6.4 Value inventory using the lower of cost or net realizable value rule
1) Under the conservatism principle, liabilities and expenses would be overstated, rather than understated.
2) The LCM rule compares original cost to current replacement cost to determine the amount at which inventory should be valued.
3) A material amount of value is one large enough to cause someone to change a decision that has been made.
4) Changing from Average Cost to FIFO over two accounting periods could be viewed as a violation of what accounting concept or principle?
A) Conservatism
B) Consistency
C) Materiality
D) Entity
E) Cost Principle
5) If a company has not recorded a significant write off of inventory in the financial statements, which principle has been violated?
A) Conservatism
B) Consistency
C) Materiality
D) Entity
E) cost principle
6) Making notes in the financial statements to explain the justification of valuation changes and other financial decisions would be an example of:
A) conservatism.
B) consistency.
C) materiality.
D) full disclosure.
E) cost principle.
7) What accounting principle would be followed when underestimating inventory?
8) When using the LCNRV rule, is the calculation of ending inventory applied to inventory on an item-by-item basis or as a whole?
9) Assigning LCNRV to the items that make up the inventory of merchandise at the end of the accounting period is an application of which accounting concept?
10) One lot of merchandise was valued at $566.34. A second count of the same merchandise showed
$566.82. The difference could be ignored due to which accounting principle?