ACG 4101 Chapter 9 Question and
answers 100% correct
An inventory write-down has the effect of reducing _______________ and
reducing ______ ____________. - correct answer ✔inventory ; net income
For companies that use FIFO, average cost, or any other method other than
LIFO, we report inventory at the
___________________________________________. For companies that
use LIFO or the retail inventory method, we report inventory at the
___________________________. - correct answer ✔lower cost or net
realizable value ; lower cost or market
What is the net realizable value formula? - correct answer ✔selling price -
costs to complete, disposal, and transportation
What happens if NRV is lower than cost? What happens if it is higher? What
is the adjusting entry made? - correct answer ✔we need an adjusting entry
to reduce inventory from its already recorded purchase cost to lower NRV ; no
adjusting entry is needed ; dr COGS cr Inventory
What is an advantage of using the lower of cost or net realizable value
method? - correct answer ✔it avoids reporting inventory at an amount
greater than the cash it can provide to the company
Under the lower of cost or market approach, market is the inventory's
_______________________________. What are two exceptions when it
comes to the market? - correct answer ✔current replacement cost ; it should
not be greater than the NRV and should not be less than NRV less normal
profit margin
, The Collins Company has three inventory items on hand at the end of the
year. The year-end selling prices and estimated costs of completion, disposal,
and transportation costs for each of the items are given below. The normal
profit for each of the products is 20% of selling price. Calculate the ceiling and
floor prices given the following information.
Item / Selling Price / Est Selling Costs
A / $100,000 / $15,000
B / $120,000 / $30,000
C / $90,000 / $15,000 - correct answer ✔NRV Ceiling
A $85,000
B $90,000
C $75,000
Normal Profit Margin
A $20,000
B $24,000
C $18,000
Floor
A $65,000
B $66,000
C $57,000
The Collins Company has three inventory items on hand at the end of the
year. The year-end selling prices and estimated costs of completion, disposal,
and transportation costs for each of the items are given below. The normal
profit for each of the products is 20% of selling price. Calculate the LCM.
Item / Cost / Replacement Costs / NRV Ceiling / Floor
A / $50,000 / $55,000 / $85,000 / $65,000
B / $100,000 / $97,000 / $90,000 / $66,000
answers 100% correct
An inventory write-down has the effect of reducing _______________ and
reducing ______ ____________. - correct answer ✔inventory ; net income
For companies that use FIFO, average cost, or any other method other than
LIFO, we report inventory at the
___________________________________________. For companies that
use LIFO or the retail inventory method, we report inventory at the
___________________________. - correct answer ✔lower cost or net
realizable value ; lower cost or market
What is the net realizable value formula? - correct answer ✔selling price -
costs to complete, disposal, and transportation
What happens if NRV is lower than cost? What happens if it is higher? What
is the adjusting entry made? - correct answer ✔we need an adjusting entry
to reduce inventory from its already recorded purchase cost to lower NRV ; no
adjusting entry is needed ; dr COGS cr Inventory
What is an advantage of using the lower of cost or net realizable value
method? - correct answer ✔it avoids reporting inventory at an amount
greater than the cash it can provide to the company
Under the lower of cost or market approach, market is the inventory's
_______________________________. What are two exceptions when it
comes to the market? - correct answer ✔current replacement cost ; it should
not be greater than the NRV and should not be less than NRV less normal
profit margin
, The Collins Company has three inventory items on hand at the end of the
year. The year-end selling prices and estimated costs of completion, disposal,
and transportation costs for each of the items are given below. The normal
profit for each of the products is 20% of selling price. Calculate the ceiling and
floor prices given the following information.
Item / Selling Price / Est Selling Costs
A / $100,000 / $15,000
B / $120,000 / $30,000
C / $90,000 / $15,000 - correct answer ✔NRV Ceiling
A $85,000
B $90,000
C $75,000
Normal Profit Margin
A $20,000
B $24,000
C $18,000
Floor
A $65,000
B $66,000
C $57,000
The Collins Company has three inventory items on hand at the end of the
year. The year-end selling prices and estimated costs of completion, disposal,
and transportation costs for each of the items are given below. The normal
profit for each of the products is 20% of selling price. Calculate the LCM.
Item / Cost / Replacement Costs / NRV Ceiling / Floor
A / $50,000 / $55,000 / $85,000 / $65,000
B / $100,000 / $97,000 / $90,000 / $66,000
