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Question 1

At the end of Year 1, a company reduced its inventory cost from $100 to its net realizable value of $80. As of the end of Year 2, the inventory was still on hand and its net realizable value increased to $150. Under IFRS, what journal entry should the company record for Year 2 to properly report the inventory value?

Answer 1

Under IFRS, inventories are measured at the lower of cost or net realizable value (NRV). NRV is the estimated selling price less the estimated costs of completion and disposal. At the end of Year 1, a loss on write-down of $20 ($100 cost – $80 NRV) was recognized. NRV is assessed each period. Accordingly, a write-down may be reversed but not above original cost. The write-down and reversal are recognized in profit or loss. Therefore, only the original $20 write-down can be reversed by debiting inventory for $20 and crediting the expense account for $20.

Question 2

When using IFRS, which of the following changes in accounting policies resulting from a significant change in the expected pattern of economic benefit will increase profit?

Answer 2

In a period of falling costs, FIFO results in higher cost of goods sold than the weighted-average method. FIFO includes the higher, earlier costs in cost of goods sold, and the weighted-average method averages the later, lower costs with the higher, earlier costs. Thus, a change from FIFO to weighted-average reduces cost of goods sold and increases reported profit.

Question 3

In a periodic inventory system that uses the weighted-average cost flow method, the beginning inventory is the

Answer 3

In a periodic inventory system, the beginning inventory is equal to the total goods available for sale minus the net purchases, regardless of the cost flow method used.

Question 4

how to compute the weighted average

Answer 4

cost of year BEG in + cost of purchase / no of beg inv + no of unit purchased

Question 5

Which of the following is a characteristic of not-for-profit, nongovernmental entities?

Answer 5

The operating environments of not-for-profit and business entities are similar in many ways. Both produce and distribute goods and services using scarce resources.

Question 6

Which one of the following errors will result in the overstatement of net income?

Answer 6

Cost of goods sold equals beginning finished goods, plus cost of goods manufactured for a manufacturer or purchases for a retailer, minus ending finished goods. Overstated ending inventory therefore results in understated cost of goods sold, overstated net income, and overstated retained earnings in the period of the error.

Question 7

Could current cost financial statements report holding gains for goods sold during the period and holding gains on inventory at the end of the period?

Answer 7

yes , yes
Holding gains may be realized or unrealized. Realized holding gains equal the difference between the current cost and the historical cost of assets sold or consumed during the period. Unrealized holding gains equal the difference between the current cost and the historical cost of assets still on hand at the end of the period.

Holding gains for cost of goods sold are realized. Holding gains for inventory on hand at the end of the period are unrealized.