AC 315 FINAL EXAMINATION -FALL 2011

AC 315 FINAL EXAMINATION -FALL 2011 - Name: _ Date: _...

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Name: ______________________________ Date: ____________________________ Student No.: _________________________ AC 315 INTERMEDIATE ACCOUNTING I FINAL EXAMINATION CHAPTERS 9-12 Directions: Underline the correct answer to the questions/statements listed below and record the answer on the attached answer sheet. There is only one correct answer for each question/statement. MULTIPLE CHOICE (2 points each) 1. 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 a. selling price will be less than their replacement cost. b. replacement cost will be more than their net realizable value. c. cost will be less than their replacement cost. d. future utility will be less than their cost. 2. When valuing raw materials inventory at lower-of-cost-or-market, what is the meaning of the term "market"? a. Net realizable value b. Net realizable value less a normal profit margin c. Current replacement cost d. Discounted present value 3. In no case can "market" in the lower-of-cost-or-market rule be more than a. estimated selling price in the ordinary course of business. b. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal. c. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for an approximately normal profit margin. d. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate reserve for possible future losses 4. Designated market value a. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin.
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b. should always be equal to net realizable value. c. may sometimes exceed net realizable value. d. should always be equal to net realizable value less a normal profit margin. 5. Lower-of-cost-or-market a. is most conservative if applied to the total inventory. b. is most conservative if applied to major categories of inventory. c. is most conservative if applied to individual items of inventory. d. must be applied to major categories for taxes 6. The floor to be used in applying the lower-of-cost-or-market method to inventory is determined as the a. net realizable value. b. net realizable value less normal profit margin. c. replacement cost. d. selling price less costs of completion and disposal. 7. What is the rationale behind the ceiling when applying the lower-of-cost-or- market method to inventory? a. Prevents understatement of the inventory value.
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This note was uploaded on 11/30/2011 for the course ACC 455-60 taught by Professor Turner during the Spring '10 term at Jackson State.

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AC 315 FINAL EXAMINATION -FALL 2011 - Name: _ Date: _...

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