Question 1

Which of the following inventory cost flow methods involves computations based on broad inventory pools of similar items?

Accepted Answer

A)  Regular quantity of goods LIFO
B)  Dollar-value LIFO
C)  Weighted average
D)  Moving averageE) All of the above
F) A) and B)

Question 2

The original cost of an inventory item is above the replacement cost.The replacement cost is below the net realizable value less the normal profit margin.Under the lower of cost or market method the inventory item should be priced at its

Accepted Answer

A)  Original cost
B)  Replacement cost
C)  Net realizable value
D)  Net realizable value less the normal profit marginE) C) and D)
F) B) and C)

Question 3

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

Accepted Answer

A)  Increase net income
B)  Have no effect on total current assets
C)  Increase working capital
D)  Decrease total current liabilitiesE) C) and D)
F) B) and D)

Question 4

Of the following items,the one that should be classified as a current asset is

Accepted Answer

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 monthsE) All of the above
F) B) and C)

Question 5

The net realizable value of receivables is calculated as the face value of the receivables less adjustments for

Accepted Answer

A)  Credit sales
B)  Actual uncollected amounts adjusted for purchase discounts.
C)  Bad debts already written off.
D)  Estimated uncollectible accountsE) A) and D)
F) B) and D)

Question 6

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

Accepted Answer

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 factorE) C) and D)
F) A) and C)

Question 7

Working capital is a measure of

Accepted Answer

A)  Financial flexibility
B)  Liquidity.
C)  Profitability.
D)  Solvency.E) None of the above
F) A) and B)

Question 8

The total amount of working capital is

Accepted Answer

A)  $155,000.
B)  $145,000.
C)  $60,000.
D)  $150,000.E) A) and B)
F) B) and C)

Question 9

Define working capital.

Accepted Answer

Working capital is the net sho...

Question 10

An account that would be classified as a current liability is

Accepted Answer

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 liquidatedE) B) and D)
F) B) and C)

Question 11

Discuss the perpetual vs.the periodic methods of accounting for inventories.

Accepted Answer

Businesses that issue audited financial ...

Question 12

Liquidity is the ability

Accepted Answer

A)  To increase net assets through regular operations
B)  To generate cash from sources other than regular operations
C)  To convert existing assets into cash
D)  Of financial statement users to predict a company's cash flowsE) A) and B)
F) All of the above C

Question 13

The advantage of relating a company's bad debt experience to its accounts receivable is that this approach

Accepted Answer

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 unnecessaryE) None of the above
F) A) and B)

Question 14

Liquidity ratios measures the

Accepted Answer

A)  Operating success of a company over a period of time
B)  The ability of a company to survive over a long period of time
C)  The short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash
D)  The number of times interest is earnedE) None of the above
F) B) and C)

Question 15

An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is

Accepted Answer

A)  FIFO
B)  LIFO
C)  Conventional retail
D)  Weighted averageE) A) and B)
F) B) and C)

Question 16

The current ratio is

Accepted Answer

A)  1.86 : 1.
B)  2.00 : 1.
C)  3.38 : 1.
D)  2.93 : 1.E) B) and D)
F) C) and D)

Question 17

If inventory levels are stable or increasing an argument that favors the FIFO method as compared to LIFO is

Accepted Answer

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 timeE) None of the above
F) C) and D) C

Question 18

A common measure of liquidity is

Accepted Answer

A)  Return on assets.
B)  Accounts receivable turnover.
C)  Profit margin.
D)  Debt to equity.E) C) and D)
F) None of the above B

Question 19

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?

Accepted Answer

A)  Sales price net of conversion costs
B)  Net realizable value
C)  Historical cost
D)  Net realizable value reduced by a normal profit marginE) All of the above
F) B) and D)

Question 20

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?

Accepted Answer

A)  Up
B)  Down
C)  Steady
D)  Cannot be determinedE) None of the above
F) All of the above

Exam 8: Working Capital

Which of the following inventory cost flow methods involves computations based on broad inventory pools of similar items?

Correct AnswerverifiedShow Answer

The original cost of an inventory item is above the replacement cost.The replacement cost is below the net realizable value less the normal profit margin.Under the lower of cost or market method the inventory item should be priced at its

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Of the following items,the one that should be classified as a current asset is

Correct AnswerverifiedShow Answer

The net realizable value of receivables is calculated as the face value of the receivables less adjustments for

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Working capital is a measure of

Correct AnswerverifiedShow Answer

The total amount of working capital is

Correct AnswerverifiedShow Answer

Define working capital.

Correct AnswerverifiedWorking capital is the net sho...View AnswerShow Answer

An account that would be classified as a current liability is

Correct AnswerverifiedShow Answer

Discuss the perpetual vs.the periodic methods of accounting for inventories.

Correct AnswerverifiedBusinesses that issue audited financial ...View AnswerShow Answer

Liquidity is the ability

Correct AnswerverifiedC

The advantage of relating a company's bad debt experience to its accounts receivable is that this approach

Correct AnswerverifiedShow Answer

Liquidity ratios measures the

Correct AnswerverifiedShow Answer

An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is

Correct AnswerverifiedShow Answer

The current ratio is

Correct AnswerverifiedShow Answer

If inventory levels are stable or increasing an argument that favors the FIFO method as compared to LIFO is

Correct AnswerverifiedC

A common measure of liquidity is

Correct AnswerverifiedB

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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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Working capital is the net sho...
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Businesses that issue audited financial ...
View Answer

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C

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C

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B

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