1. Applying the lower of cost or net realizable value rule to individual items in inventory results in the highest cost of goods sold, the lowest inventory amount, and the lowest net income when compared with applying the rule to the inventory at an aggregate level.

True or False

2. One purpose of using LIFO is it reduces income taxes payable in during periods of when inventory prices are going down (deflation).

True or False

3. If inventory at the end of the year is understated by $40,000, what will this error cause?

A) An overstatement of gross profit for the year

B) An overstatement of total assets for the year

C) An overstatement of cost of goods sold for the year

D) All of the above would result from this error

E) None of the above would result from this error

4. Once sold, bonds can be traded in the market place similar to shares of stock. The prices of bonds fluctuate with interest rates. If the market interest rate of a bond increases, what happens to the market price of a bond?

A) The price decreases

B) The price increases

C) The price could increase or decrease

D) The price likely remains unchanged

5.

What dollar amount of additional PP&E did Plarimed acquire in 20x2? Use the following information to answer the question. Plarimed Corp. Plarimed Corp. Income Statement Balance Sheet 20X2 20X1 20X2 Revenue 8,500 Cash 200 180 Cost of Goods Sold -5,600 Accounts Receivable 1,650 1,625 Inventory 1,900 2,000 PPE 6,500 7,000 Depreciation -1,200 Expense Interest Expense -35 Income Tax -350 Expense Net Income 1,315 Accumulated Dep. -2,500 -3,000 Total Assets 7,750 7,805 900 80 1,700 Accounts Payable 850 Interest Payable 100 Notes Payable 1,500 Common Stock 2,500 Retained Earnings 2,800 Total 7,750 Liabilities+Equity 2,500 2,625 7,805