Which of the following statements is true regarding the lower of cost or net-realizable value (NRV)? I. Firms have the option whether to apply this accounting method. II. Firms can reduce the cost of inventory but not increase it. III. If the NRV is lower, the entry recorded reduces total assets.

Q: AD, Inc. uses the LIFO-lower of cost or market method to value inventory. If the inventory value is…

A: For financial reporting purposes, will value the inventory in accounting at lower prices or on the…

Q: which of the following will not be deducted to compute the consolidated cost of goods sold? A.…

A: Consolidated financial statements means financial statements of overall group where company have one…

Q: Which of the following statements about the use of the FIFO assumption is NOT true?   a.   The…

A: Solution: "The FIFO assumption produces inventory asset values that are based on older purchase…

Q: When net realizable value is lower than cost, and the loss method applying the…

A: As per Accounting Standards on Inventory valuation, each item of inventory is calculated at cost or…

Q: What is the effect on net income if a company failed ro record a purchase in transit (FOB shipping…

A: Purchase in transit (FOB shipping point) means that where buyer become the owner of the goods at the…

Q: A company records inventory at gross invoice price. Theoretically, how should the following affect…

A: Solution: Interest on inventory loan do not affect cost of inventory, it is working capital loan…

Q: Lower of cost and net realizable value a. results in the lowest valuation if applied to the total…

A: It is preferable to value the inventory at lower of cost or net realizable value (LCNRV) in…

Q: "Market" is defined in the "Lower-of-cost-or-market" rule required to account for FIFO inventory as:…

A: Inventory- Inventory refers to the items which business kept on hand in order to make the money, it…

Q: According to the expense recognition principle, inventory costs are expensed as cost of goods sold…

A: True

Q: Which of the following statements is NOT true of Economic Order Quantity? O A. The economic order…

A: EOQ: Economic Order Quantity is basically the optimal quantity of number of orders which in turn…

Q: Which of the following is not a disadvantage of the LIFO inventory cost flow assumption? a. The…

A: LIFO is the Last in first out method of inventory which says that inventory purchased last should be…

Q: Which inventory method provides a better matching ofcurrent costs with sales revenue on the income…

A: Inventory valuation is a method of finding the actual cost of the goods left unsold at the end of a…

Q: In calculating inventory turnover, why is cost of goods sold used as the numerator? As the inventory…

A: Inventory turnover ratio:Inventory turnover ratio is used to determine the number of times inventory…

Q: Under the lower of cost or market inventory valuation rule, market value of inventory is defined as:…

A: Market value is the price of an item/product prevailing in the market on the given date.

Q: Which of the following statements about merchandisingactivities is true? (More than one answer may…

A: Merchandising activities means activities of purchase and sale of goods that are ready for sale.…

Q: Which of the following statements is incorrect?

A: Cost of Goods Sold: Cost of Goods sold is the Cost of the items that are sold it is calculated for…

Q: nsidered when not only counting inventory, but likewise in the final valuation of inventory?  Why is…

A: Inventory is the goods lying in the stock of the entity which is either purchased or produced, ready…

Q: operating income is: a- net sales less cost of goods sold b- earning before interset and tax c-…

A: Operating income is that income which is computed by subtracting all the operating expenses from the…

Q: Which of the following statements is incorrect? Select one: a. By using the IFRS, goods shipped on…

A: Option C is correct.

Q: The gross profit method and retail inventory method C Are both estimates of ending inventory and…

A: In company, there is a requirement of valuation of the inventory to find out the cost of the goods…

Q: Do you agree with the following statements? Express your opinion on each statement. An inventory…

A: 1) This statement is correct  This can be explain with the help of example: Suppose closing stock is…

Q: Which of the following is the same as 'net realisable value' of inventory?   a. proceeds of sale…

A: The question is multiple choice question  Required  Choose the Correct Option.

Q: What is the effect on net income if a company fails to record a purchase in transit (FOB shipping…

A: Accounting for inventory Inventory is all type of goods and products held by the seller to sell in…

Q: Explain the lower of cost or market rule for inventory valuation and explain why it is GAAP.

A: Lower of cost or market value for inventory valuation is just a mixture of many accounting…

Q: Explain what is meant by the cost rule or net realizable value, whichever is less, and how it is…

A: As per IAS -02 inventory should be measured on cost or Net realizable value whichever is lower.…

Q: Which inventory valuation model serves as a middle-of-the-road approach for taxes and income?…

A: When a corporation values its inventory using FIFO, it reports reduced COGS, which boosts its gross…

Q: If merchandise inventory is being valued at cost and the price level is decreasing, which of the…

A: Inventory cost is calculated by LIFO, FIFO and average cost method. Under LIFO method, inventory…

Q: Which U.S. GAAP principle or rule would apply if the net realizable value of acompany’s inventory is…

A: Net realizable value: Net realizable value is the net amount of receivables which a business expects…

Q: The application of the lower of cost or market rule to inventory valuation is an example of a. the…

A: The valuation of inventory is done at lower of cost or net realisable value as per relevant…

Q: Which of the following statements related to the application of the lower of cost and net realizable…

A: Option B is correct

Q: Which of the following statements about the valuation of the inventory is correct, according to PAS…

A: Philippine Accounting Standards (PAS) 2 Inventories guides how to record or value inventories in the…

Q: 1. Which one of the following types of costs is most likely to be included in determining the cost…

A: Answer to the first question: The type of cost that is directly related to the cost of inventory is…

Q: How would the following transactions affect the current ratio and the acid-test ratio? (a) Purchase…

A: Current ratio is the ratio between the current assets and current liabilities. It shows the…

Q: For companies using FIFO or LIFO, inventory on the balance sheet is valued at: OA. Replacement cost.…

A: The question is based on the concept of Accounting Standard on Inventory Valuation.

Q: a. Income manipulation is difficult under LIFO. b. Accounting principles do not require that the…

A: The right answer is option b. Accounting principles do not require that the inventory cost flow…

Q: Which of the following statements about the use of the FIFO assumption is NOT true? a.The FIFO…

A: In FIFO method  the opening  and earliest goods will be sold first.

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.