Deck14

Question 1

How would a switch from FIFO to LIFO affect Ending Inventory and Net Income? Increase or Decrease to which?

Answer 1

Decrease to Ending Inventory - Decrease to Net Income

Question 2

In a period of rising prices, FIFO perpetual and FIFO Periodic yield _________ result(s) for Ending Inventory. Same or Different

Answer 2

Same

Question 3

(Inventory)For LCM the Ceiling Price is:

Answer 3

Net Realizable Value (NRV) - Selling cost less the cost to complete the sale

Question 4

(Inventory)For LCM, the Floor Price is:

Answer 4

NRV reduced even father by Profit Margin

Question 5

(Inventory)For LCM, if the Market Cost is between the Ceiling and the Floor then LCM is:

Answer 5

Replacement Cost

Question 6

Original (Historical) Cost is used to Value LCM when it is below NRV-Profit Margin. T or F

Answer 6

T - When the original cost of the item is below NRV-Profit Margin (or Market Value) the Lower of Cost or Market is used. In this case Cost would be used.

Question 7

(Retail Method for Inventory) The Retail Method measures Beg Inv at both Cost and Retail. T or F

Answer 7

True

Question 8

Under the Retail Inv Method what is an abnormal shortage?

Answer 8

The inventory was destroyed, but it’s not a common type of thing. (eg. plumbing leak ruined some Inventory)

Question 9

How does the Retail Method of Calculating Inventory establish the Lower of Cost or Market (LCM) valuation for inventory?

Answer 9

By excluding the Markdowns from Cost to Retail Ratio.

Question 10

The Cost to Retail Method under FIFO LCM excludes what?

Answer 10

Beginning Inventory and Net Markdowns

Question 11

Property, Plant, and Equipment that is on the market for sale is reclassified from “PPE” to:

Answer 11

“Assets held for Sale” - This will reclassify it as a Current Asset and it will NO longer be depreciated.

Question 12

These assets must have a useful life of 1 year beyond the balance sheet date.

Answer 12

Plant Assets

Question 13

Required Footnote disclosures of PPE.

Answer 13

Range of useful lives, Depreciation method, Accumulated Depreciation

Question 14

List the requirement to be considered a Plant Asset

Answer 14

Currently Used in Operation, Useful life of more than 1 year, Have physical Substance

Question 15

What decides if a cost gets Capitalized or Expensed?

Answer 15

If the cost is necessary to place the asset in intended use or location then it is Capitalized, not Expensed

Question 16

The proceeds recorded on the Sale of a building are:

Answer 16

Part of continuing operations - It is assumed that this will happen from time to time with continuing operations.

Question 17

If a plant asset’s cost is more than it’s fair value, then which is the asset capitalized at?

Answer 17

Fair Value

Question 18

If a note is used to acquire an asset, what amount of the note and interest is the asset capitalized at?

Answer 18

Present Value - no interest is capitalized over the long term because it does not assist in placing the asset into its intended condition and location.