Reference no: EM132969858

Problem 1: Inventories are assets (choose the incorrect one):

a) Held for sale in the ordinary course of business.

b) In the process of production for sale.

c) In the form of materials or supplies to be consumed in the production process or in the rendering of services.

d) Held for use in the production or supply of goods and services.

Problem 2: The credit balance that arises when a loss on a purchase commitment is recognized should be:

a) Presented as a current liability.

b) Subtracted from ending inventory.

c) Presented as an appropriation of retained earnings.

d) Presented in the income statement.

Problem 3: The gross profit method of estimating inventory would not be useful when:

a) A periodic system is in use and inventories are required for interim statements.

b) Inventories have been destroyed or lost by fire, theft, or other casualty, and the specific data required for inventory valuation are not available.

c) There is a significant change in the mix of products being sold.

d) The relationship between gross profit and sales remain stable over time.