Question

1.Non-monetary transactions where there is an exchange of similar assets should normally be recorded at:

A. Fair market value of asset given up.

B. Fair market value of asset received.

C. Book value of asset given up.

D. Book value of asset received.

2.On March 1 a sale is made and the customer has a right to return the good which expires April 29. There is no ability to predict the amount of returns.

A. A sale would be recorded on March 1.

B. Inventory would not be reduced until April 29.

C. An asset of Right to Recovery would be recorded on March 1.

D. An account receivable would be recorded on April 29.

3.

Which of the following operations ideally should not be performed by the same person?

A. Prepare journal entries and bank reconciliations.

B. Order departmental supplies, file correspondence, type memos, and type cheques.

C. Receive invoices from suppliers, compare invoices to purchase orders, and prepare cheque requisitions for payment to suppliers.

D. Type, sign, and mail cheques, and prepare the bank reconciliation.

Answer 1

1. Option - B, Fair market value of asset received.

Explnation : In case of commercial substance we should record exchange of similar assets should normally be at ' Fair market value of asset received'.

2. Option - A, A sale would be recorded on March 1.

Explnation : Right of return is a insignificant risk due to which revenue is not delayed provided return is reliably estimated and recognises as liability. In this case, return is not reliably estimated, hence sale is recorded on the same date on which performance is complete i.e. March 1.

3. Option - D, Type, sign, and mail cheques, and prepare the bank reconciliation.

Explnation: All the work is done by same person except the sign.