Where Inventories in an Industry Are Measured by Reference to Historical

question 19

Multiple Choice

Where inventories in an industry are measured by reference to historical cost, which of the following measurement rules applies subsequent to initial measurement:

• A) Historical cost
• B) Discounted cash flow
• C) Lower of cost and net realisable value
• D) Replacement cost

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Definitions:

Days' Sales in Inventory

A measure of how quickly inventory is sold and replaced over a period, calculated by dividing the ending inventory by the cost of goods sold and multiplying by 365.

Year 2

Typically refers to the second year in a given time frame or study period, often used in financial analysis, forecasts, or planning scenarios.

Ending Inventory Balance

The value or quantity of goods available for sale or use at the end of an accounting period, after accounting for purchases and sales during the period.

Income Statement

An income statement is a financial statement that shows a company's revenues and expenses over a specific period, resulting in a net income or loss.