ACCT 311 Final Test Questions and Answers Already Passed Latest Update 2025-2026
Identify the accounting standard(s) that permit reversal of inventory value write-downs. -
Answers IFRS
Which of the following can be used to write-down inventory according to the lower of cost and
net realizable value rule? (Select all that apply.)
Defer the write-down until the inventory is sold.
Recognize the write-down as an addition to cost of goods sold.
Recognize the write-down as a separate line item on the income statement. - Answers
Recognize the write-down as an addition to cost of goods sold.
Recognize the write-down as a separate line item on the income statement.
True or false: Both U.S. GAAP and IFRS require inventory to be valued at the lower of cost and
net realizable value. - Answers True
Under IFRS, the lower of cost and net realizable value rule typically is applied to - Answers
individual items
Which of the following represents a criticism of the lower of cost and net realizable value rule? -
Answers Losses that have not actually occurred are recognized
Ending inventory plus cost of goods sold equals - Answers cost of goods available for sale
Identify the situations for which ending inventory and cost of goods sold may be estimated
utilizing the gross profit method. (Select all that apply.)
For interim reporting periods.
To determine reasonableness of inventory amounts during an audit.
When inventory was lost, destroyed, or stolen.
For preparing annual financial statements. - Answers For interim reporting periods.
To determine reasonableness of inventory amounts during an audit.
When inventory was lost, destroyed, or stolen.
Which of the following information is needed to utilize the gross profit method? (Select all that
apply.)
purchases
cost of goods sold
, estimated gross profit ratio
net sales
beginning inventory - Answers purchases
estimated gross profit ratio
net sales
beginning inventory
Which of the following statements is correct regarding the accuracy of the estimates derived
under the gross profit method?
The company's cost flow assumption is irrelevant.
A physical count is necessary to enhance reliability.
The gross profit ratio must be reliable. - Answers The gross profit ratio must be reliable.
What is an important limitation of the gross profit method? - Answers It does not explicitly
consider possible theft or spoilage of inventory.
If gross profit is 30%, then what is the markup on cost? - Answers (.3) /(1-.3)
Which of the following must be considered when applying the gross profit method? (Select all
that apply.)
The shipping terms utilized for the purchase and sale of inventory items.
The inventory cost flow assumption used by the company.
Conditions that may have changed the current year gross profit margin. - Answers The inventory
cost flow assumption used by the company.
Conditions that may have changed the current year gross profit margin.
Which of the following must be known to apply the retail inventory method? (Select all that
apply.) - Answers Inventory and purchases based on retail value.
Inventory and purchases based on cost.
The cost-to-retail percentage is found by dividing goods available for sale at _____________, by
goods available for sale at ________________ - Answers -cost
-retail or price
Advantages of the retail inventory method include that it can - Answers be adjusted to
Identify the accounting standard(s) that permit reversal of inventory value write-downs. -
Answers IFRS
Which of the following can be used to write-down inventory according to the lower of cost and
net realizable value rule? (Select all that apply.)
Defer the write-down until the inventory is sold.
Recognize the write-down as an addition to cost of goods sold.
Recognize the write-down as a separate line item on the income statement. - Answers
Recognize the write-down as an addition to cost of goods sold.
Recognize the write-down as a separate line item on the income statement.
True or false: Both U.S. GAAP and IFRS require inventory to be valued at the lower of cost and
net realizable value. - Answers True
Under IFRS, the lower of cost and net realizable value rule typically is applied to - Answers
individual items
Which of the following represents a criticism of the lower of cost and net realizable value rule? -
Answers Losses that have not actually occurred are recognized
Ending inventory plus cost of goods sold equals - Answers cost of goods available for sale
Identify the situations for which ending inventory and cost of goods sold may be estimated
utilizing the gross profit method. (Select all that apply.)
For interim reporting periods.
To determine reasonableness of inventory amounts during an audit.
When inventory was lost, destroyed, or stolen.
For preparing annual financial statements. - Answers For interim reporting periods.
To determine reasonableness of inventory amounts during an audit.
When inventory was lost, destroyed, or stolen.
Which of the following information is needed to utilize the gross profit method? (Select all that
apply.)
purchases
cost of goods sold
, estimated gross profit ratio
net sales
beginning inventory - Answers purchases
estimated gross profit ratio
net sales
beginning inventory
Which of the following statements is correct regarding the accuracy of the estimates derived
under the gross profit method?
The company's cost flow assumption is irrelevant.
A physical count is necessary to enhance reliability.
The gross profit ratio must be reliable. - Answers The gross profit ratio must be reliable.
What is an important limitation of the gross profit method? - Answers It does not explicitly
consider possible theft or spoilage of inventory.
If gross profit is 30%, then what is the markup on cost? - Answers (.3) /(1-.3)
Which of the following must be considered when applying the gross profit method? (Select all
that apply.)
The shipping terms utilized for the purchase and sale of inventory items.
The inventory cost flow assumption used by the company.
Conditions that may have changed the current year gross profit margin. - Answers The inventory
cost flow assumption used by the company.
Conditions that may have changed the current year gross profit margin.
Which of the following must be known to apply the retail inventory method? (Select all that
apply.) - Answers Inventory and purchases based on retail value.
Inventory and purchases based on cost.
The cost-to-retail percentage is found by dividing goods available for sale at _____________, by
goods available for sale at ________________ - Answers -cost
-retail or price
Advantages of the retail inventory method include that it can - Answers be adjusted to
