511 Final Exam Review questions with
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correct answers |
FIFO |- |correct |answer |ending |inventory |is |at |the |most |recent |purchase |prices, |while |COGS |is |at
|older |purchase |prices.
In |an |inflationary |economy: |Lowest |COGS |and |Highest |EI, |GP, |NI
LIFO |- |correct |answer |ending |inventory |is |at |the |oldest |purchase |prices, |while |COGS |is |at |more
|recent |purchase |prices.
In |an |inflationary |economy: |Highest |COGS |and |Lowest |EI, |GP, |NI
Average |Cost |- |correct |answer |Based |on |the |assumption |that |the |average |COGS |in |the |
beginning |inventory |and |the |goods |purchased |during |the |period |should |be |used |for |both |the |
ending |inventory |and |the |COGS
Net |Realizable |Value |(NRV) |- |correct |answer |The |non-discounted |amount |of |cash, |or |its |
equivalent, |into |which |an |asset |is |expected |to |be |converted |in |due |course |of |business |less |
direct |costs, |if |any, |necessary |to |make |that |conversion.
B/S |Approach |(preferable) |for |the |allowance |method |of |accounting |for |bad |debts |- |correct |
answer |Estimated |loss |is |based |on |outstanding |A/R |balance; |provides |a |better |estimate |of |
NRV.
I/S |Approach |for |the |allowance |method |of |accounting |for |bad |debts |- |correct |answer |
Estimated |loss |is |based |on |annual |sales; |does |not |measure |how |much |is |expected |to |be |
collected |from |the |outstanding |receivable, |rather, |it |measures |how |much |is |expected |to |be |
uncollectible |from |a |given |year's |sales; |provides |better |matching |(the |matching |concepts |
implies |that |revenues |should |be |matched |with |the |cost |of |generating |them)
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correct answers |
FIFO |- |correct |answer |ending |inventory |is |at |the |most |recent |purchase |prices, |while |COGS |is |at
|older |purchase |prices.
In |an |inflationary |economy: |Lowest |COGS |and |Highest |EI, |GP, |NI
LIFO |- |correct |answer |ending |inventory |is |at |the |oldest |purchase |prices, |while |COGS |is |at |more
|recent |purchase |prices.
In |an |inflationary |economy: |Highest |COGS |and |Lowest |EI, |GP, |NI
Average |Cost |- |correct |answer |Based |on |the |assumption |that |the |average |COGS |in |the |
beginning |inventory |and |the |goods |purchased |during |the |period |should |be |used |for |both |the |
ending |inventory |and |the |COGS
Net |Realizable |Value |(NRV) |- |correct |answer |The |non-discounted |amount |of |cash, |or |its |
equivalent, |into |which |an |asset |is |expected |to |be |converted |in |due |course |of |business |less |
direct |costs, |if |any, |necessary |to |make |that |conversion.
B/S |Approach |(preferable) |for |the |allowance |method |of |accounting |for |bad |debts |- |correct |
answer |Estimated |loss |is |based |on |outstanding |A/R |balance; |provides |a |better |estimate |of |
NRV.
I/S |Approach |for |the |allowance |method |of |accounting |for |bad |debts |- |correct |answer |
Estimated |loss |is |based |on |annual |sales; |does |not |measure |how |much |is |expected |to |be |
collected |from |the |outstanding |receivable, |rather, |it |measures |how |much |is |expected |to |be |
uncollectible |from |a |given |year's |sales; |provides |better |matching |(the |matching |concepts |
implies |that |revenues |should |be |matched |with |the |cost |of |generating |them)
