Which statement is not true about the gross profit method of inventory valuation? None of these It may be used to estimate inventories for annual statements It may be used to estimate inventories for interim statements It may be used by auditors

Which statement is not true about the gross profit method of inventory valuation? None of these It may be used to estimate inventories for annual statements It may be used to estimate inventories for interim statements It may be used by auditors

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter5: Inventories And Cost Of Goods Sold

Section: Chapter Questions

Problem 5.13E

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Question

Which statement is not true about the gross profit method of inventory valuation?
None of these
It may be used to estimate inventories for annual statements
It may be used to estimate inventories for interim statements
It may be used by auditors

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Which of the following is accounted for prospectively? Change in reporting entity. Change in the percentage used to determine warranty expense. Correction of an error. Changes from the weighted-average method of inventory costing to FIFO.
Do you agree with the following statements? Express your opinion on each statement. An inventory error that causes an understatement (or overstatement) for net income in one accounting period, if not corrected, will cause an overstatement (or understatement) in the next. Since an understatement (overstatement) of one period offsets the overstatement (understatement) in the next, such errors as said to correct themselves. Market usually means replacement cost of inventory when applied in the LMC. Cost of goods available for sale equals the inventory plus cost of sales.
Do you agree with the following statements? Express your opinion on each statement. An inventory error that causes an understatement (or overstatement) for net income in one accounting period, if not corrected, will cause an overstatement (or understatement) in the next. Since an understatement (overstatement) of one period offsets the overstatement (understatement) in the next, such errors are said to correct themselves. Market usually means replacement cost of inventory when applied in the LCM. Cost of goods available for sale equals ending inventory plus cost of sales.
which of the following is not true regarding standards for interim reporting? a. declines in inventory value should be deferred to future interim periods b. use of the gross margin method for computing cost of goods sold must be disclosed c. costs and expenses not directly associated with interim revenue must be allocated to interim period on a reasonable basis d. gains and losses that arise in an interim period should be recognized in the interim period in which they arise if they would not normally be deferred at year end
How long does it take an inventory error affecting ending inventory to correct itself in the financial statements? Explain.
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What can be the effect of inventory errors on the financial reports? How can these errors be corrected?
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Which of the following statements about the valuation of the inventory is correct, according to PAS 2 Inventories? A. Inventory items are normally valued at the higher of cost and net realizable value. B. The cost of goods manufactured by an entity cannot include overhead costs. C. LIFO (last in, first out) may be used to value inventory in limited circumstances D. Selling price less estimated profit margin may be used to arrive at cost if this gives a reasonable approximation of actual cost.
How does an inventory error effect the financial statements?
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