1. Exhibit 8-1 Rival Inc. uses the lower of cost or market rule in valuing its inventory. Assume the company uses the LIFO method and that one unit has a ceiling constraint of $45.50. The following is other information concerning this unit:

Estimated transportation costs for delivery	$3.90
Normal profit margin	7.50
Packaging costs prior to delivery	3.40

Refer to Exhibit 8-1. The selling price of this unit must be

$49.10

$49.30

$52.80

$53.00

2. A purchase on credit is recorded twice and not corrected during the year-end physical inventory. Which of the following statements correctly describes the impact of this error?

The current year balance sheet ending inventory and accounts payable are understated.

3. The ability to utilize financial resources and to adapt to changes in the business environment is referred to as a company's financial flexibility.

True

False

4. The FASB is concerned with the accurate portrayal of liquidity because users evaluate future cash flows in their decision making practices.

True

False

5. Which of the following is not a characteristic of a liability?

The company has no discretion to avoid the future sacrifice.

The obligating event has already happened.

It will be settled by a future transfer of assets.

All of these choices are characteristics of a liability.