statement credit column equals $195,600. From this data, it can be determined that:

A) the company had a net loss of $4,800 added to the income statement credit column.

B) the company had a net income of $4,800 added to the income statement debit column.

C) the company had a net loss of $4,800 added to the income statement debit column.

D) the company had a net income of $4,800 added to the income statement credit column.

17) Which of the following appears in the balance sheet debit column of a worksheet?

A) service revenue

B) income summary

C) owner withdrawals

D) accounts payable

18) Which of the following appears in the income statement credit column of a worksheet?

A) service revenue

B) income summary

C) owner withdrawals

D) accounts receivable

19) If the unearned service revenue account had an unadjusted normal balance of $4,800, and an adjustment was made debiting the account for $1,500, the account would appear on the adjusted trial balance of the worksheet as a:

A) $4,800 debit.

B) $6,300 credit.

C) $3,300 credit.

D) $3,300 debit.

20) After all the account balances have been extended to the balance sheet columns of the worksheet, the totals of the debit and credit columns are $35,350 and $38,750, respectively. It can be concluded the company has a:

A) net income of $3,400.

B) net loss of $3,400.

C) $74,100 net loss.

D) $74,100 net income.