WorksheetsAcct 221 Chapter 09
Total questions: 8
Worksheet time: 4mins
Name
Class
Date
1.
A company abandons the historical cost principle when the future utility (revenue-producing ability) of the asset drops below its original cost.
a)
True
b)
False
2.
Companies must apply the LCNRV rule directly to each item.
a)
True
b)
False
3.
A method of valuing inventory in which cost of goods sold is debited for the write-down of inventory to market. As a result, the company does not report a loss in the income statement because the cost of goods sold already includes the amount of loss.
a)
cost of goods sold method
b)
loss method
c)
historical cost method
d)
fair value method
4.
FASB decided to grant an exception to the LCNRV approach for companies that use the LIFO or retail inventory methods. Under the alternative approach, companies compare a “designated market value” of the inventory to cost. This approach is commonly referred to as lower-of-cost-or-market (LCM).
a)
True
b)
False
5.
Under LCM, the lower limit (floor) is the net realizable value of inventory.
a)
true
b)
false
6.
The gross profit method is acceptable for financial reporting purposes.
a)
True
b)
False
7.
The approach that calculates cost ratio using markups but not markdowns) is referred to as the conventional retail inventory method or the lower-of-cost-or-market approach.
a)
True
b)
False
8.
This measures the number of times on average a company sells the inventory during the period. It measures the liquidity of the inventory.
a)
inventory turnover
b)
average days to sell
c)
liquidity ratio
d)
working capital
100 %
