FAR — Financial Accounting & Reporting — Quiz 46

Questions in this quiz (10)

1. Which accounting principle requires companies to recognize losses from obsolete inventory?

   • Revenue recognition principle
   • Conservatism principle
   • Matching principle
   • Consistency principle

2. Which financial statement item increases when inventory is written down?

   • Cost of goods sold
   • Cash
   • Revenue
   • Accounts payable

3. Which inventory system continuously updates inventory balances?

   • Periodic inventory system
   • Perpetual inventory system
   • Manual inventory system
   • Temporary inventory system

4. Why is inventory accounting important for businesses?

   • It determines employee wages
   • It ensures accurate asset and cost reporting
   • It eliminates accounting errors
   • It determines tax liability only

5. Which best describes the lower-of-cost-or-market rule?

   • Inventory recorded at market value only
   • Inventory recorded at the lower of cost or market
   • Inventory recorded at historical cost only
   • Inventory recorded at replacement cost only

6. Which concept supports writing down inventory when market value declines?

   • Matching principle
   • Conservatism principle
   • Revenue recognition principle
   • Periodicity principle

7. What is the purpose of inventory valuation?

   • Calculate employee wages
   • Determine ending inventory and cost of goods sold
   • Determine liabilities
   • Calculate tax deductions

8. Which account increases when inventory is written down?

   • Cost of goods sold
   • Revenue
   • Accounts receivable
   • Notes payable

9. Which inventory system records cost of goods sold at each sale?

   • Periodic inventory system
   • Perpetual inventory system
   • Manual inventory system
   • Temporary inventory system

10. Which inventory system requires a physical count to determine ending inventory?

    • Perpetual inventory system
    • Periodic inventory system
    • Continuous inventory system
    • Weighted-average system