Reference no: EM1310501
1. All of the following costs should be charged against revenue in the period in which costs are incurred except for
A.Manufacturing overhead costs for a product manufactured and sold in the same accounting period.
B.Costs which will not benefit any future period.
C.Costs from idle manufacturing capacity resulting from an unexpected plant shutdown.
D.Costs of normal shrinkage and scrap incurred for the manufacture of a product in ending inventory.
2.Which of the following types of interest cost incurred in connection with the purchase or manufacture of inventory should be capitalized as a product cost?
A.Purchase discounts lost
B.Interest incurred during the production of discrete projects such as ships or real estate projects
C.Interest incurred on notes payable to vendors for routine purchases made on a repetitive basis
D.All of these should be capitalized.
3.The use of a Discounts Lost account implies that the recorded cost of a purchased inventory item is its
A.Invoice price.
B.Invoice price plus the purchase discount lost.
C.Invoice price less the purchase discount taken.
D.Invoice price less the purchase discount allowable whether taken or not.
4.Which of the following recording procedures would result in the highest net income for 2004?
1. Recording purchases at gross amounts
2. Recording purchases at net amounts, with the amount of discounts not taken shown under "other expenses" in the income statement
A.1
B.2
C.Either 1 or 2 will result in the same net income.
D.Cannot be determined from the information provided.
5.When using the periodic inventory system, which of the following generally would not be separately accounted for in the computation of cost of goods sold?
A.Trade discounts applicable to purchases during the period
B.Cash (purchase) discounts taken during the period
C.Purchase returns and allowances of merchandise during the period
D.Cost of transportation-in for merchandise purchased during the period
6.Which of the following is true about lower of cost or market?
A.It is inconsistent because losses are recognized but not gains.
B.It usually understates assets.
C.It can increase future income.
D.All of these.
7. The primary basis of accounting for inventories is cost. A departure from the cost basis of pricing the inventory is required where there is evidence that when the goods are sold in the ordinary course of business their
A.Selling price will be less than their replacement cost.
B.Replacement cost will be more than their net realizable value.
C.Cost will be less than their replacement cost.
D.Future utility will be less than their cost.
8. When valuing raw materials inventory at lower of cost or market, what is the meaning of the term "market"?
A.Net realizable value
B.Net realizable value less a normal profit margin
C.Current replacement cost
D.Discounted present value
9.Plant assets purchased on long-term credit contracts should be accounted for at
A.The total value of the future payments.
B.The future amount of the future payments.
C.The present value of the future payments.
D.None of these.