Which of the Following Is/are Not True Regarding Inventories When

question 64

Multiple Choice

Which of the following is/are not true regarding inventories when their replacement cost declines below acquisition cost?

• A)Both U.S.GAAP and IFRS require firms to write down inventories when their replacement cost, or market value, declines below acquisition cost.
• B)Accountants refer to the inventory as impaired and to this valuation as the lower-of-cost-or-market basis.
• C)The journal entry to record the inventory impairment results in a loss and a new balance sheet carrying value that is the lower of cost or market value.
• D)U.S.GAAP permits firms to recognize subsequent value increases, as long as the new value remains less than the original acquisition cost.
• E)IFRS permits firms to reverse previous impairments, up to the amount of the original acquisition cost of the inventory, if the circumstances that caused the inventory impairment no longer exist.

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