1.

Given equal circumstances, which inventory method would probably be the most time-consuming?

FIFO

LIFO

Average-cost

Specific identification

2.

The retained earnings statement shows all of the following except

the causes of changes in retained earnings during the period.

the time period following the one shown for the income statement.

the amounts of changes in retained earnings during the period.

beginning retained earnings on the first line of the statement.

3.

As the president of Harter Company, you notice that no discounts have been taken when settling accounts payables. What would be an acceptable explanation?

There is not sufficient cash to pay within the discount period.

All invoices have credit terms of n/30.

Discounts are missed because no one knows how to enter them in the new accounting software.

The full amount of the invoice is being paid within the discount period and the treasurer is pocketing the discount amount.

4.

The relationship between current assets and current liabilities is important in evaluating a company's

market value.

solvency.

profitability.

liquidity.

5.

All of the following statements regarding the financial statement presentation of receivables are true except:

Short-term receivables are reported above the short-term investments in the balance sheet.

The gross amount of receivables less the allowance for doubtful accounts is equal to the net receivables.

Short-term receivables are reported in the current assets section of the balance sheet.

Companies report bad debts expense under "Selling Expenses" in the operating expenses section of the income statement.

6.

All of the following are true regarding financial statement analysis ratios associated with liabilities except

if a company's current ratio is lower than the industry average, then it may lack liquidity.

high liquidity ratios mean that lines of credit should be high to compensate.

a high times interest earned ratio indicates that a company is more likely to meet interest payments as scheduled.

unrecorded obligations causing sizeable differences between liquidity and solvency ratios can be ignored.