Acc 304 Week 2 Quiz – Strayer New

ACC 304 Week 2 Quiz – Strayer NEW

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CHAPTER 8

VALUATION OF INVENTORIES:A COST-BASIS APPROACH

IFRS questions are available at the end of this chapter.

TRUE FALSE—Conceptual

1. A manufacturing concern would report the cost of units only partially processed as inventory in the balance sheet.

2. Both merchandising and manufacturing companies normally have multiple inventory accounts.

3. When using a perpetual inventory system, freight charges on goods purchased are debited to Freight-In.

4. If a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier delivers the goods to the common carrier.

5. If ending inventory is understated, then net income is understated.

6. If both purchases and ending inventory are overstated by the same amount, net income is not affected.

7. Freight charges on goods purchased are considered a period cost and therefore are not part of the cost of the inventory.

8. Purchase Discounts Lost is a financial expense and is reported in the “other expenses and losses” section of the income statement.

9. The cost flow assumption adopted must be consistent with the physical movement of the goods.

10. In all cases when FIFO is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.

11. The change in the LIFO Reserve from one period to the next is recorded as an adjustment to Cost of Goods Sold.

12. Many companies use LIFO for both tax and internal reporting purposes.

13. LIFO liquidation often distorts net income, but usually leads to substantial tax savings.

14. LIFO liquidations can occur frequently when using a specific-goods approach.

15. Dollar-value LIFO techniques help protect LIFO layers from erosion.

16. The dollar-value LIFO method measures any increases and...