Inventories: Additional Valuation Issues with verified solutions and graded A+

Which of the following accounts is credited in the loss method of writing-down of inventory to its net realizable value? a. Allowance to Reduce Inventory to NRV b. Loss Due to Decline of Inventory to NRV c. Cost of Goods Sold d. Inventory - ANSd. Inventory When the cost-of-goods-sold method is used to record inventory at net realizable value a. there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale. b. a loss is recorded directly in the inventory account by crediting Inventory and debiting Loss on Inventory Decline. c. only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements. d. the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold. - ANSd. the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold. Lower-of-cost or net realizable value as it applies to inventory is best described as the a. drop of future utility below its original cost. b. method of determining cost of goods sold. c. assumption to determine inventory flow. d. change in inventory value to market value. - ANSa. drop of future utility below its original cost. Why are inventories stated at lower-of-cost and net realizable value? a. To report a loss when there is a decrease in the future utility. b. To keep track of the market value of the inventory. c. To report a loss when there is a decrease in the future utility below the original cost. d. To permit future profits to be recognized. - ANSc. To report a loss when there is a decrease in the future utility below the original cost. Which of the following is not an acceptable approach in applying the lower-of-cost-and net realizable value method to inventory? a. Inventory location. b. Categories of inventory items. c. Individual item. d. Total of the inventory. - ANSa. Inventory location.