A) FIFO reports lower income amounts than LIFO when B) FIFO reports a higher inc
ID: 2589130 • Letter: A
Question
A) FIFO reports lower income amounts than LIFO when B) FIFO reports a higher income amount than LIFO when prices are C) LIFO reports a higher income amount D) LIFO reports higher income than FIFO when prices are decreasing. E) None of the above is correct 5. Which of the following statements is correct prices are rising than FIFO when prices are rising. 6. Under the lower-of-cost-or-market basis for valuing inventory if replacement cost of an item in inventory has declined during a given accounting period, A) pretax income and the amount ofending inventory will be reduced for the period in which the merchandise is sold. B) pretax income and the amount of ending inventory will be reduced for the period during which the decline in merchandise market value occurred, C) pretax income wil be reduced for the period during which the decline in market value occurred and the amount of ending inventory will decline for the period in which the merchandise is sold. D) A and B are both correct. E) None of the above is correct. 7. An understatement of the ending inventory in Year 1, if not corrected, will cause A) Year 1 net income to be overstated and Year 2 net income to be understated. B) Year 1 net income to be understated and Year 2 net income to be overstated. C) Year 1 net income to be overstated and Year 2 net income will be correct. D) Year 1 net income to be overstated and Year 2 net income to be overstated. E) Year 1 net income to be understated and Year 2 net income will be correct. 8. Which of the following about the characteristics of all long-lived operational assets is tnie? A) They have physical substance. B) They are being used in the company's operations. C) They are classified as non-current assets on the balance sheet. D) Only B and C are true. E) All of the above are true. 9. Which of the following statements is true? A) All intangible assets are amortized over their useful lives. B) The research and development costs connected to developing a product, which is subsequently patented are capitalized to the patent account. C) If an intangible asset has an indefinite life, it is not amortized but is tested annually to determine any impairment. D) All of the above are true. E) None of the above is true.Explanation / Answer
6.Answer:D
The lower-of-cost-or-market (LCM) method is an inventory costing method that values inventory at the lower of its historical cost or its current market (replacement) cost. Market generally refers to a merchandise item’s replacement cost in the quantity usually purchased. The basic assumption of the LCM method is that if the purchase price of an item has fallen, its selling price also has fallen or will fall.
When replacement cost reduces
Pre tax income and ending inventory get reduces when sold or even market value occured
7.answer:B
The understatement of the ending inventory balance causes ,if not corrected
net income to be understated year 1 and net income to be overstated in year 2
8. answer.E
long-lived assets that have physical substance ( land, buildings, machinery, vehicles, office equipment, furniture).
long-lived assets are those that a business retains for long periods of time for use in the course of normal operations rather than for sale.
These assets are grouped into a single line on the BALANCE SHEET called property, plant, and equipment. because many long-lived tangible assets are fixed in place, they are also known as FIXED ASSETS under NON CURRENT ASSETS.
9. answer:D
Intangible assetsvamortized depending on their useful lives to the entity.
Developing costs should be capitalized when such asset is patented
Assets with finite lives are amortized; assets with indefinite lives are not but should check for any impairment
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