ACC 301 FINAL EXAM QUESTIONS & ANSWERS
Inventory - Answers -Which of the following accounts is credited in the loss method of
writing-down of inventory to its net realizable value?
-Allowance to Reduce Inventory to NRV
-Loss Due to Decline of Inventory to NRV
-Cost of Goods Sold
-Inventory
-higher gross profit but net income will be the same - Answers -Watauga Company has
an inventory write-down to record and is deciding whether to use the loss method or the
cost of goods sold method. Compared to the cost of goods sold method the loss method
will report.
-lower gross profit and net income
-higher gross profit but net income will be the same
-higher gross profit and lower operating income
-lower gross profit but operating income will be the same
-both the cost of goods sold method and the loss method - Answers -Which method(s)
may be used to record a loss due to a price decline in the value of inventory?
-the cost of goods sold method
-the sales method
-the loss method
-both the cost of goods sold method and the loss method
c. The loss method provides for greater financial statement transparency. - Answers -
Which of the following statements is true regarding the choice between the cost-of-
good-sold method and the loss method for writing down inventory to the lower-of-cost-
or-net realizable value?
a. The income statement presentation under the loss method lacks representational
faithfulness.
b. Tax rules require the use of the loss method.
c. The loss method provides for greater financial statement transparency.
d. All of these statements are true regarding the choice between the cost-of-good-sold
method and the loss method for writing down inventory to the lower-of-cost-or-net
realizable value.
d. selling price less costs to complete, sell, and transport. - Answers -Net realizable
value is
a. acquisition cost plus costs to complete and sell.
b. selling price.
c. selling price plus costs to complete and sell.
, d. selling price less costs to complete, sell, and transport.
a. is always the middle value of replacement cost, net realizable value, and net
realizable value less a normal profit margin. - Answers -The designated market value
a. is always the middle value of replacement cost, net realizable value, and net
realizable value less a normal profit margin.
b. will always equal net realizable value.
c. may sometimes exceed net realizable value.
d. will always equal net realizable value less a normal profit margin.
c. conventional retail method. - Answers -An inventory method that is designed to
approximate inventory valuation at the lower-of-cost-or-market is
a. last-in, first-out.
b. first-in, first-out.
c. conventional retail method.
d. specific identification.
a. include markups but not markdowns. - Answers -To produce an inventory valuation
that approximates the lower-of-cost-or-market using the conventional retail inventory
method, the computation of the ratio of cost to retail should
a. include markups but not markdowns.
b. include markups and markdowns.
c. ignore both markups and markdowns.
d. include markdowns but not markups.
$14,250 - Answers -Zahler Company uses a periodic inventory system and the average
cost method. At December 31, 2025, the following information has been compiled for its
finished goods inventory:
Replacement value $13,000
Cost $14,500
Expected selling price $15,000
Normal profit margin 15%
Selling costs 5% of expected selling price
At what amount should the company value its finished goods inventory at December 31,
2025?
a. $14,500
b. $14,250
c. $13,000
d. $12,250
$16 - Answers -Lexington Company sells product 1976NLC for $20 per unit. The cost
of one unit of 1976NLC is $18, and the replacement cost is $17. The estimated cost to
dispose of a unit is $4, and the normal profit is 40% of the selling price. At what amount
per unit should product 1976NLC be reported, applying lower-of-cost-or-market?
a. $8.
Inventory - Answers -Which of the following accounts is credited in the loss method of
writing-down of inventory to its net realizable value?
-Allowance to Reduce Inventory to NRV
-Loss Due to Decline of Inventory to NRV
-Cost of Goods Sold
-Inventory
-higher gross profit but net income will be the same - Answers -Watauga Company has
an inventory write-down to record and is deciding whether to use the loss method or the
cost of goods sold method. Compared to the cost of goods sold method the loss method
will report.
-lower gross profit and net income
-higher gross profit but net income will be the same
-higher gross profit and lower operating income
-lower gross profit but operating income will be the same
-both the cost of goods sold method and the loss method - Answers -Which method(s)
may be used to record a loss due to a price decline in the value of inventory?
-the cost of goods sold method
-the sales method
-the loss method
-both the cost of goods sold method and the loss method
c. The loss method provides for greater financial statement transparency. - Answers -
Which of the following statements is true regarding the choice between the cost-of-
good-sold method and the loss method for writing down inventory to the lower-of-cost-
or-net realizable value?
a. The income statement presentation under the loss method lacks representational
faithfulness.
b. Tax rules require the use of the loss method.
c. The loss method provides for greater financial statement transparency.
d. All of these statements are true regarding the choice between the cost-of-good-sold
method and the loss method for writing down inventory to the lower-of-cost-or-net
realizable value.
d. selling price less costs to complete, sell, and transport. - Answers -Net realizable
value is
a. acquisition cost plus costs to complete and sell.
b. selling price.
c. selling price plus costs to complete and sell.
, d. selling price less costs to complete, sell, and transport.
a. is always the middle value of replacement cost, net realizable value, and net
realizable value less a normal profit margin. - Answers -The designated market value
a. is always the middle value of replacement cost, net realizable value, and net
realizable value less a normal profit margin.
b. will always equal net realizable value.
c. may sometimes exceed net realizable value.
d. will always equal net realizable value less a normal profit margin.
c. conventional retail method. - Answers -An inventory method that is designed to
approximate inventory valuation at the lower-of-cost-or-market is
a. last-in, first-out.
b. first-in, first-out.
c. conventional retail method.
d. specific identification.
a. include markups but not markdowns. - Answers -To produce an inventory valuation
that approximates the lower-of-cost-or-market using the conventional retail inventory
method, the computation of the ratio of cost to retail should
a. include markups but not markdowns.
b. include markups and markdowns.
c. ignore both markups and markdowns.
d. include markdowns but not markups.
$14,250 - Answers -Zahler Company uses a periodic inventory system and the average
cost method. At December 31, 2025, the following information has been compiled for its
finished goods inventory:
Replacement value $13,000
Cost $14,500
Expected selling price $15,000
Normal profit margin 15%
Selling costs 5% of expected selling price
At what amount should the company value its finished goods inventory at December 31,
2025?
a. $14,500
b. $14,250
c. $13,000
d. $12,250
$16 - Answers -Lexington Company sells product 1976NLC for $20 per unit. The cost
of one unit of 1976NLC is $18, and the replacement cost is $17. The estimated cost to
dispose of a unit is $4, and the normal profit is 40% of the selling price. At what amount
per unit should product 1976NLC be reported, applying lower-of-cost-or-market?
a. $8.
