Chapter 4 Theories Flashcards
The costing method that considers materials on hand to be from the last ones purchased is:
a. LIFO
b. FIFO
c. Moving average
d. Specific identification
b. FIFO
Under what costing method are the materials on hand considered to be from the first ones purchased?
a. FIFO
b. LIFO
c. Moving average
d. Specific identification
b. LIFO
Which inventory costing method charges current costs against current revenues?
a. FIFO
b. LIFO
c. Moving average
d. Specific identification
b. LIFO
When must a new unit cost be calculated under the moving average method?
a. After each issue.
b. After each receipt.
c. Before each issue.
d. Before each receipt.
b. After each receipt
How is a loss on inventory write-down shown on the statement of comprehensive income?
a. as a deduction from the cost of goods sold.
b. as an addition to the cost of goods sold.
c. as a deduction from the sales revenue.
d. as an addition to sales revenue.
b. as an addition to the cost of goods sold
The costing method that is no longer permitted by PAS No. 2 is:
a. FIFO
b. LIFO
c. Moving average
d. Specific identification
b. LIFO
How is recovery from a decrease in the allowance for the reduction of inventory to NRV shown?
a. Deduction from the sales revenue.
b. Addition to sales revenue.
c. Deduction from the cost of goods sold
d. Addition to cost of goods sold.
c. Deduction from cost of goods sold
In period of rising prices, what effect would the use of FIFO have on the net income of a company?
a. No effect.
b. The net income increases.
c. The net income decreases.
d. There will be a loss.
b. The net income increases
How is the allowance for inventory write-down shown in the statement of financial position?
a. As a deduction from the inventory at cost.
b. As a deduction from the inventory of NRV.
c. As an asset.
d. As a liability
a. As a deduction from the inventory at cost
What is the major advantage of using a perpetual inventory system?
a. It provides efficient internal control over materials.
b. It avoids inventory shortages and overages.
c. It minimizes error in posting receipts and issues of materials.
d. It avoids losses due to theft.
a. It provides efficient internal control over materials
