ScienceEconomicsACCT ch 6 example #7780
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ACCT ch 6 example #7780

Persephone Allen avatar Persephone Allen
10 May 2023
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16 test answers

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question
when is physical inventory taken
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at end of the fiscal year
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Inventory costing methods place primary reliance on assumptions about the flow of
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costs
question
Which of the following is true of the FIFO inventory method?
answer
It assumes that the cost of the earliest units purchased are the first to be allocated to cost of goods sold.
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Which of the following would most likely employ the specific identification method of inventory costing?
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jewelry stores
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In a period of rising prices
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LIFO produces lower net income than FIFO; FIFO will have greatest amount of income tax expense and highest ending inventory
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in inflation
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LIFO produces higher COGS and lower net income than FIFO
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in period of falling prices
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LIFO gives the largest net income
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Understating ending inventory will overstate
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COGS
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In the perpetual inventory system
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FIFO cost of goods sold will be the same as in a periodic inventory system.
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If a firm is using a perpetual inventory system and is using the average-cost method of valuation, when is a new average cost computed?
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after each purchase
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How do the results under FIFO in a perpetual system compare to the results using a periodic system?
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they are the same
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Which is true if the ending inventory is overstated?
answer
Net income will be overstated and the stockholders' equity will be overstated AND Assets are overstated and stockholders' equity is overstated.
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If there is an error in the ending inventory affecting the net income of the current period, what will happen to the net income of the next accounting period?
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It will have the reverse effect on the net income during the next accounting period.
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ending inventory understated
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COGS overstated net income understated
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How do write downs of inventory differ between IFRS and GAAP?
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GAAP allows write-downs, but disallows write-ups if the cost increases, while IFRS allows reversals of write-downs.
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What is true about who owns goods in transit and consigned goods under GAAP and IFRS?
answer
They agree