Menu

1 the lower of cost and net realizable value rule is a good example of conservatism 4300734

1) The lower-of-cost-and-net-realizable-value rule is a good example of conservatism in accounting.

2) When applying the lower-of-cost-and-net-realizable-value rule to ending inventory valuation, net realizable value generally refers to the company&#39;s expected selling price for its inventory net of any selling costs.

3) When the sales value of the inventory subsequently increases after a write down to net-realizable-value the reported value may be increased to the the limit of the original cost.

4) Using the lower-of-cost-and-net-realizable-value rule of valuing inventory allows the accountant to attain:

A) consistency.

B) conservatism.

C) matching.

D) full disclosure.

5) If the cost of an item of inventory is \$80 and the current selling price is \$75, the amount shown in inventory on the balance sheet under the lower-of-cost-and-net realizable-value rule is:

A) \$75.

B) \$80.

C) \$100.

D) \$75 or \$80.

6) Ending inventory for Commodity X consists of 20 units. Under the FIFO method, the cost of the 20 units is \$5 each. Current net realizable value is \$4.75 per unit. Using the lower-of-cost-and-net -realizable-value rule to value inventory, the balance sheet would show ending inventory of:

A) \$5.00.

B) \$4.75.

C) \$95.00.

D) \$100.00.

7) Piggly Wiggly Sales had six CD players in inventory on December 31. They were purchased in November for \$170 each. A quoted price received from the supplier on December 31 shows the CD players now cost \$175 each. Piggly Wiggly has marked each player to sell for \$320. Using the lower-of-cost-and-net-realizable-value rule, the ending inventory of CD players should be shown at:

A) \$1,050.

B) \$1,920.

C) \$1,020.

D) \$900.

8) Piggly Wiggly Sales had six CD players in inventory on December 31.  The players were purchased in November for \$170.  Price lists from Piggly Wiggly Sales&#39; supplier indicate that the same CD player would now cost the company \$168.  The current sales price for each of the CD players is \$320. Using the lower-of-cost-and-net-realizable-value rule, the ending inventory of CD players should be shown at:

A) \$1,008.

B) \$1,035.

C) \$1,020.

D) \$1,920.

9) For the current year, Heedy&#39;s Department Store reported the following data:

 Goods available for sale \$1,074,450 December 31, inventory balance 85,430

The current net realizable value of the inventory on the balance sheet date is \$91,730. Using the lower-of-cost-and-net-realizable-value rule, what is cost of goods sold for Heedy&#39;s Department Store?

A) \$989,020

B) \$982,720

C) \$897,290

D) \$1,080,750

10) Given the following data:

 Ending inventory at cost \$23,600 Ending inventory at net realizable value 24,000 Cost of goods sold (before consideration of the      lower-of-cost-and-net-realizable-value rule) 37,000

Which of the following depicts the proper account balance after the application of the lower-of-cost-and-net-realizable-value rule?

A) Ending inventory will be \$24,000.

B) Cost of goods sold will be \$36,400.

C) Cost of goods sold will be \$37,400.

D) Ending inventory will be \$23,600.