Flashcards in Chapter 9 Deck (22):
What is net realizable value (NRV)?
Net realizable value (NRV) is selling price less any costs of completion, disposal, and transportation.
What is an advantage of the retail inventory and gross profit methods?
A physical inventory is not necessary.
Taking a "big bath" tends to impair a company's __________ and __________.
Accounting errors must be corrected:
as soon as they are discovered
The gross profit method allows companies to approximate __________.
A company applies the __________ concept when it applies the same accounting principles from period to period.
In the retail inventory method, a __________ ratio is used to estimate ending inventory and cost of goods sold.
Under the LIFO Retail Method, a new layer at retail is calculated by:
subtracting beg. inventory at retail from ending inventory at retail
___________ permits the reversal of LCM write-downs, while __________ does not.
Before we can determine whether there is a "real" increase in inventory quantity, we need to eliminate the effect of any __________ changes.
Consistent with IFRS, inventory write-downs typically are credited to a __________ account.
Note disclosures relating to the correction of prior-year errors include information about:
1. the nature of the error
2. the effect on earnings per share
3. the effect on net income
4. the effect on income before extraordinary items
The ending inventory balance determined using the gross profit method is __________.
A net decrease in inventory quantity will result in a __________ of LIFO layers.
Ending inventory at _________ is always the same regardless of the cost flow assumption used.
Consistent with IFRS, the LCM rule is typically applied to __________ inventory items.
LIFO layers are added to ending inventory when there is a net increase in __________.
The conventional retail method __________ the LCM average cost method.
Under the retail inventory method, sales discounts are not deducted from sales because it would cause inventory to be __________.
When a company switches form a non-LIFO method to LIFO, its income and taxes typically __________.
Application of the LCM rule will yield the same results under IFRS and U.S. GAAP:
only if the replacement cost exceeds net realizable value (NRV)