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Question 4 (40 marks) Requirement: Choose the best answer for each of the following questions Which of the following inventory costing methods yields the lowest
Question 4 (40 marks)
Requirement:Choose the best answer for each of the following questions
- Which of the following inventory costing methods yields the lowest net income during a period of rising inventory costs?
- specific identification
- last-in, first-out
- weighted-average
- first-in, first-out
- ----------- A measure of how quickly an asset may be converted into cash.
- Materiality Concept
- Cash Basis Accounting
- Accrual Basis Accounting
- Liquidity
- -----------Records revenues when earned and expenses when incurred.
- Materiality Concept
- Accrual Basis Accounting
- Time Period Concept
- Liquidity
- ----------- A business's activities can be divided into small segments and that financial statements can be prepared for specific periods, such as a month, quarter, or year.
- Materiality Concept
- Accrual Basis Accounting
- Time Period Concept
- Liquidity
- ----------- A company must perform strictly proper accounting only for significant items.
- Materiality Concept
- Cash Basis Accounting
- Accrual Basis Accounting
- Time Period Concept
- ----------- Is an asset account that is used only for goods purchased that the business owns and intends to resell to customers.
- Materiality Concept
- Perpetual Inventory System
- Merchandise Inventory account
- Cash Basis Accounting
- At May 1, 2017, Deitrich Company had beginning inventory consisting of 300 units with a unit cost of 3.50. During May, the company purchased inventory as follows:
600 units at 3.50
900 units at 4.00
The company sold 1,500 units during the month for 6 per unit. Deitrich uses the average-cost method. The average cost per unit for May is
- 3.50.
- 3.75.
- 3.80.
- 4.00.
- ----------- An inventory system that keeps a running computerized record of merchandise
- Perpetual Inventory System
- Merchandise Inventory account
- Cash Basis Accounting
- Accrual Basis Accounting
- Revenue is earned when the business has ________.
- entered into an agreement with the customer about the goods or services to be delivered
- prepared a journal entry to record revenue
- received cash from the customer before goods or services are delivered
- delivered a good or service to the customer
- The goal of reporting realistic figures and never overstating assets or net income applies to the ________.
- materiality concept
- conservatism principle
- disclosure principle
- consistency principle
- ABC Company earned revenues of $19,000 and incurred expenses of $4,000. The company declared and paid cash dividends of $1,500. What is the balance in the Income Summary account after closing net income or loss to the Retained Earnings account?
- debit balance of $19,000
- credit balance of $4,000
- credit balance of $15,000
- balance of $0
- An invoice of $600 for merchandise purchased is showing 3/15, n/30 as terms of credit. If the invoice is paid on or before the fifteenth day, the amount to be paid is ________.
- $582
- $600
- $618
- $621
- A company purchased inventory for $73,000 from a vendor on account, FOB shipping point, with terms of 4/10, n/30. The company paid the shipper $1,500 cash for freight in. The company paid the vendor nine days after the sale. If there was no beginning inventory, the cost of inventory would be ________. (Assume a perpetual inventory system.)
- $71,580
- $74,500
- $68,580
- $71,500
- Quality Jewelers uses the perpetual inventory system. On April 2, Quality sold merchandise for $60,000 to a customer on account with terms of 2/15, n/30. The allowances and returns on this sale amounted to $10,000. The cost of goods sold was $23,000. On April 20, Quality received payment from the customer. Calculate the amount of gross profit.
- $50,000
- $23,000
- $27,000
- $25,800
- Which of the following accounting elements does the matching principle help to match?
- revenues and liabilities
- expenses and assets
- expenses and revenues
- expenses and liabilities
- Unearned Revenue is classified as a(n) ________ account.
- liability
- asset
- revenue
- Equity
- Ted's Used Cars uses the specific identification method of costing inventory. During March, Ted purchased three cars for $8,000, $10,000, and $13,000, respectively. During March, two cars are sold for $11,000 each. Ted determines that at March 31, the $13,000 car is still on hand. What is Teds gross profit for March?
- $3,000.
- $4,000.
- $1,000.
- $9,000.
- Prepaid insurance is classified as a(n) ________ account.
- liability
- asset
- revenue
- Equity
- The following contains information from the records of XYZ Company.
XYZ Company
Selected Financial Information
December 31, 2017
Current Assets | $90,000 |
Current Liabilities | 30,000 |
Long-Term Assets | 95,000 |
Long-Term Liabilities | 65,000 |
Total Revenues | 50,000 |
Total Expenses | 37,000 |
Calculate the current ratio. (Round your answer to two decimals.)
- 1.46
- 3.00
- 0.64
- 2.28
- Which of the following statements is correct with respect to inventories?
- The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.
- It is generally good business management to sell the most recently acquired goods first.
- Under FIFO, the ending inventory is based on the latest units purchased.
- FIFO seldom coincides with the actual physical flow of inventory.
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