In case Company A asks for some loan from Burgan Bank to be paid back in 5 equal installments in the coming 5 years, as a creditor Burgan Bank needs to conduct only liquidity analysis on the financial statements of Company A.

True /False

On December 31, 2020 Best Al Yousifi sold a printer to Ahmad for 300 KWD. Ahmad paid 150 KWD and promised to pay the remaining in the coming month and left the shop with his new laptop. Best Al Yousifi trusts Ahmad as he is a regular customer. Note that the cost of printer to Best Al Yousifi is 120 KWD. You are now analyzing 2020 year end financial reports of Best Al Yousifi.

Which of the followings seems to be correct?

a.

In the 2020 Income Statement, Total Revenue should include 300 KWD from the printer sales to Ahmad and COGS should include 120 KWD.

b.

In the 2020 Income Statement, Total Revenue should include 150 KWD from the printer sales to Ahmad but COGS should include 120 KWD.

c.

There should be only 60 KWD addition to the COGS account in the 2020 Income Statement from the printer sales to Ahmad.

d.

30 KWD of the Net Income in the 2020 Income Statement should come from the printer sales to Ahmad.

e.

There should be only 150 KWD addition to the Total Revenue account in the 2020 Income Statement from the printer sales to Ahmad.

There is no difference between the levels of risk that investors and creditors are taking by investing or lending money to the companies respectively.

True /False

On December 31, 2020 Company A purchased a car for 5,000 KWD from Company B. The car will be used in the logistics operations. Company A paid half of the amount in advance and the remaining amount will be paid in the coming 6 months. In the end of the day accountants prepared the balance sheet and showed the new car in the Inventory account as part of the Current Assets, and showed the unpaid 2,500 KWD due to Company B in the Accounts Receivables as part of the Non-Current Liabilities.

Which of the followings is incorrect?

a.

This transaction increased the both sides of the Balance Sheet with an equal amount.

b.

Accountants of Company A should show the new car in the Vehicles instead of Inventory.

c.

Accountants of Company A should show the amount due to Company B in Accounts Payable.

d.

Accountants of Company A should show the amount due to Company B as part of Current Liabilities.

e.

Accountants of Company A should not show the new car as part of the Current Assets.

Changing useful life from 20 years to 50 years in the 2nd year of an administrative building leads to an increase in the depreciation expense starting from the current year, thus, to a decrease in the net income that ruins the comparability of financial reports. (Note that company uses straight line depreciation method)

True /False