If Companies Have Identical Inventoriable Costs but Use Different Inventory

question 95

Multiple Choice

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

• A)cost of goods sold of the companies will be identical.
• B)cost of goods purchased during the year will be identical.
• C)ending inventory of the companies will be identical.
• D)net income of the companies will be identical.

Comprehend the financial implications of raw material price and quantity variances.

Process standard cost variances into cost of goods sold adjustments.

Utilize standard cost information to calculate net operating income.

Understand the recording process of transactions in a standard cost system.

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Definitions:

Eligible Dividends

Eligible dividends are those paid by Canadian corporations to Canadian residents, which are eligible for an enhanced dividend tax credit.

CCA Rate

Capital Cost Allowance Rate; a percentage used to calculate the yearly depreciation of tangible property for tax purposes in Canada.

Half-Year Rule

CRA’s requirement to figure CCA on only one-half of an asset’s installed cost for its first year of use.

Depreciation Expense

The process of charging a portion of the cost of an asset to expense over its expected useful life, reflecting the asset’s consumption or wear and tear.