Question

1.

Held-to-muturity investments are reported at

A. maturity value.

B. amortized cost.

C. fair value.

D. acquisition cost.

2.

Ace Bonding Company purchased merchandise inventory on account and it uses perpetual inventory system. The inventory costs $2,000 and is expected to sell for $3,000. Which account will Ace debit to?

A. Purchases

B. Cost Of Goods Sold

C. Inventory

D. Accounts Receivable

3.

If Top Company owns 5% of the ordinary shares of Bon Company, then Top Company typically:

A. Would record 5% of the net income of Bon Company as investment income each year.

B. Would record dividends received from Bon Company as reduction in its investment account.

C. Would increase its investment account by 5% of Bon Company income each year.

D. None of the above

4.

Retrospective treatment of prior years' financial statements is required when there is a change from:

A. Average cost to FIFO.

B. FIFO to average cost.

C. LIFO to average cost.

D. All of the above.

5.

When using the gross profit method to estimate ending inventory, it is not necessary to know:

A. Net purchases.

B. Accounts payable.

C. Gross profit ratio.

D. Cost of goods sold.

Answer 1