ACG 3131 Chapter 9 Review Questions and Correct Answers
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Course
ACG 3131
Institution
ACG 3131
NRV less normal profit margin The floor to be used in applying the lower-of-cost-or-market method to inventory is determined as the
NRV When inventory declines in value below original (historical) cost, and this decline is considered other than temporary, what is the maximum amount that the invent...
ACG 3131 Chapter 9 Review Questions
and Correct Answers
NRV less normal profit margin ✅The floor to be used in applying the lower-of-cost-or-
market method to inventory is determined as the
NRV ✅When inventory declines in value below original (historical) cost, and this
decline is considered other than temporary, what is the maximum amount that the
inventory can be valued at?
Current liability ✅The credit balance that arises when a net loss on a purchase
commitment is recognized should be presented as a
Perpetual ✅How is the gross profit method used as it relates to inventory valuation?
Verify the accuracy of the _______ inventory records
D ✅Which of the following is not a reason the retail inventory method is used widely?
A. As a control measure in determining inventory shortages
B. For insurance information
C. To permit the computation of net income without a physical count of inventory
D. To defer income tax liability
GAAP ✅Valuation at Net Realizable value is permitted by _____ under the following
conditions.
- a controlled market with a quoted price -applicable to all quantities, and
- no significant costs of disposal
- too difficult to obtain cost figures
Seller ✅In purchase commitments, generally the _____ retains the title to the
merchandise
Buyer ✅With purchase commitments, the _____ recognizes no asset or liability
Gross profit on selling price ✅Percentage markup on cost
---------------------------------
100% + % markup on cost
% markup on cost ✅Gross profit on selling price
--------------------------------
100% - Gross profit on selling price
Gross profit method ✅Disadvantages of the _________
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