Under US GAAP and all else being equal, in a period of stable inventory quantities and rising inventory unit costs, which inventory valuation method is least likely to incur inventory write-downs?
A. FIFO
B. LIFO
C. Weighted average cost
Era la b, puse la c por descarte o adivinar.
An analyst gathers the following information (in € millions) about an automobile manufacturer’s inventory:
Year 2 Year 1
Cost of goods sold 600 700
Cost of inventory 100 90
Net realizable value of inventory 120 80
The inventory turnover (calculated using average inventory) in Year 2 is closest to:
Incorrect answer:
A. 6.0.
B. 6.3.
C. 6.7.
Era la C, puse la A
no sabía que el average inventory era coger el NRV o lower. de lo que haya. entonces es entre 90 que es media entre 100 y 80
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Inventarios
Medición posterior: menor entre coste y NRV/“market”.
IFRS: Lower of Cost and NRV (NRV = precio de venta estimado − costes de terminar/vender).
US GAAP: Lower of Cost or Market (LCM), donde market = coste de reposición limitado por techo (NRV) y suelo (NRV − beneficio normal).
Coste se determina por FIFO / promedio ponderado (LIFO solo bajo US GAAP).
Si NRV/market < coste → write-down. Bajo IFRS puede revertir; bajo US GAAP, no.
All else being equal, in a period of stable inventory quantities and declining inventory unit costs, using the LIFO inventory valuation method will result in a lower:
A. gross profit than if the FIFO inventory valuation method had been used.
:
B. current ratio than if the FIFO inventory valuation method had been used.
C. inventory turnover ratio than if the FIFO inventory valuation method had been used.
Puse la B, era la C. Pues no pensé parece ser coño.
es obvio. incresean los assets.
el inventory en denominador
Which of the following ratios will most likely increase as a result of an inventory write-down in the current year?
A. Quick ratio
B. Current ratio
C. Working capital turnover ratio
Correct Answer:
C. Working capital turnover ratio
Under US GAAP, which of the following is a required financial statement disclosure concerning inventory?
A. Only the material amount of income resulting from the liquidation of LIFO inventory
B. Only the amount of any reversal of any write-down that is recognized as a reduction in cost of goods sold in the period
C. Both the material amount of income resulting from the liquidation of LIFO inventory, and the amount of any reversal of any write-down that is recognized as a reduction in cost of goods sold in the period
e liquidation of LIFO inventory.
Correcta la A, puse la B
Feedback
Based on your answer
Incorrect because disclosures are useful when analyzing a company. IFRS requires eight financial statement disclosures concerning inventory, three of which are:
the accounting policies adopted in measuring inventories, including the cost formula (inventory valuation method) used;
the amount of any reversal of any write-down that is recognized as a reduction in cost of sales in the period;
the circumstances or events that led to the reversal of a write-down of inventories.
Inventory-related disclosures under US GAAP are very similar to the disclosures above, except that requirements for the second and third are not relevant because US GAAP does not permit the reversal of prior-year inventory write-downs. US GAAP also requires disclosure of significant estimates applicable to inventories and of any material amount of income resulting from th
Fernando’s Pasta purchased inventory and later wrote it down. The current net realizable value is higher than the value when written down. Fernando’s inventory balance will most likely be:
A. higher if it complies with IFRS.
B. higher if it complies with US GAAP.
C. the same under US GAAP and IFRS.
General feedback
A is correct. IFRS requires the reversal of inventory write-downs if net realizable values increase; US GAAP does not permit the reversal of write-downs. Therefore, Fernando’s inventory balance would be higher under IFRS.
he puto entendido mal la pregunta, como si write down es que lo escribieron jdoer jajaj
Zimt AG uses the FIFO method, and Nutmeg Inc. uses the LIFO method. Compared to the cost of replacing the inventory, during periods of rising prices, the cost of sales reported by:
A. Zimt is too low.
B. Nutmeg is too low.
C. Nutmeg is too high.
Puse la C
General feedback
A is correct. Zimt uses the FIFO method, so its cost of sales represents units purchased at a (no longer available) lower price. Nutmeg uses the LIFO method, so its cost of sales is approximately equal to the current replacement cost of inventory.
The costs least likely to be included by the CFO as inventory are:
A. storage costs for the chocolate liquor.
B. excise taxes paid to the government of Brazil for the cacao beans.
C. storage costs for chocolate and purchased finished goods awaiting shipment to customers.
Jodí
Feedback
General feedback
C is correct. The storage costs for inventory awaiting shipment to customers are not costs of purchase, costs of conversion, or other costs incurred in bringing the inventories to their present location and condition and are not included in inventory. The storage costs for the chocolate liquor occur during the production process and are thus part of the conversion costs. Excise taxes are part of the purchase cost.
What is the most likely justification for Century Chocolate’s choice of inventory valuation method for its purchased finished goods?
A. It is the preferred method under IFRS.
B. It allocates the same per unit cost to both cost of sales and inventory.
C. Ending inventory reflects the cost of goods purchased most recently.
Correct Answer:
C. Ending inventory reflects the cost of goods purchased most recently.
If the trend noted in the ICCO report continues and Century Chocolate plans to maintain constant or increasing inventory quantities, the most likely impact on Century Chocolate’s financial statements related to its raw materials inventory will be:
A. a cost of sales that more closely reflects current replacement values.
B. a higher allocation of the total cost of goods available for sale to cost of sales.
C. a higher allocation of the total cost of goods available for sale to ending inventory.
Feedback
General feedback
C is correct. Using the FIFO method to value inventories when prices are rising will allocate more of the cost of goods available for sale to ending inventories (the most recent purchases, which are at higher costs, are assumed to remain in inventory) and less to cost of sales (the oldest purchases, which are at lower costs, are assumed to be sold first).
