Chapter 8

Question 1

If gross profit is 40%…

Answer 1

COGS is 60%

Question 2

Purchase discount lost

Answer 2

• it is used with the net method (of measuring of the cost of inventory) - has a debit balance and is reported in the OTHER EXPENSES section of the IS - journal entry:

Dr. Purchases 8000

Dr. Purchase Discount Lost 2,000

Cr. Cash 10,000

Question 3

Current Ratio = short term debt paying ability

Answer 3

Current Assets /Current Liabilities

Question 4

Indirect method to writte of the inventory

Answer 4

A method used to revalue inventory to reflect net realizable value under the LC&NRV method whereby a contra Inventory account is used to revalue inventory

Question 5

Direct method

Answer 5

A method of recording inventory used when
revaluing inventory to reflect net realizable value under
the LC&NRV method where the Inventory account is
revalued.

Question 6

debt-to-total-assets ratio

(pecentage of total assets provided by creditors)

Answer 6

Total Debt/Total Assets

Question 7

Rate of return on Assets

(overall profitability of assets)

Answer 7

Net Income/Average total Assets

Question 8

How do you report a loss from a fire?

ASPE vs IFRS

Answer 8

ASPE - extraordinary loss

IFRS - loss from fire

Question 9

Capitalizing borowing costs

Answer 9

to inventory (IFRS)

ASPE does not require it

Question 10

you write down inventory when…

Answer 10

the decline happens, not when is disposed