CH9R - 21. Which of the following is true about...

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21. Which of the following is true about lower-of-cost-or-market? d. All of these. 22. The primary basis of accounting for inventories is cost. A departure from the cost basis of pricing the inventory is required where there is evidence that when the goods are sold in the ordinary course of business their d. future utility will be less than their cost. 23. When valuing raw materials inventory at lower-of-cost-or-market, what is the meaning of the term "market"? c. Current replacement cost 24. In no case can "market" in the lower-of-cost-or-market rule be more than b. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal. 25. Designated market value a. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin. 26. Lower-of-cost-or-market c. is most conservative if applied to individual items of inventory. 27. An item of inventory purchased this period for $15.00 has been incorrectly written down to its current replacement cost of $10.00. It sells during the following period for $30.00, its normal selling price, with disposal costs of $3.00 and normal profit of $12.00. Which of the following statements is not true? d. Income of the following year will be understated. S 28. When the direct method is used to record inventory at market d. the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold. S 29. Recording inventory at net realizable value is permitted, even if it is above cost, when there are no significant costs of disposal involved and c. there is a controlled market with a quoted price applicable to all quantities. 30. When inventory declines in value below original (historical) cost, and this decline is considered other than temporary, what is the maximum amount that the inventory can be valued at?
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b. Net realizable value 31. Net realizable value is d. selling price less costs to complete and sell. 32. If a unit of inventory has declined in value below original cost, but the market value exceeds net realizable value, the amount to be used for purposes of inventory valuation is a. net realizable value. 33. Inventory may be recorded at net realizable value if d. all of these. 34. If a material amount of inventory has been ordered through a formal purchase contract at the balance sheet date for future delivery at firm prices, a. this fact must be disclosed. 35. The credit balance that arises when a net loss on a purchase commitment is recognized should be a. presented as a current liability. P 36. In 2006, Lucas Manufacturing signed a contract with a supplier to purchase raw materials in 2007 for $700,000. Before the December 31, 2006 balance sheet date, the market price for these materials dropped to $510,000. The journal entry to record this situation at December 31, 2006 will result in a credit that should be reported . b.
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This note was uploaded on 09/29/2011 for the course ACCOUNTING 3321 taught by Professor Sanchez during the Spring '11 term at Texas Pan American.

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CH9R - 21. Which of the following is true about...

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