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CHAPTER 8VALUATION OF INVENTORIES: A COST-BASIS APPROACH IFRS questions are available at the end of this chapter. TRUE-FALSE—Conceptual Answer No. Description T 1. Work-in-process inventory. F 2. Merchandising and manufacturing inventory accounts. F 3. Perpetual inventory system. F 4. Determining when title passes. T 5. Inventory errors. T 6. Overstatement of purchases and ending inventory. F 7. Period vs. product costs. T 8. Reporting Purchase Discounts Lost. F 9. Cost flow assumption. T 10. FIFO periodic vs. perpetual system. T 11. Purchase commitments. F 12. Using LIFO for reporting purposes. F 13. LIFO liquidation. T 14. LIFO liquidations. T 15. Dollar-value LIFO F 16. Dollar-value LIFO method. F 17. LIFO-FIFO comparison. T 18. LIFO conformity rule. F 19. Selection of inventory method. T 20. Appropriateness of LIFO. MULTIPLE CHOICE—Conceptual Answer No. Description c 21. Identify manufacturer inventory similar to merchandise inventory. b 22. Classification of raw materials. b 23. Accounts included in inventory. a 24. Reason inventories are included in net income computation. c 25. Characteristic of perpetual inventory system. a 26. Reporting consignment inventory in balance sheet. d 27. Reporting goods in transit purchased f.o.b. destination. b 28. Effect of inventory error on net income. b 29. Effect of goods in transit on the current ratio. c 30. Description of consigned inventory. d 31. Entries under perpetual inventory system. b 32. Classification of goods in transit. a 33. Classification of goods in transit.
Test Bank for Intermediate Accounting, Fourteenth Edition 8 - 2 MULTIPLE CHOICE—Conceptual (cont.) Answer No. Description d 34. Identify inventory ownership. 35. Identify a product financing arrangement. 36. Identify ownership under product financing arrangement. 37. Classification of goods on consignment. c S38. Valuation of inventories. b P39. Classification of beginning inventory. b P40. Effect of beginning inventory overstated. d S41. Effect of understating purchases. b 42. Effect of recording merchandise on consignment. a 43. Effect of ending inventory overvaluation. a 44. Effect of inventory errors on income. d 45. Effect of understating purchases and ending inventory. b 46. Effect of beginning inventory overstatement. c 47. Identification of a product cost. d 48. Identification of a period cost. d 49. Method used to record cash discounts. a 50. Identification of inventory costs. b 51. Identification of product costs. d 52. Determine product costs. b 53. Interest capitalization in manufacturing inventory. d 54. Determine cost of purchased inventory, using net method. a 55. Determine cost of purchased inventory, using gross method. a 56. Recording inventory purchases at gross or net amounts. c 57. Recording inventory purchases at gross or net amounts. a 58. Nature of trade discounts. d S59. Identifying inventoriable costs.