1- Select the approach which should not be used when you apply the lower-of-cost-or-market method to inventory.

a

Inventory location

b

Individual item

c

Categories of inventory items

d

Inventory total

2- When using a perpetual inventory system, ________.

a

recording a sale requires two journal entries

b

a purchases account is not used

c

a cost-of-goods-sold account is used

d

all of these

3- Select the true statement about perpetual inventory systems.

a

Inventory purchases are debited to the Inventory account.

b

Inventory records are maintained for every item.

c

The cost of goods sold is recorded with every sale

d-

Cost of Goods Sold = Amount of Purchases - Change in Inventory

4- When inventory permanently declines to a value lower than its original (historical) cost, select the maximum value the inventory can be assigned?

a

Net realizable value

b

Net realizable value reduced by a normal profit margin

c

Historical cost

d

Sales price

5-

During a period of declining prices, which of these would usually result in the lowest cost-to-retail ratio?

a

LIFO

b

FIFO

c

Average cost

d

Lower of average cost or market

6- Select the true statement regarding the lower-of-cost-or-market rule.

a	It is conservative (losses, but not gains, are recognized).
b	It understates assets.
c	It increases future income.
d	None of these statements are true.