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Financial Reporting And Analysis MCQ - Financial Reporting And Analysis Section 2

66 Which of the following inventory valuation methods is not permitted under IFRS?

IFRS does not permit the use of LIFO method for inventory valuation.

67 Which of the following is most likely to have the greatest impact on the amount of reported cost of sales and inventory?

The inventory valuation method has a significant impact on the amount allocated to cost of sales and inventory.

68 Which of the following methods requires a separate purchases account?

The periodic inventory system requires a separate purchases account.

69 Goods that are not ordinarily interchangeable and are likely to be segregated are most likely valued using the:

Goods that are not ordinarily interchangeable and are likely to be segregated are valued using the specific identification method.

70 A company values measures its ending inventory using the costs of its recent purchases. Which of the following inventory valuation methods is the company most likely using?

Under FIFO, costs of most recent purchases is allotted to ending inventory.

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Direct Cash Flow Method

The direct method presents major operating cash receipts and payments separately. It provides useful information about cash collections, payments, and operating patterns that may be less visible under the indirect method.

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Question:

If a company uses a perpetual inventory system, the inventory method that best matches the actual historical cost of the inventory sold with their physical flow is:

A. FIFO.
B. LIFO.
C. specific identification.

Correct answer: C

Explanation:

Specific identification matches the actual historical costs of the specific inventory items to their physical flow: The costs remain in inventory until the actual identifiable inventory is sold.

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