Chapter 8 True/False Acct 1
An advantage of the average-cost method of accounting for inventory is that the inventory is valued in the balance sheet at current replacement costs. True/False
False
Because of the consistency principle, inventory should never be written down below cost True/False
False
During periods of inflation, the FIFO cost flow assumption will yield a higher cost of goods sold than LIFO. True/False
False
If the terms of a sale are F.O.B. shipping point, the sale should not be recorded until the goods are delivered to the buyer. True/False
False
Merchandise sold F.O.B. destination belongs to the buyer while in transit. True/Fals
False
The LIFO conformity requirement permits a company to use LIFO for tax purposes only if the company also uses LIFO for internal reporting purposes. True/False
False
The gross profit method can be used for both interim and year-end financial reporting. True/False
False
The principle of consistency prohibits a company from changing an inventory valuation method once one is selected. True/False
False
The retail inventory method requires a company to state inventory on the year-end balance sheet at its retail value. True/False
False
Any business that sells numerous units of identical products may determine its cost of goods sold using a cost flow assumption, rather than the specific identification method. True/False
True
Assume ending inventory is overstated at the end of Year 1 and correctly stated at the end of Year 2. Owners' equity will be correctly stated at the end of Year 2. True/False
True
During periods of inflation, the LIFO cost flow assumption will yield a lower inventory value than FIFO. True/False
True
In a periodic inventory system, understating the amount of ending inventory will cause an understatement of gross profit in the current year. True/False
True
The specific identification method is acceptable only when the actual cost of individual units of merchandise can be determined from the accounting records True/False
True
When the periodic inventory system is used, determining the cost of the year-end inventory involves two distinct steps: counting the units and pricing the units. True/False
True
