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Question
A firm using FIFO had a beginning inventory of $48,000, an ending inventory of $56,000, and a pretax income of $400,000. If it had used LIFO, its beginning inventory would have been $20,000, and its ending inventory would have been $16,000. From the information provided, one can conclude that:
A. quantities increased and prices decreased
B. quantities decreased and prices increased
C. prices increased but we cannot conclude what happened to quantities
D. quantities decreased but we cannot conclude what happened to prices
E. not enough information to reach a conclusion
Answer
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Q:
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Quantity Received
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200
$4.20 November 9 150 November 11
200
4.40 November 17 220 November 22
250
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Q:
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B. GAAP does not permit firms to revalue inventories above acquisition cost
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Q:
Value Company
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$22,000 Work-in-process
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Value Company
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40,000
35,000 Finished goods
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B. $252,000
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E. $224,000
Q:
A department store had items in its inventory at the end of the year that had a recorded book value of $10,000 and, because of fashion changes, a market value of only $7,000. The department store failed to write down these inventory items to market value. To keep the obsolete condition of the inventory items away from its auditors, the firm shipped the goods to a remote warehouse. The effect of this error was to
A. understate the inventory turnover ratio
B. overstate the cost of goods sold to sales percentage
C. overstate the total assets turnover ratio
D. understate net income
E. none of the above
Q:
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
Q:
Discuss the application of the allowance method for sales returns.
Q:
Which of the following is/are not true regarding repairs?
A. Repairs include routine costs such as for cleaning and adjusting.
B. Repairs include the costs of restoring an assets service potential after breakdowns or other damage.
C. Repairs do not extend the estimated service life or increase its productive capacity of an asset beyond original expectations.
D. U.S. GAAP and IFRS treat repair expenditures as expenses of the period when the firm makes the expenditure.
E. Distinguishing repairs from maintenance is difficult but typically not necessary because expenditures for both are period expenses.