Reference no: EM132969905

Problem 1: 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 2: 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.

Problem 3: Which of the following cost flow assumptions is used for inventory when an entity build townhouses?

a) FIFO

b) Specific identification

c) Weighted average

d) Any of these cost flow assumptions