Reference no: EM132778333

Problem 1: Which of the following statements is true?

a. Accounting standards require that merchandise costs be specifically traced to units left in inventory and to units that have been sold.
b. Accountants have developed methods which make assumptions concerning how costs should be assigned to inventory and cost of goods sold.
c. The flow of inventory costs should match the physical flow of the merchandise.
d. Alternative inventory cost-flow assumptions have the same effect on the amount of net income reported.

Problem 2: Which of the following statements regarding the application of the lower-of-cost-or-market (LCM) rule is true?

a. The LCM rule is most commonly applied on a total inventory basis because it is a more conservative approach.
b. When the LCM rule is used, inventories are valued at selling price.
c. The LCM rule is an exception to the historical cost principle.
d. Generally, market value is greater than replacement cost.