06 Inventories and Long-Lived Assets.pdf

06 Inventories and Long-Lived Assets.pdf - Inventories and...

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Inventories and Long-Lived Assets Test ID: 7694097 Question #1 of 107 Question ID: 414504 A) B) C) Question #2 of 107 Question ID: 414479 A) B) C) Question #3 of 107 Question ID: 414489 A) B) C) Question #4 of 107 Question ID: 414508 Component depreciation is required under: U.S. GAAP, but not IFRS. IFRS, but not U.S. GAAP. both IFRS and U.S. GAAP. Explanation IFRS requires firms to use component depreciation, which refers to depreciating the identifiable components of an asset separately. U.S. GAAP permits component depreciation but does not require it. Under which financial reporting standards is a firm required to discuss the circumstances when reversing an inventory writedown? Neither IFRS nor U.S. GAAP. IFRS, but not U.S. GAAP. Both IFRS and U.S. GAAP. Explanation Reversals of inventory writedowns are permitted under IFRS but not under U.S. GAAP. If an IFRS reporting firm reverses an inventory writedown, the firm is required to discuss the circumstances of the reversal. Capitalized interest costs are typically reported in the cash flow statement as an outflow from: investing. financing. operating. Explanation Capitalized interest costs are reported as CFI on the statement of cash flows, as they are treated as part of the cost of the constructed capital asset. Intangible assets with finite useful lives are: 1 of 40
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A) B) C) Question #5 of 107 Question ID: 414448 A) B) C) Question #6 of 107 Question ID: 414445 A) B) C) Question #7 of 107 Question ID: 414457 amortized over their expected useful lives. not amortized, but are tested for impairment at least annually. amortized over their actual lives. Explanation Intangible assets with finite lives are amortized over their expected useful lives, which is an estimate. Actual lives of intangible assets are often not known in advance. Intangible assets with infinite lives are not amortized, but are tested for impairment at least annually. Given the following inventory data about a firm: Beginning inventory 20 units at $50/unit Purchased 10 units at $45/unit Purchased 35 units at $55/unit Purchased 20 units at $65/unit Sold 60 units at $80/unit What is the inventory value at the end of the period using first in, first out (FIFO)? $3,100. $3,475. $1,575. Explanation Ending inventory equals 20 + 10 + 35 + 20 - 60 = 25 of last units purchased in inventory. (20 units)($65/unit) + (5 units)($55/unit) = $1,300 + $275 = $1,575 Under the first-in-first-out (FIFO) inventory valuation method, ending inventory reflects the costs of the: specific units available for sale. earliest purchases. most recent purchases. Explanation Under the FIFO inventory valuation method, ending inventory reflects the costs of the most recently purchased items and cost of sales reflects the costs of the earliest purchases. If prices are increasing or decreasing, ending inventory is unlikely to reflect the costs of the specific units available for sale. 2 of 40
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A) B) C) Question #8 of 107 Question ID: 414442 A) B) C) Question #9 of 107 Question ID: 414461 A) B) C) Question #10 of 107 Question ID: 434296 In a decreasing price environment, the first-in first-out (FIFO) inventory cost method results in: lower cost of goods sold compared to last-in first-out.
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