CH8: Inventories
Carey Company adheres to U.S. GAAP, while Jonathan Company adheres to IFRS. It is least likely that A. Carey has reversed an inventory write - down. B. Jonathan has reversed an inventory write - down. C. Jonathan and Carey both use the FIFO inventory accounting method.
A
Carrying inventory at a value above its historical cost would most likely be permitted if A. the inventory was held by a produce dealer. B. financial statements were prepared using U.S. GAAP. C. the change resulted from a reversal of a previous write - down.
A
Eric ' s Used Bookstore prepares its financial statements in accordance with U.S. GAAP. Inventory was purchased for $1 million and later marked down to $550,000. However, one of the books was later discovered to be a rare collectible item and the inventory is now worth an estimated $3 million. The inventory is most likely reported on the balance sheet at A. $550,000. B. $1,000,000. C. $3,000,000.
A
Zimt AG uses the FIFO inventory accounting method, and Nutmeg Inc. uses the LIFO method. Compared to the cost of replacing the inventory, during periods of rising prices the cost of goods sold reported by A. Zimt is too low. B. Nutmeg is too low. C. Nutmeg is too high.
A
Ajax Factories produces pencils at a factory designed to produce 10 million pencils per year. In 2007 the fixed production overhead related to the factory was $1 million and the factory produced 9 million pencils. The inventory cost for each pencil related to the fixed production overhead is closest to A. $0.00 B. $0.10 C. $0.11
B
Compared to a company that uses the FIFO inventory accounting method, during periods of rising prices a company that uses the LIFO method will most likely appear more A. liquid. B. efficient. C. profitable.
B
Compared to using the FIFO method to account for inventory, during periods of rising prices a company that uses the LIFO method is most likely to report higher A. net income. B. cost of sales. C. income taxes.
B
Compared to using the weighted average cost method to account for inventory, during a period in which prices are generally rising the current ratio of a company using the FIFO method would most likely be A. lower. B. higher. C. dependent upon the interaction with accounts payable.
B
Like many technology companies, TechnoTools operates in an environment of declining prices. Its reported profi ts will tend to be highest if it accounts for inventory using the A. FIFO method. B. LIFO method. C. weighted average cost method.
B
Zimt AG uses the FIFO inventory accounting method, and Nutmeg Inc. uses the LIFO method. Compared to the cost of replacing the inventory, during periods of rising prices the ending inventory balance reported by A. Zimt is too high. B. Nutmeg is too low. C. Nutmeg is too high.
B
Inventory cost is least likely to include A. production - related storage costs. B. costs incurred due to normal waste of materials. C. transportation costs of shipping inventory to customers.
C
Sauerbraten Corp. reported 2007 sales ($ in millions) of $2,157 and cost of goods sold of $1,827. The company uses the LIFO method for inventory valuation and discloses that if the FIFO inventory valuation method had been used, inventories would have been $63.3 million and $56.8 million higher in 2007 and 2006, respectively. If Sauerbraten used the FIFO method exclusively, it would have reported 2007 gross profit closest to A. $324. B. $330. C. $337.
C
Zimt AG started business in 2007 and uses the FIFO inventory method. During 2007 it purchased 45,000 units of inventory at € 10 each and sold 40,000 units for € 20 each. In 2008 it purchased another 50,000 units at € 11 each and sold 45,000 units for € 22 each. Its 2008 ending inventory balance (in € thousands) was closest to A. € 105. B. € 109. C. € 110.
C
Zimt AG wrote down the value of inventory in 2007 and reversed the write - down in 2008. Compared to ratios calculated if the write - down had never occurred, Zimt ' s reported 2007 A. current ratio was too high. B. gross margin was too high. C. inventory turnover was too high.
C
