Problem 1. Which of the following terms best describes the assumption made in applying the four inventory methods?
- Cost flow
- Goods flow
- Asset flow
- Physical flow
Problem 2. An understatement of year 1's beginning inventory will:
- Cause year 2's margin to be overstated
- Cause year 1's cost of goods sold to be understated
- Cause year 2's gross margin to be understated
- Have no effect on year 1's gross margin
Problem 3. A retail store has goods available for sale of $2 million at retail and $1,100,000 at cost, and ending inventory of $160,000 at retail. What is the estimated cost of ending inventory?
- $128,000
- $160,000
- $110,000
- $88,000
Problem 4. In a period of rising prices, which inventory method is best to use for tax purposes?
- FIFO
- Average cost
- Specific Identification
- LIFO
Problem 5. Cash consists of all of the following except.
- Deposits in savings accounts
- Money orders from customers
- Compensating balances
- IOU's from customers
Problem 6. An NSF check should appear in which section of the bank reconciliation?
- Deduction from the balance per books
- Deductions from the balance per banks
- Addition to the balance per books
- Addition to the balance per bank
Problem 7. The matching rule
- Results in the recording of a known amount for bad-debt losses
- Necessitates the recording of an estimated amount for bad debts
- Requires that all bad-debt losses be recorded when an individual
- customer defaults
- Is violated when the allowance method is employed
Problem 8. One might infer from a debt balance in Allowance for Uncollectable Accounts that
- A posting error has been made
- Uncollectable Accounts Expense has been overestimated
- The accounts receiving aging method apparently being used
- More has been written off than had been estimated