Rustic Company has recognized an impairment loss on the value of inventory. If the inventory's value subsequently recovers, under which accounting standards may Rustic revalue the inventory upward and recognize a gain? A) Neither IFRS nor U.S. GAAP allows a recovery in inventory value to be recognized as a gain. B) IFRS allows a recovery in inventory value to be recognized as a gain, but U.S. GAAP does not. c) U.S. GAAP allows a recovery in inventory value to be recognized as a gain, but IFRS does not.

Rustic Company has recognized an impairment loss on the value of inventory. If the inventory's value subsequently recovers, under which accounting standards may Rustic revalue the inventory upward and recognize a gain? A) Neither IFRS nor U.S. GAAP allows a recovery in inventory value to be recognized as a gain. B) IFRS allows a recovery in inventory value to be recognized as a gain, but U.S. GAAP does not. c) U.S. GAAP allows a recovery in inventory value to be recognized as a gain, but IFRS does not.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 6QE

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1. Which of the following are prohibited when accounting for inventory under U.S. GAAP? a. FIFO method b. Average cost method c. Recovery of written down inventory d. LIFO method 2. Under IFRS GAAP research costs and development costs (when product technologically and economically feasible) are a. both capitalized b. both expensed c. research costs are expensed and development costs are capitalized d. research costs are capitalized and development costs are expensed
What method does the company use to value its inventory? What other alternativesare available under IFRS? Under U.S. GAAP?
The main difference between U.S. accounting standards and international accounting standards when accounting for plant, property and equipment is a. international accounting standards require the use of current fair value with changes recognized in equity only. b. U.S. accounting standards do not allow the write-down of assets due to impairment. c. international accounting standards allow plant, property and equipment to be stated at current fair value with changes recognized in income or equity. d. U.S. accounting standards allow plant, property and equipment to be stated at current fair value with changes recognized in income or equity.
Identify any differences between U.S. GAAP and IFRS when applying the lower of cost and net realizable value rule to inventory valuation.
The New Zealand Equivalent to the IASB Conceptual Framework for Financial Reporting (2018) states that assets can be measured at historical cost or current value. One measure of current value is the amount an asset can expected to be sold for in an active market, i.e. fair value. Fair value may be higher or lower than historical cost. However, the accounting standard for inventory (NZ IAS 2) does not allow inventory, which is an asset, to be valued above the historical cost. It must be measured at the lower of historical cost and fair value. Which accounting principle supports the accounting practice of valuing inventory at the lower of historical cost and fair value? O a. All of the options are correct O b. Historical cost O c. Faithful representation O d. Fair value Oe. Prudence (or conservativism)
Which of the following statements is correct regarding reporting of “Extraordinary gains and losses” as a separate category on the income statement? It is no longer permitted under U.S. GAAP. It is permitted under U.S. GAAP, if the related event is both unusual in nature and infrequent in occurrence. Is permitted under IFRS, but not U.S. GAAP. It is permitted under U.S. GAAP, but not IFRS.
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Which of the following statements is false regarding property, plant and equipment (PPE)? Group of answer choices A. PPE is reported as a non-current asset on the balance sheet B. PPE is not intended for resale C. PPE can also be referred to as "inventory" D. None of the other alternatives
What inventory costing methods are allowed under IFRS? How does this differ from the treatment under U.S. GAAP?
Purchase commitmentsA. Are obligations of the company to acquire certain goods at a fixed price and fixed quantity sometime in the futureB. require disclosures when considered common and significantC. Giving rise to a purchase price falling below the agreed price is accounted for as debit to loss on purchase commitments and credited to an estimated liabilityD. All of the aboveE. None of the aboveOwnership of inventories is normally transferred to the buyerA. when legal title to inventories is transferredB. when the purchase price if fully paidC. upon shipment of the goodsD. upon filling up the sales orderWhen accounting for inventoriesA. the form of sales contract is more important than its substanceB. the agreement between seller and buyer shall be considered in determining the timing of transfer of ownership over the goodsC. sales contract is ignored since ownership over inventories are transferred only upon receipt of delivery by the buyerD. a journal entry is made only upon receipt…
Which of the following is not a difference between U.S. GAAP and IFRS treatment of impaired assets? Multiple Choice The use of discounted cash flow. Due to differences, U.S. GAAP may trigger an impairment loss that would not be triggered by IFRS. The right to reverse prior impairment losses when there is a change in the estimates used to measure the loss. In determining the valuation, costs to sell are deducted from fair value.
In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true? Multiple Choice Negative goodwill is recorded. A deferred credit is recorded. A gain on bargain purchase is recorded. Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as a deferred credit. Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values. Any excess is recorded as gain.