QUIZ 2 CFAS - MIDTERM

The cost of purchase of inventory does not include

• Purchase price

• Import duties and irrecoverable taxes

• Freight, handling, and other cost directly attributable to the acquisition of goods

• Trade discounts, rebates, and other similar items

A property develop must classify properties that it holds for sale in the ordinary course of business as

• Inventory

• Property, plant, and equipment

• Financial asset

• Investment property

Which of the following should be included in inventory at the end of reporting period?

• Goods in transit which were purchased FOB shipping point

• Goods in transit which were purchased FOB destination

• Goods received from another entity on consignment

• Goods in transit to a customer which were sold to the customer FOB shipping point

What is consigned inventory?

• Goods that are shipped and title transfers to the consignee.

• Goods that are sold but payment is not required until the goods are sold.

• Goods that are shipped but title remains with the consignor.

• Goods that have been segregated for shipment to a customer.

In a period of rising prices, the inventory cost allocation method that tends to result in the highest reported net income is

• LIFO

• FIFO

• Moving average

• Weighted average

Which inventory cost flow assumption provides the best measure of earnings, where “best” means most appropriate for predicting future earnings, when prices have been declining?

• FIFO

• Specific identification

• LIFO

• Average cost

IFRS prohibits which of the following cost flow assumptions?

• LIFO

• Specific identification

• Weighted average

• Any of these cost flow assumptions is allowed

Which of the following cost flow assumptions is used for inventory when the entity builds townhouses?

• FIFO

• Specific identification

• Weighted average

• Any of these cost flow assumptions

The cost of inventory shall be measured using

• FIFO

• Average method

• LIFO

• Either FIFO or average method

Which statement is incorrect regarding LCNRV?

• Net realizable value is the estimated selling price less estimated cost to complete and estimated cost of disposal.

• In most situations, entities measure inventory on a total inventory basis.

• The direct method may be used to record the income effect of valuing inventory at net realizable value.

• An entity may use an allowance account to reduce inventory to net realizable value.