1. Which statement is true when the direct method is used to record inventory at net realizable value?*

A. A loss is recorded directly by crediting inventory

B. The net realizable value for ending inventory is substituted for cost and the loss is buried in cost of goods sold

C. There is a direct reduction in estimated selling price that results in a loss

D. Only the portion of loss attributable to inventory sold during the period is recorded.

2. The following are basic assumptions of the gross profit method except*

A. The total amount of purchases and the total amount of sales remain relatively unchanged from the comparable previous period.

B. The beginning inventory plus the purchases equal total goods to be accounted for.

C. Goods not sold must be on hand.

D. If the sales, reduced to the cost basis, are deducted from the sum of the opening inventory plus purchases, the result is the amount of inventory on hand.

3. DEE Inc. purchased 600 milking cows on January 1, 2020 for P2,700,000. During 2020, the change in fair value due to physical and price changed amounted is P45,000 and the change in fair value due to harvest is (P5,000). Milk harvested but not yet sold had a net realizable value of P125,000. What is the correct entry to record the net gain from the change in fair value of biological asset.*

A. Debit biological asset, credit gain from biological asset - P45,000

B. Debit biological asset, credit gain from biological asset - P165,000

C. Debit biological asset, credit gain from biological asset - P40,000

D. Debit inventory, credit gain from biological asset - P125,000

4.

Statement 1: A group of biological assets is an aggregation of dissimilar living plants and animals. Statement 2: In all cases, an entity measures agricultural produce at the point of harvest at its fair value less cost to sell. Statement 3: A gain or loss arising on initial recognition of a biological asset at fair value less cost to sell and from a change in fair value less cost to sell of a biological asset shall be included in the other comprehensive income for the period in which it arises Statement 1: If the contract price on a noncancelable purchase commitment exceeds the market price, the buyer should recognize a liability and corresponding loss in the period in which the market decline takes place. Statement 2: When a buyer enters into a formal, noncancelabie purchase contract, an asset and a liability are recorded at the inception of the contract