Which company’s gross profit margin would best reflect current costs of the industry?
A. Crux.
B. Rolby.
.
C. Mikko.
Feedback
General feedback
C is correct. Mikko’s and Crux’s gross margin ratios would better reflect the current gross margin of the industry than Rolby because both use LIFO. LIFO recognizes as cost of goods sold the cost of the most recently purchased units; therefore, it better reflects replacement cost. However, Mikko’s gross margin ratio best reflects the current gross margin of the industry because Crux’s LIFO reserve is decreasing. This could reflect a LIFO liquidation by Crux which would distort gross profit margin.
n Exhibit 2, the Industry and Business Risk excerpt states that, “Increased competition may lead to lower unit sales and excess production capacity and excess inventory. This may result in a further downward price pressure.” The downward price pressure could lead to inventory that is valued above current market prices or net realizable value. Any write-downs of inventory are least likely to have a significant effect on the inventory valued using:
A. weighted average cost.
B. first-in, first-out (FIFO).
C. last-in, first-out (LIFO).
Feedback
General feedback
C is correct. In a period of rising inventory costs, inventory valued using FIFO would have relatively higher values compared to inventory valued using LIFO. Thus, any mark downs of inventory values to NRV would have the least impact on inventories valued using the LIFO method as they are already conservatively valued.
In a period of declining inventory unit costs and constant or increasing inventory quantities, which inventory method is most likely to result in a higher debt-to-equity ratio?
A. LIFO
B. FIFO
C. Weighted average cost
Feedback
General feedback
B is correct. In an environment of declining inventory unit costs and constant or increasing inventory quantities, FIFO (in comparison with weighted average cost or LIFO) will have higher cost of goods sold and lower net income and inventory. Because both inventory and net income are lower, total equity is lower, resulting in a higher debt-to-equity ratio.
The following information is available for a manufacturing company:
$ millions
Cost of ending inventory computed using FIFO 4.3
Net realizable value 4.1
Current replacement cost 3.8
If the company is using International Financial Reporting Standards (IFRS) instead of US GAAP, its cost of goods sold (in millions) is most likely:
Incorrect answer:
A. $0.3 higher.
B. $0.3 lower.
C. the same.
C. the same.
Porque con FIFO bajo US GAAP (tras ASU 2015-11) y bajo IFRS, el inventario se mide por Lower of Cost and NRV (LCNRV).
Aquí: coste = 4.3, NRV = 4.1 ⇒ ambos marcos llevan el inventario final a 4.1 (write-down de 0.2).
El replacement cost (3.8) sería relevante en el antiguo LCM de US GAAP, pero ya no aplica para inventarios que no usan LIFO ni el retail method. Como es FIFO, GAAP también usa NRV, de modo que COGS no cambia entre IFRS y US GAAP en este caso.
During its first two years of operations, a retailer has found that the cost of the inventory was quite variable. The following table shows the company’s purchases and sales during the past two years.
Inventory Purchased Inventory Sold
Year Units Unit Cost Units Selling Price
1 80,000 $10 75,000 $15.50
2 65,000 $8 55,000 $12.40
In Year 2, the company’s inventory turnover ratio was 3.67, using end-of-period inventory and cost of goods sold (COGS). The method that the retailer is using to value its inventory is most likely:
A. first-in, first-out (FIFO).
B. last-in, first-out (LIFO).
C. weighted average cost.
pregunta 55
es la c
Selected financial information about a company is provided in the table:
(€ millions) 2014 2013
Sales 4,448 4,246
Inventories
Raw materials 125 141
Work in process 230 240
Finished goods 410 296
Supplies and other 73 72
Valuation allowance –133 –118
Total 705 631
Which of the following conclusions is most accurate based on the foregoing information?
A. The company faces a strong possibility of future write-downs.
B. The price of supplies increased significantly.
C. Management anticipates a strong increase in product demand.
Puse la c, era la a
Correct Answer:
A. The company faces a strong possibility of future write-downs.
Feedback
Based on your answer
Incorrect. There is a large buildup of finished goods (38% increase) and a decline in both raw materials (–11.3%) and work in process (–4.0%). This suggests a decline in demand for the firm’s products.
An analyst gathers the following information (in € thousands) about an electronics manufacturing company’s inventory:
Cost of ending inventory 3,600
Net realizable value 3,300
Current replacement cost 3,200
Net realizable value less a normal profit margin 3,100
The inventory (in € thousands) is carried on the balance sheet at:
A. 3,100.
B. 3,200.
C. 3,300.
es la C
IFRS
All else being equal, a write-down of inventory by a manufacturing company most likely results in a:
Incorrect answer:
A. lower total asset turnover ratio and a lower current ratio.
B. higher total asset turnover ratio and a lower current ratio.
C. lower total asset turnover ratio and a higher current ratio.
, Not Selected
Puse la A, es la b
Feedback
Based on your answer
Incorrect because a write-down of inventory to its net realizable value would increase total asset turnover and decrease the current ratio.
