Which of the following is true about the issues of the gross profit method of estimating inventory? O A. This method provides an estimate amount for the ending inventory. O B. Since this method provides estimated amount for the ending inventory, it is not acceptable for financial reporting purposes. OC. This method uses past ratios to make the computation. O D. All of the answers are correct. Question 2 of 5 A Moving to another question will save this response.

Which of the following is true about the issues of the gross profit method of estimating inventory? O A. This method provides an estimate amount for the ending inventory. O B. Since this method provides estimated amount for the ending inventory, it is not acceptable for financial reporting purposes. OC. This method uses past ratios to make the computation. O D. All of the answers are correct. Question 2 of 5 A Moving to another question will save this response.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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4/ Which of the following concept is true about the advantage of FIFO inventory valuation method? a. No manipulation of income b. It is known as middle of the road approach c. None d. It is suitable for price change from one purchase to another
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Based on the fundamental principle of IAS2, identify two (2) circumstances where the NRV of inventory might be lower than its cost?
1.At a time of declining prices, which cost flow assumption will result in the highest ending inventory? A. FIFO B. LIFO C. Weighted average D. Either A or C 2. When the cost of inventory is rising, which inventory cost flow method will produce the lowest amount of cost of goods sold? A. FIFO B. Weighted Average. C. All methods will produce the same amount of cost of goods sold. D. LIFO 200 The inventory records for Raymond Co. reflected the following Beginning Inventory @ May 1 200 units @ $1.00 First Purchase @ May 7 Second Purchase @ May 17 Third Purchase @ May 23 Sales @ May 31 B. $1.15 C. $1.14 D. $1.31 B. $130 C. $324 D. $340 300 units @ $1.10 = 400 units @ $1.20 100 units @ $1.30 = 120 900 units @ $1.50 1350 30 go 3. Determine the weighted average cost per unit for May. A. $1.22 .4.Determine the amount of cost of goods sold assuming the LIFO cost flow method. A. $1,140 B. $1,040 C. $1,000 D. $940 5. Determine the amount of gross margin assuming the FIFO cost flow method. A. $114
H7. For the same transactions, why does the weighted-average cost method provide different value for ending inventory and COGS depending on whether the periodic or perpetual inventory system is used? Select one: a. Perpetual inventory calculates and assigns costs as items are sold, while periodic inventory calculates and assigns costs at the end of the period. b. Perpetual inventory calculates and assigns costs at the end of the period, while periodic inventory calculates and assigns costs as items are sold. c. Perpetual inventory counts all the purchases for the month first before calculating the average cost, while periodic calculates the average cost after every transaction. d. Perpetual inventory and periodic inventory will not provide different values using Explain also wrong options and explain with details
following in the calculation of the goods available for sale 2. To produce an inventory valuation which approximates d. Provides a method for inventory control and facilitates a. Permits entities to avoid taking an annual physical 1. An advantage of the retail inventory method is thet inventory. b. Yields a more accurate measurement of inventom. Hides costs from customers and employees. с. a determination of the periodic inventory. 2. To produce an inventory valuation which approximates the lower of cost and NRV using the retail method, the computation of the ratio of cost to retail should a. Include markup but not markdown b. Include markup and markdown c. Ignore both markup and markdown d. Include markdown but not markup 3. When the conventional retail inventory method is used, markdowns are commonly ignored in the computation of cost to retail ratio because a. There may be no markdowns during the year. b. This tends to give a better approximation of the lower of average cost and net…
Problem 2: Multiple choice- Theory 1. Which of the following statements is correct? a.PAS 2 Inventories does not allow the use of inventory estimates. b. If the cost ratio is 80%, the gross profit rate based on cost is 20%. c. If the gross profit based on cost is 25%, the cost ratio is 75%. d. PAS 2 allows the use of estimates if the estimate reasonably approximates the cost.
1. At the end of a period, the inventory account is _______. 2. Gross sales less sales discounts and sales returns and allowances equals____. 3. When an unearned, The revenue will go____. 4. Sales returns and allowances are used in calculating _______. 5. Ending inventory represents goods not yet ________. 6. Inventory is increased by a _______.
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Which of the following statements is not incorrect? I. PAS 2 requires the use of the Allowance Method in accounting for inventory write-down. II. There shall always be an allowance for inventory write-down if the net realizable value of inventories is lower than its cost. III. Regardless of what method the company uses in accounting for inventory write-down, the cost of goods sold must always be the same IV. A company may recognize a gain on reversal of inventory write-down even if the cost of inventory exceeds its net realizable value. a. I and II b. None of these c. II and III d. III and IV e. I and IV