Question

Which of the following statements is true of the LIFO cost flow assumption

a. LIFO yields a higher net income than FIFO and averaging in a period of rising prices.

b. LIFO provides a better matching of current costs and expenses.

c. LIFO yields a higher cost of goods sold than other costing methods, in periods of falling prices.

d. LIFO yields a lower ending inventory than other costing methods, in periods of falling prices.

e. LIFO puts the earliest costs into cost of goods sold.

2). Which of the following statements is true?

a. The FIFO assumption is more in line with the matching principle.

b. In inflationary times, the LIFO assumption is associated with a higher reported net income.

c.The FIFO assumption is often used to reduce income tax costs.

d. The average method assumes most recent costs are transferred first to cost of goods sold.

e. The specific identification method physically identifies its remaining inventory.

3)In a period of rising prices, averaging yields a cost of goods sold that is:

a. between those yielded by FIFO and LIFO.

b. greater than the amount yielded by LIFO.

c. lesser than the amount yielded by FIFO.

d. equal to the amount yielded by FIFO.

e. equal to the amount yielded by LIFO.

4). Which of the following assumes that the most recent costs are transferred first from the inventory to cost of goods sold?

a. LIFO

b. FIFO

c. Specific identification

d. Weighted averaging

e. Moving averaging

5) In which of the following methods, the most recent costs of purchasing inventory remains in the ending inventory?

a. Moving averaging

b. FIFO

c. Specific identification

d. Weighted averaging

e. LIFO

6) Which of the following is true of the FIFO cost flow assumption?

a. In a period of rising prices, FIFO yields a higher cost of goods sold than other costing methods.

b. In a period of falling prices, FIFO yields a higher ending inventory than other costing methods.

c. In a period of falling prices, FIFO yields a higher net income than other costing methods.

d. In a period of rising prices, FIFO yields a lower net income than other costing methods.

e. In a period of rising prices, FIFO yields a higher ending inventory than other costing methods.

7) Which of the following accounts shows the cost of an asset expensed to date?

a. Equipment

b. Allowance for doubtful accounts

c. Depreciation expense

d. Accumulated depreciation

e. Land

8). What type of account is accumulated depreciation?

a. Equity

b. Contra asset

c. Liability

d. Expense

e. Loss

9) Which of the following accounts will be shown on the balance sheet with an accumulated depreciation account?

a. Prepaid rent

b. Building

c. Land

d. Cash

e. Goodwill

10). Which of the following is used to gauge the fair value of a business as a whole?

a. Fair value capitalization

b. Market capitalization

c. Market rationalization

d. Fair value rationalization

e. Market depreciation

11). Property and equipment are reported at its:

a. historical cost.

b. fair value.

c. book value.

d. depreciation cost.

e. market value.

12) Which of the following accounting principles dictates that an asset’s cost should be expensed over its useful life?

a. Matching

b. Conservatism

c. Consistency

d. Going concern

e. Revenue recognition

13) Which of the following accounting principles supports the use of historical cost for reporting fixed assets?

a. Matching

b. Conservatism

c. Consistency

d. Going concern

e. Revenue recognition

14) Which of the following is an intangible asset?

a. Accounts Payable

b. Retained Earnings

c. Equipme

d. Accounts Receivable

e. Franchise

15) In 2013, Book Creations Company published a management book and got it copyrighted in the same year. The legal life of the book is 15 years and estimated useful life is 10 years. For how many years should the cost of copyright be amortized?

a. 70 years

b. 15 years

c. 10 years

d. 12.5 years

e. 0 year

16) The intangible assets are amortized over:

a. the shorter of the legal life or estimated useful life.

b. the longer of the legal life or estimated useful life.

c. the economic life of the asset.

d. 10 years from the date of its purchase or creation.

e. 15 years from the date of its purchase or creation.

17) Which of the following is the grant of a property right to the inventor?

a. Copyright

b. Patent

c. Franchise

d. Trademark

e. Goodwill

18) Reclassifying the cost of an intangible asset to expense over a time period is termed as:

a. depreciation.

b. depletion.

c. amortization

d. appreciation.

e. allowance.

19). As per U.S. GAAP, which of the following is capitalized and amortized during the life of an intangible asset?

a. Legal cost for successful defense

b. Revenue earned from giving permission to use copyright

c. Difference between book value and fair value

d. Research costs

e. Development costs

20) The amount of change in the fair value of an investment classified as trading securities is:

a. reported as Investment Income or Investment Expense.

b. is taken into account only at the time of sale.

c. ignored unless permanent drop in value occurs.

d. included within stockholders’ equity section.

e. included in the net income.

21) Gain or loss on sale of trading securities is calculated as a difference between the sales price and the:

a. fair value or the original cost of the investment, whichever is greater.

b. cost plus portion of investee income.

c. cost less any dividends received.

d. carrying amount of the investment on the date of sale.

e. original cost of the investment.

22) Dividends received on trading securities are recorded with a:

a. debit to Investment in Trading Securities and credit to Unrealized Gain—Trading Securities.

b. debit to Cash and credit to Dividend Revenue.

c. debit to Cash and credit to Investment in Trading Securities.

d. debit to Cash and credit to Investment Income.

e. debit to Investment in Trading Securities and credit to Investment Income.

23) Which of the following is true concerning trading securities?

a. They are expected to be held for a long period of time.

b. They are recorded at historical cost on the acquisition date.

c. Dividends are not paid on them.

d. They are purchased to make the company look financially strong.

e. Unrealized gains and losses are reported in the stockholders’ equity section of the balance sheet.

24) Which of the following is a reason for reporting trading securities at their fair value?

a. Reporting securities at fair value improves its marketability

b. To make the company look financially strong

c. The value of the security may radically fluctuate

d. The owner may plan to hold the security for a long period of time

e. The fair value of the security can be objectively determined

Answer 1

Q1.
Answer is b. LIFO provides the better matching of cost and revenue
Q2.
Answer is e. Specific identification method physically identfies its remaining inventory.
Q3.
Answer is a. between those yielded by FIFO and LIFO
Q4.
Answer is a. LIFO
Q5.
Answer is b. FIFO
Q6.
Answer is e. in a period of rising prices, FIFO yields the higher ending inventory than other costing methods
Q7.
Answer is d. Accumulated depreciation
Q8.
Answer is b. contra asset
Q9.
Answer is b. Building
Q10.
Answer is a. Fair value capitalization.