ACC 101 Exam queries and answers
graded 100%
Method that assumes that inventory costs flow in the order incurred - ANS✅✅FIFO
What are the 4 methods of inventory valuation? - ANS✅✅LIFO, FIFO, Weighted Average, Specific
Identification
Market defined by lower cost or market - ANS✅✅Current replacement cost reflects a loss of value
in inventory.
What is the assumption of the FIFO inventory method? - ANS✅✅The inventory items are sold in
the order acquired.
What is the consistency principle? - ANS✅✅Prescribes use of the same accounting method over
time so that financial statements are comparable across periods.
Are damaged & obsolete goods included in inventory if they cannot be sold? - ANS✅✅NO
How does the retail inventory method estimate the cost of ending inventory? (Through the use of
the cost to retail ratio) - ANS✅✅By the use of the Cost to retail ratio (estimated ending inventory
at retail X Cost Ratio)
Which inventory estimation method is used when companies avoid the time-consuming process of
taking a physical count of the inventory? (Retail Inventory method) - ANS✅✅The retail inventory
method is used.
Can the lower of cost or market be applied to individual units, major categories of inventory or the
entire inventory? - ANS✅✅The lower of cost or market can be applied in any way.
Are all goods in transit automatically included in inventory? - ANS✅✅No
What is the reasoning behind the retail inventory method? - ANS✅✅To avoid the time consuming
and expensive process of taking a physical inventory each month or quarter.
graded 100%
Method that assumes that inventory costs flow in the order incurred - ANS✅✅FIFO
What are the 4 methods of inventory valuation? - ANS✅✅LIFO, FIFO, Weighted Average, Specific
Identification
Market defined by lower cost or market - ANS✅✅Current replacement cost reflects a loss of value
in inventory.
What is the assumption of the FIFO inventory method? - ANS✅✅The inventory items are sold in
the order acquired.
What is the consistency principle? - ANS✅✅Prescribes use of the same accounting method over
time so that financial statements are comparable across periods.
Are damaged & obsolete goods included in inventory if they cannot be sold? - ANS✅✅NO
How does the retail inventory method estimate the cost of ending inventory? (Through the use of
the cost to retail ratio) - ANS✅✅By the use of the Cost to retail ratio (estimated ending inventory
at retail X Cost Ratio)
Which inventory estimation method is used when companies avoid the time-consuming process of
taking a physical count of the inventory? (Retail Inventory method) - ANS✅✅The retail inventory
method is used.
Can the lower of cost or market be applied to individual units, major categories of inventory or the
entire inventory? - ANS✅✅The lower of cost or market can be applied in any way.
Are all goods in transit automatically included in inventory? - ANS✅✅No
What is the reasoning behind the retail inventory method? - ANS✅✅To avoid the time consuming
and expensive process of taking a physical inventory each month or quarter.
