Question:
The use of the lower of cost or net realizable value (LCNRV) method to value inventory for reporting purposes is a departure from the accounting principle of:
A) Historical cost.
B) Matching.
C) Going concern.
D) Conservatism.
Answer:
The Right answer is A) Historical Cost.
Explanation:
Inventories are recorded at their cost. If inventory declines in value below its original cost, a major departure from the historical cost principle occurs.
Whatever the reason for a decline-damage, physical deterioration, obsolesce, changes in price levels, or other causes, a company should write down the inventory to Lower-of-Cost or Net Realizable Value (LCNRV) to report this loss.
A company abandons the historical cost principle when the future utility (revenue-producing ability) of the asset drops below its original cost.
Net Realizable Value refers to the net amount that a company expects to realize from the sale of inventory. Specifically, net realizable value is the estimated selling price in the normal course of business minus estimated costs to make a sale.
Example
Inventory Value - Unfinished $2,000
Less: Estimated Cost of Completion $ 50
Estimated Cost to sell <u>200</u> <u> 250</u>
<u>Net Realizable Value 750</u>
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Cheers!
Answer:
a. Stock dividends
Explanation:
As we know that the cash flow statement records those transactions which deals in cash only.
It includes three types of activities
1. Operating activities: It records payment of expenditures, cash receipts, changes in working capital
2. Investing activities: It records inflow and outflow of long term assets
3. Financing activities: It records the stockholder equity related transactions
Since in the given case, the related disclosure do not report the stock dividend as it does not involved any kind of cash transactions
Answer:
44%
Explanation:
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested
Internal rate of return can be determined using a financial calculator
Cash flow in year 0 = $-30 million
Cash flow in year 1 = $13 million
Cash flow in year 2 = $23 million
Cash flow in year 3 = $29 million
IRR = 44%
To find the IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
Answer: Air travel is a normal good and vacation travel by car is an inferior good
Explanation: What is a normal good and what is an inferior good.
Normal goods are those goods for which the demand rises as consumer income rises. While inferior goods are goods whose demand increases when consumer income decreases.
This therefore means that the demand of inferior goods is inversely related to the income of the consumer.
From the question above, we can say that car trips are inferior goods while the air travel are normal goods.