Under the Principle of Lower of Cost and Net Realizable

question 40

Multiple Choice

Under the principle of lower of cost and net realizable value,when a company has 10 units of inventory A with net realizable value of $50 and a cost of $60,what is the adjustment?

• A)Debit Inventory $100;credit Cost of Goods Sold $100.
• B)Debit Inventory $500;credit Cost of Goods Sold $500.
• C)Debit Cost of Goods Sold $100;credit Inventory $100.

Apply the lower of cost or market method to determine inventory valuation.

Comprehend the tax implications and advantages of using LIFO inventory valuation method.

Calculate and interpret the inventory turnover ratio and its significance on business operations.

Identify and correct inventory valuation errors and understand their impact on financial statements.

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Definitions:

Functional Currency

The main currency used by a business or unit within a company for accounting purposes, reflecting the primary economic environment in which it operates.

Pound Sterling

The official currency of the United Kingdom, which is one of the world's oldest currencies still in use.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Temporal Method

A technique used in foreign currency translation that uses exchange rates based on the timing of the original transaction.