Question :
1.Of the following items, the one that should be classified : 1242791
1.Of the following items, the one that should be classified as a current asset is
a.Trade installment receivables normally collectible in 18 months
b.Cash designated for the redemption of callable preferred stock
c.Cash surrender value of a life insurance policy of which the company is beneficiary
d.A deposit on machinery ordered, delivery of which will be made within six months
2.The advantage of relating a company’s bad debt experience to its accounts receivable is that this approach
a.Gives a reasonable correct statement of receivables in the balance sheet
b.Relates bad debts expense to the period of sale
c.Is the only generally accepted method for valuing accounts receivable
d.Makes estimates of uncollectible accounts unnecessary
3.Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because
a.Most short-term receivables are not interest bearing
b.The allowance for uncollectible accounts includes a discount element
c.The amount of the discount is not material
d.Most receivables can be sold to a bank or factor
4.An account that would be classified as a current liability is
a.Dividends payable in stock
b.Accounts payable – debit balance
c.Reserve for possible losses on purchase commitments
d.Excess of replacement cost over LIFO cost of basic inventory temporarily liquidated
5.Jamison Corporation’s inventory cost on its statement of financial position was lower using first-in, first-out than last-in, first-out. Assuming no beginning inventory, what direction did the cost of purchases move during the period?
a.Up
b.Down
c.Steady
d.Cannot be determined
6.If inventory levels are stable or increasing an argument that favors the FIFO method as compared to LIFO is
a.Income taxes tend to be reduced in periods of rising prices
b.Cost of goods sold tends to be stated at approximately current cost in the income statement
c.Cost assignments typically parallel the physical flow of the goods
d.Income tends to be smoothed as prices change over time
7.An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is
a.FIFO
b.LIFO
c.Conventional retail
d.Weighted average
8.When inventory declines in value below original (historical) cost, and this decline is considered other than temporary, what is the maximum amount that the inventory can be valued at?
a.Sales price net of conversion costs
b.Net realizable value
c.Historical cost
d.Net realizable value reduced by a normal profit margin
9.Which of the following inventory cost flow methods involves computations based on broad inventory pools of similar items?
a.Regular quantity of goods LIFO
b.Dollar-value LIFO
c.Weighted average
d.Moving average
10.When the allowance method of recognizing bad debt expense is used, the entries at the time of collection of an account previously written off would
a.Increase net income
b.Have no effect on total current assets
c.Increase working capital
d.Decrease total current liabilities
