Inventory

In a decreasing price environment, the first-in first-out (FIFO) inventory cost method results in:

• lower cost of goods sold compared to last-in first-out.

• higher inventory compared to last-in first-out.

• lower gross profit compared to last-in first-out.

If prices are decreasing, the best estimates of inventory and cost of goods sold from an analyst's point of view are provided by:

• FIFO inventory and LIFO cost of goods sold.

• FIFO inventory and FIFO cost of goods sold.

• LIFO inventory and FIFO cost of goods sold.

A U.S. GAAP reporting firm changes its inventory cost flow assumption from average cost to LIFO. The firm must apply this change:

• prospectively, with LIFO layers calculated from past purchases and sales.

• prospectively, with the carrying value as the first LIFO layer.

• retrospectively, because it is a change in accounting principle.

Under which financial reporting standards is a firm required to discuss the circumstances when reversing an inventory writedown?

• Neither IFRS nor U.S. GAAP.

• Both IFRS and U.S. GAAP.

• IFRS, but not U.S. GAAP.

In periods of rising prices and stable or increasing inventory quantities, using the LIFO method for inventory accounting compared to FIFO will result in:

• higher cost of sales, lower income, higher cash flows, and lower inventory.

• higher cost of sales, lower income, lower cash flows, and lower inventory.

• lower cost of sales, higher income, identical cash flows, and lower inventory.

Information related to Bledsoe Corporation's inventory, as of December 31, 20x7, follows: Estimated selling price$3,500,000 Estimated disposal costs50,000 Estimated completion costs300,000 Original FIFO cost3,200,000 Replacement cost3,300,000 Using the appropriate valuation method, what adjustment is necessary to accurately report Bledsoe's inventory at the end of 20x7, and will this adjustment affect Bledsoe's quick ratio?

• $100,000 write-upNo

• $50,000 write-downNo

• $50,000 write-downYes

Using the lower of cost or market principle under U.S. GAAP, if the market value of inventory falls below its historical cost, the minimum value at which the inventory can be reported in the financial statements is the:

• net realizable value.

• market price minus selling costs minus normal profit margin.

• net realizable value minus selling costs.

A company purchased inventory on January 1, 20X2, for $600,000. On December 31, 20X2, the inventory had a net realizable value (NRV) of $550,000 and a replacement cost of $525,000, which is also the NRV less the normal profit margin. What would be the carrying value of the inventory on the company's December 31, 20X2, balance sheet using: lower of cost or NRV?:lower of cost or market?

• $525,000;$525,000

• $525,000;$550,000

• $550,000;$525,000

During periods of rising prices and stable or growing inventories, the most informative inventory accounting method for income statement purposes is:

• FIFO because it allocates historical prices to cost of good sold (COGS) and provides a better measure of current income.

• LIFO because it allocates current prices to cost of good sold (COGS) and provides a better measure of current income.

• weighted average because it allocates average prices to cost of good sold (COGS) and provides a better measure of current income.

If prices and inventory quantities are increasing, the last-in first-out (LIFO) inventory cost method results in:

• higher inventory compared to first-in first-out.

• lower cost of goods sold compared to first-in first-out.

• lower gross profit compared to first-in first-out.