Question 1

A successful discount retail store such as Wal-Mart would probably have
a.A low inventory turnover
b.A high inventory turnover
c.Zero profit margin
d.Low volume

Accepted Answer

b Use the following information to Answer: questions Acme Auto Supplies Balance Sheet December 31,2007 Cash $ 60,000 Accounts Payable $ 65,000 Prepaid Insurance 40,000 Salaries Payable 10,000 Accounts Receivable 50,000 Mortgage Payable 90,000 Inventory 70,000 Total Liabilities $165,000 Land held for investment 80,000 Land 95,000 Building $100,000 Common Stock $120,000 Less Accumulated Retained Earnings 250,000 Depreciation 30,000) 70,000 Total stockholders' equity $370,000 Trademark 70,000 Total Liabilities and Total Assets $535,000 Stockholders' Equity $535,000

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 margin 
A) Original cost 
B) Replacement cost 
C) Net realizable value 
D) Net realizable value less the normal profit margin D

Question 3

Define working capital.

Accepted Answer

Working capital is the net short-term investment needed to carry on day-to-day activities.It is calculated: current assets - current liabilities.

Question 4

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 time 
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

Question 5

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 earned 
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 earned

Question 6

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 unnecessary 
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

Question 7

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

Question 8

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

Accepted Answer

Businesses that issue audited financial

Question 9

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 determined 
A) Up 
B) Down 
C) Steady 
D) Cannot be determined

Question 10

A common measure of liquidity is

Accepted Answer

A) Return on assets. 
B) Accounts receivable turnover. 
C) Profit margin. 
D) Debt to equity. 
A) Return on assets. 
B) Accounts receivable turnover. 
C) Profit margin. 
D) Debt to equity.

Question 11

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 margin 
A) Sales price net of conversion costs 
B) Net realizable value 
C) Historical cost 
D) Net realizable value reduced by a normal profit margin

Question 12

The total amount of working capital is

Accepted Answer

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

Question 13

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 average 
A) Regular quantity of goods LIFO 
B) Dollar-value LIFO 
C) Weighted average 
D) Moving average

Question 14

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 factor 
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

Question 15

The current ratio is

Accepted Answer

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

Question 16

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 flows 
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 flows

Question 17

Working capital is a measure of

Accepted Answer

A) Financial flexibility 
B) Liquidity. 
C) Profitability. 
D) Solvency. 
A) Financial flexibility 
B) Liquidity. 
C) Profitability. 
D) Solvency.

Question 18

The net realizable value of receivables is calculated as the face value of the receivables less adjustments for
a.Credit sales
b.Actual uncollected amounts adjusted for purchase discounts.
c.Bad debts already written off.
d.Estimated uncollectible accounts

Accepted Answer

a.Credit sales b.Actual uncoll

Question 19

Which of the following statements is not valid as it applies to inventory costing methods?

Accepted Answer

A) If inventory quantities are to be maintained,part of the earnings must be invested plowed back)in inventories when FIFO is used during a period of rising prices. 
B) LIFO tends to smooth out the net income pattern,since it matches current cost of goods sold with current revenue,when inventories remain at constant quantities. 
C) When a firm using the LIFO method fails to maintain its usual inventory position reduces stock on hand below customary levels),there may be a matching of old costs with current revenue. 
D) The use of FIFO permits some control by management over the amount of net income for a period through controlled purchases,which is not true with LIFO. 
A) If inventory quantities are to be maintained,part of the earnings must be invested plowed back)in inventories when FIFO is used during a period of rising prices. 
B) LIFO tends to smooth out the net income pattern,since it matches current cost of goods sold with current revenue,when inventories remain at constant quantities. 
C) When a firm using the LIFO method fails to maintain its usual inventory position reduces stock on hand below customary levels),there may be a matching of old costs with current revenue. 
D) The use of FIFO permits some control by management over the amount of net income for a period through controlled purchases,which is not true with LIFO.

Question 20

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 liquidated 
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

A successful discount retail store such as Wal-Mart would probably have a.A low inventory turnover b.A high inventory turnover c.Zero profit margin d.Low volume

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

Define working capital.

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

Liquidity ratios measures the

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

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

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

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 common measure of liquidity is

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?

The total amount of working capital is

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

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

The current ratio is

Liquidity is the ability

Working capital is a measure of

The net realizable value of receivables is calculated as the face value of the receivables less adjustments for a.Credit sales b.Actual uncollected amounts adjusted for purchase discounts. c.Bad debts already written off. d.Estimated uncollectible accounts

Which of the following statements is not valid as it applies to inventory costing methods?

An account that would be classified as a current liability is

The Development of Accounting Theory

The Pursuit of the Conceptual Framework

International Accounting

Research Methodology and Theories on the Uses of Accounting Information

Income Concepts,revenue Recognition and Matching

Financial Statement I: the Income Statement

Financial Statements Ii: the Balance Sheet and the Statement of Cash Flows

Long-Term Assets I: Property,plant,and Equipment

Long-Term Assets Ii: Investments and Intangibles

Long-Term Liabilities

Accounting for Income Taxes

Leases

Pensions and Other Postretirement Benefits

Equity

Accounting for Multiple Entities

Financial Reporting Disclosure Requirements and Ethical Responsibilities

Filters

Exam 8: Working Capital

A successful discount retail store such as Wal-Mart would probably have a.A low inventory turnover b.A high inventory turnover c.Zero profit margin d.Low volume

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

Define working capital.

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

Liquidity ratios measures the

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

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

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

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 common measure of liquidity is

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?

The total amount of working capital is

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

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

The current ratio is

Liquidity is the ability

Working capital is a measure of

The net realizable value of receivables is calculated as the face value of the receivables less adjustments for a.Credit sales b.Actual uncollected amounts adjusted for purchase discounts. c.Bad debts already written off. d.Estimated uncollectible accounts

Which of the following statements is not valid as it applies to inventory costing methods?

An account that would be classified as a current liability is

The Development of Accounting Theory

The Pursuit of the Conceptual Framework

International Accounting

Research Methodology and Theories on the Uses of Accounting Information

Income Concepts,revenue Recognition and Matching

Financial Statement I: the Income Statement

Financial Statements Ii: the Balance Sheet and the Statement of Cash Flows

Long-Term Assets I: Property,plant,and Equipment

Long-Term Assets Ii: Investments and Intangibles

Long-Term Liabilities

Accounting for Income Taxes

Leases

Pensions and Other Postretirement Benefits

Equity

Accounting for Multiple Entities

Financial Reporting Disclosure Requirements and Ethical Responsibilities

Filters