Ch 092

Ch 092 - 10/26/2009 Chapter 09: Inventories: Additional...

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0% (0 out of 21 correct) Responses to questions are indicated by the symbol. 1. Net realizable value is defined as estimated selling price less purchase price. A. True B. False Net realizable value is equal to estimated selling price less cost of completion and disposal. 2. The lower of cost or market rule may be applied using three different methods. A. True B. False The lower of cost or market rule may be applied to individual items, to major categories, or to the total inventory. 3. The direct method of recording inventory at market under the lower of cost or market rule establishes a separate contra asset account and a loss account to record the write-off. A. True B. False The indirect method uses a separate contra account and loss account to record the write-off. The direct method substitutes the lower market value figure for cost when valuing inventory. 4. The gross profit method of estimating inventory is acceptable for annual financial reports. A. True B. False The gross profit method is not acceptable for annual financial reports. However, it can be used for interim periods. 10/26/2009 Chapter 09: Inventories: Additional Valu… higheredbcs.wiley.com/…/ch09.html 1/6
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5. The conventional retail inventory method includes both net markups and net markdowns to calculate the cost-to-retail ratio. A. True B. False The conventional retail inventory method includes net markups but does not include net markdowns in the cost-to-retail ratio. 6.
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This note was uploaded on 02/22/2010 for the course ACG 6200 taught by Professor Lorenzo during the Spring '10 term at FIU.

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Ch 092 - 10/26/2009 Chapter 09: Inventories: Additional...

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