3. Why are iventoies stated at hower of-sost and met realizable value? lessuben

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3. Why are iventoies stated at hower of-sost and met realizable value? lessuben there is a decrease in the future utility below B) Ta permiàt futune grofites to be recognized C) To keep track of the markei value of the inventory. A) To report cost To reon a kos when there is a decrease in the future utility. AG Inc made a $25000 s company uses the net neethod to recond sal the journal entry to record the sale? A) Dehit Aecounts Receivable for $25,000 t methd to resol sales made on credit, what islare the debits) in Debit Accounts Reveivable for $24,500 and Sales Discounts for $500 D) Debit Accounts Reeivable for 524,500. B Debit ecounts Receivable for $25.000 and Sales Discounts for S500 er-of-cost-or-market 7. What is the rationale behind the ceiling when applying the low method to inventony? A) Allows for a normal profit to be carned. Allows for items to be valued at replacement cost. ) Prevents overstatement of the valuc of obsolete or damaged inventories D) Prevents iwmderstatement of the inventory value. &. Why is the allowance method preferred over the direct write-off method of accounting for bad debts? Improved matching of bad debt expense with revenue. B) Allowance method is used for tax purposes. C) Estimates are used D) Determining worthless ascounts under direct write-off method is difficult to do. 9On June l , 2017, Pitts Company sold some quipment to Gannon Company. The two companies entered into an installment sales contract at a rate of 8%-The contract required 8 equal annual payments with the first payment due on June 1, 2017. What type of compound interest table is appropriate for this situation? A) Future amount of I table, B) Future amount of an ordinary annuity of 1 table. Present value of an annuity due of 1 table. D) Present value of an ordinary annuity of 1 table.

Explanation / Answer

Question 5: Why are inventories stated at lower of cost and Net realizable value?

Answer- A) To report a loss when there is decrease in the future utility below the original cost. Because it is a conservative approach to valuing and reporting inventory.

Question 6:AG Inc made a $25,000 sale on account with the following terms:2/10, n/10. If the company uses the net method to record sales made on credit , what is/are the debit(s) in the journal entry to record the sales?

Answer:D) Debit account receivable for $24,500

Question 7:What is the rationale behind the ceiling when applying the lower-of-cost or-market method to inventory?

Answer:C) Prevents overstatement of the value of obsolete or damaged inventories.

Question 8: Why is the allowance method preferred over the direct write off method of accounting for bad debts?

Answer: A)Improved matching of bad debt expenses with revenue

  

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