What is the main criticism of LIFO?
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What is the main criticism of LIFO?
A. It presents a
B. It artificially creates a higher income.
C. It utilizes a unit cost that has no evidence of existence.
D. It is often complicated to implement, especially if inventory costs change frequently.
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- Which of the following statements regarding traditional accounting is true? a. Traditional accounting does not provide managers in a JIT setting with timely information. b. The financial orientation allows for effective measuring disparate items. c. Overhead allocations may lead to cost distortions. d. All of the above are true statements. e. A and C are true, but B is not true.Which one of the following is not a disadvantage of the specific identification method of inventory costing? a. It allows manipulation of profits b. It does not match expenses against revenues c. It is too expensive to use in complex manufacuring situations d. It is only practical where units are costly and easily distinguishableWhich of the following criticisms does NOT apply to historical cost financial statements during a period of rising prices? A They are difficult to verify because transactions could have happened many years ago. They are difficult to verify because transactions could have happened B They contain mixed values; some items are at current values and some are at out of date values . C They understate assets and overstate profit. They overstate gearing in the statement of financial position
- CVP analysis makes all of the following assumptions except a change in volume is the only factor that affects costs. revenues are linear throughout the relevant range. the mix of products will not change. inventory levels will increase.Under the LIFO cost flow assumption during a period ofinflation, which of the following is false? A. Cost of goods sold will be lower than under FIFO B. Gross margin will be lower than under FIFO C. Income tax expense will be lower than under FIFO D. Ending inventory will be lower than under FIFOT o p i c : F o r e c a s t i n g T e c h n i q u e s Why does the presence of fixed costs cause the percent-of-sales method of pro forma income statement preparation to fail? What is a better method? Describe the judgmental approach for simplified preparation of the pro forma balance sheet. T o p i c : F i n a n c i n g O p e r a t i o n s a n d E x p a n s i o n W h a t a r e t h e n e t p r o c e e d s f r o m t h e s a l e o f a b o n d ? W h a t a r e f l o t a t i o n c o s t s , a n d h o w d o t h e y a f f e c t a b o n d ’ s n e t p r o c e e d s ? W h a t p r e m i s e a b o u t s h a r e v a l u e u n d e r l i e s t h e c o n s t a n t - g r o w t h v a l u a t i o n ( G o r d o n g r o w t h ) m o d e l t h a t i s u s e d t o m e a s u r e t h e c o s t o f c o m m o n s t o c k e q u i t y , r s ? H o w d o t h e c o n s t a n t - g r o w t…
- Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule is true? a.The LCNRV rule is an application of the cost principle. b.When the net realizable value of inventory drops below the cost of inventory, an adjustment is made to decrease inventory to its net realizable value and decrease income. c.If a company uses the LCNRV rule, there is no need to use a cost flow assumption such as FIFO, or weighted average cost. d.When the net realizable value of inventory is above the cost of inventory, an adjustment is made to increase inventory to its net realizable value and increase income.Analysts must recognize that the use of the specific identification method to value inventory has a serious deficiency because it: Multiple Choice allows manipulation of selling expenses. allows manipulation of period costs. allows manipulation of administrative expenses. allows manipulation of net income.Which one of the following statements is true? a. Income manipulation is difficult under LIFO.b. Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.c. Companies may use LIFO for tax purposes and FIFO in the financial statements.d. In periods of declining prices, LIFO will result in the payment of less income taxes.
- Which of the following is not a disadvantage of the LIFO inventory cost flow assumption? a. The impact of LIFO liquidation profits b. It does not match the most recent costs with revenue c. The possibility of income manipulation by management d. It impairs comparability between companies using LIFODisregarding the special circumstances when bases other than the point of sale are used, discuss the advantages of each of the following objections to the point-of-sale basis of revenue recognition: (i) It is too conservative because revenue is earned throughout the entire process of production. (ii) It is not conservative enough because accounts receivable do not represent disposable funds, sales returns and allowances may be made, and collection and bad debt expenses may be incurred in a later periodWhy is variable costing not in compliance with generally accepted accounting principles?a. Fixed manufacturing costs are assumed to be period costs.b. Variable costing procedures are not well known in industry.c. Net earnings are always overstated when using variable costing.d. Variable costing ignores the concept of lower of cost or market when valuing inventory.
