Question Details

When inventory is misstated, its presentation lacks 



1.	When inventory is misstated, its presentation lacks ?
a.	Relevance.
b.	Faithful representation.
c.	Comparability.
d.	All of the choices are correct.

2.	Which of the following costs should not be included on the statement of financial position as part of the cost of inventory?
a.	Abnormal freight.
b.	Import duties.
c.	Conversion costs.
d.	All of the choices are included on the statement of financial position as part of the cost of inventory.

	3.	Jarvis, Inc. manufactures cruise ships for sale. Each ship costs approximately $25,000,000 to build and takes 3 years to fully construct. During the time it takes to construct one cruise ship, Jarvis incurs $2,400,000 in interest cost related to the construction. The interest cost is incurred evenly throughout the construction period. During the first year of construction, Jarvis builds a shell that can be customized for any purchaser according to specifications; construction during the final 2 years is all based on client specification. The International Accounting Standards Board requires that Jarvis account for this interest cost as
a.	$2,400,000 is recorded as interest expense as incurred.
b.	$2,400,000 is capitalized to the cruise ship.
c.	$800,000 incurred in 1st year is expensed as incurred; the remaining amount is capitalized to the cruise ship.
d.	$800,000 is capitalized to the cruise ship; the remaining amount is expensed as incurred.

	4.	Oats Company offers a trade discount to its customers as a reward for large orders. According to the International Accounting Standards Board (IASB) how should the customers of Oats Company account for these trade discounts?
a.	As an expense.
b.	As a revenue.
c.	As a reduction in the cost of inventory.
d.	The IASB allows any of these treatments so long as the company applies it consistently.

	5.	Amazon.com (USA) and other e-tailers account for certain selling costs--fulfillment costs related to inventory shipping and warehousing--as part of administrative expenses, instead of as cost of goods sold. Which of the following is incorrect regarding this treatment?
a.	IFRS allows this treatment as long as it- applied consistently and adequately disclosed.
b.	The practice does not affect the bottom line.
c.	The practice does not affect gross margins.
d.	U.S. GAAP allows this treatment as long as it- applied consistently and adequately disclosed.




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