INVENTORIES

CHAPTER 10-14

1. Sales in which the buyer is not yet ready to take delivery but does take title are known as:

ANSWER: BILLS AND HOLD SALES

2. In a period of falling prices, which inventory method generally provides the lowest amount of
net income?
ANSWER: FIFO
3. The amount of any writedown of inventory to net realizable value and all losses of inventory
shall be:
ANSWER: Recognized as component of cost of goods sold in the period the
writedown or loss occurs.
4. LCNRV of inventory:
ANSWER: Is always either the net realizable or cost
5. The cost of inventories that are not ordinarily interchangeable and goods produced and
segregated for specific projects shall be measured using:
ANSWER: Specific Identification
6. Under the retail inventory method, freight in would be included in the calculation of the goods
available for sale for which of the following?
Cost Retail
ANSWER: YES NO
7. According to the net method, which of the following items should be included in the cost of
inventory?
ANSWER: Freight costs = YES; Purchase discounts not taken = NO
8. Assume that the items of inventory that were purchased or produced first are sold first, and
consequently the items remaining in inventory at the end of the period are those most recently
purchased or produced:
ANSWER: FIFO
9. Inventories shall be measured at:
ANSWER: Lower of cost and net realizable value
10. The gross profit method of estimating ending inventory may be used for all of the following,
except:
ANSWER: Internal as well as external year-end reports