Question : 5.5   Questions 1) An example of full disclosure would be a : 1232302

 

5.5   Questions

 

1) An example of full disclosure would be a footnote to the financial statements indicating what method was used to value inventory.

 

2) Knowledgeable decisions that are made by outsiders who read financial reports are a result of the concept of conservatism.

 

3) Shrinkage refers to the loss of inventory due to theft, damage or other similar occurrences.

4) If shrinkage is found for $500, an adjusting entry would be made as follows:

A) debit Inventory for $500; credit Cost of Goods Sold for $500.

B) debit Inventory for $500; credit Sales Returns and Allowances for $500.

C) debit Cost of Goods Sold for $500; credit Inventory for $500.

D) debit Sales Returns and Allowances for $500; credit Inventory for $500.

 

5) The ending physical inventory count revised for adjustments is listed on the balance sheet as a:

A) current asset before Accounts Receivable.

B) current asset after Accounts Receivable.

C) long-term asset.

D) current asset immediately after cash.

 

6) Which of the following is often used when taking a physical inventory?

A) Pre-numbered count sheets

B) Tags to show what inventory has been counted

C) Maps of the location of the inventory

D) All of the above

 

7) If the inventory shows an actual count of $350 and the perpetual inventory according to the records shows $339, the adjusting entry for the $11 would:

A) debit Cost of Goods Sold; debit Purchase Returns and Allowances.

B) debit Cost of Goods Sold; credit Inventory.

C) debit Inventory; credit Cost of Goods Sold.

D) debit Inventory; credit Purchase Returns and Allowances.

8) Footnotes are used with what concept or principle of accounting?

A) Conservatism

B) Consistency

C) Materiality

D) Full disclosure

 

9) Which is usually NOT a common practice in taking a physical inventory?

A) Taking inventory during slow store hours

B) Hiring an outside firm

C) Taking inventory during the November and December holidays

D) Taking inventory in team of two persons

 

10) Which account would always be used for an inventory adjustment?

A) Sales

B) Purchase Returns and Allowances

C) Cost of Goods Sold

D) Cash

 

11) Which is NOT an assurance of footnote disclosures?

A) Conservative information

B) Reliable information

C) Comparable information

D) Relevant information

12) Which of the following would probably NOT need to be disclosed in a footnote?

A) Change of inventory methods

B) A material change in estimated shrinkage

C) A change in depreciation method

D) A 10% increase in sales

 

13) Which of the following would cause inventory shrinkage?

A) Employee theft

B) Spoilage of items

C) Spills of items

D) All of the above

 

14) Making notes in the financial statements to explain the justification of valuation changes and other financial decisions would be an example of:

A) conservatism.

B) consistency.

C) materiality.

D) full disclosure.

 

 

 

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