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ch09 Student: ___________________________________________________________________________ 1. In determining lower-of-cost-or-market, market is the expected selling price under normal operations. True False 2. Net realizable value is selling price less costs of completion and disposal. True False 3. The primary motivation behind LCM is consistency. True False 4. The purpose of ceilings and floors in LCM is to prevent profit distortion. True False 5. Losses on reduction to LCM may be charged to either cost of goods sold or to a current loss account without distorting financial statement ratios. True False 6. Inventory written down due to LCM may be written back up if market values go back up. True False 7. In using the LIFO retail method, the current period cost-to-retail percentage includes both net markdowns and net markups. True False 8. Purchase returns and purchase discounts are ignored when computing cost-to-retail ratios for the retail method. True False 9. The cost-to-retail percentage used in the retail method to approximate average costs considers both markdowns and markups. True False 10. If the quantity of goods held in inventory decreased during the period, the dollar amount of ending inventory cannot exceed the dollar amount of beginning inventory. True False 11. For a change from the average cost method to FIFO, the current year's income includes the cumulative after-tax difference that would have resulted if the company had used FIFO in all prior years. True False 12. A change from LIFO to any other inventory method is accounted for retrospectively. True False 13. For a purchase commitment contained within a single fiscal year, if the market price is less than the contract price, the purchase is recorded at the contract price. True False 14. For a purchase commitment extending beyond the current fiscal year, if the market price on the purchase date declines from the previous year-end price, the purchase is recorded at the market price. True False 15. International Financial Reporting Standards allow the reversal of an inventory write-down. True False 16. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. 1. Change from LIFO to FIFO Estimates value of inventory based on historical relationships. __ __ 2. LIFO retail Requires retrospective treatment. __ __ 3. Net markup Added in arriving at ending inventory at retail. __ __ 4. Gross profit method Beginning inventory is not included in the calculation of the current period's cost-to-retail percentage. __ __ 5. Retrospective treatment Required for a change from FIFO to average cost. __ __ 17. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. ... View Full Document

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