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QUESTION 1 Concerning accounting for warranties, which of the following statements is true? The expense warranty accrual method is the only method accepted for federal

QUESTION 1

Concerning accounting for warranties, which of the following statements is true?

The expense warranty accrual method is the only method accepted for federal income tax purposes.

The modified cash basis is the method used for for tax reporting.

The sales warranty accrual method uses a percentage of completion approach to warranty revenue recognition.

The modified cash basis recognizes warranty expense when cash is received on the sale.

QUESTION 2

Which of the following is the most appropriate way to display liabilities on the balance sheet?

nearness to maturity

relative likelihood of payment

alphabetically by payee

all of the above

QUESTION 3

Which of the following would not be an acceptable method of presenting current liabilities on the balance sheet?

alphabetically

in order of their average time to maturity

in order of their liquidation preference

in order of their amount (largest to smallest)

QUESTION 4

Which of the following statements is not true?

Loss contingencies should be disclosed if there is just a reasonable possibility of a loss.

Indirect guarantees should normally be disclosed by footnote, not by accrual.

In the case of loss contingencies, accrual can be made even if the exact payee and payment date are not known.

Losses may be accrued for unasserted claims and other potential unfiled lawsuits.

QUESTION 5

The operating cycle is typically defined as the time it requires to convert

cash to inventory to receivables

raw materials to finished goods

finished goods to receivables to cash

cash to inventory to receivables to cash

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