mcq

Question 1

Should you include the insurance premium for shipping consignment goods in inventory costs?

Answer 1

Yes, its included because its a necessary cost to bring the goods to their location.

Question 2

How should advanced commission on goods held on consignment be recorded?

Answer 2

as a pre paid expense, NOT part of inventory cost

Question 3

Inventory Turnover =

Answer 3

Cost of goods sold / average inventory

Question 4

When calculating for the gain/loss on an equity security when sold should you include the brokerage commission and taxes in the loss amount?

Answer 4

Yes, it should be included.

Question 5

In a troubled debt restructuring when calculating the gain to be reported should you use the fair value or the carrying value?

Answer 5

the fair value

Question 6

how do you calculate the unrealized profit regarding consolidated financial statements?

Answer 6

inter-company profit on inventory x % of inventory still on hand

Question 7

when calculating COGS should you include freight out or freigt in?

Answer 7

You should include freight in but dont include freight out

Question 8

Debenture bonds are

Answer 8

unsecured bonds

Question 9

serial bonds are

Answer 9

redeemed pro-rata over the life of the issue

Question 10

When an investment is classified under the equity method investment income is equal to

Answer 10

the investors proportional share of net income

Question 11

a firm can capitalize interest on assets when

Answer 11

special order goods are held for customers

Question 12

what are the 3 conditions that are necessary to begin capitalizing interest?

Answer 12

1. expenditures for the building have been made
2. interest cost is being incurred
3. permits have been filed

Question 13

when calculating the operating cash flows if there is a increase in a Asset you should:

Answer 13

subtract it from net income

Question 14

when calculating the operating cash flows if there is a decrease in a Asset you should:

Answer 14

add it to net income

Question 15

when calculating the operating cash flows if there is a decrease in a liability you should:

Answer 15

subtract it from net income

Question 16

when calculating the operating cash flows if there is a increase in a liability you should:

Answer 16

add it to net income

Question 17

COGS formula =

Answer 17

beginning inventory
(+) purchases
(-) ending inventory
_______________________
COGS

Question 18

When figuring out the market value of inventory how do you do it?

Answer 18

Its the middle amount of these 3 things :
Replacement cost:
Market ceiling- which is net realizable value
Market floor - which is = market ceiling - (selling price * profit margin)

Question 19

NRV =

Answer 19

selling price less cost to complete and sell
(including cost of disposal)

Question 20

periodic inventory system is

Answer 20

only counted at the end of each period

Question 21

4 step approach of determining Dollar-value LIFO

Answer 21

step 1) determine the ending inventory at base year
step 2) determine the increase without inflation (base year)
step 3) determine the dollar value lifo layer
step 4) determine the ending dollar value LIFO inventory

Question 22

When a material “infrequent in occurrence” and/or “unusual in nature” should be presented

Answer 22

separately as a component of “income from continuing operations” when the transaction results in a gain or loss.

Question 23

what are the steps to follow when calculating the amount of profit to be recognized for a long-term contract that is not fully completed

Answer 23

Step 1) compute the gross profit of the total contract
step 2) compute % of completion
step 3) compute gross profit earned to date

Question 24

when calculating the parents % of a subsidiary’s earnings you need to:

Answer 24

multiply the net income x % of ownership

Question 25

when a purchase option is given with a lease you need to

Answer 25

capitalize it (PV of of 1)

Question 26

Under the percentage-of-receivables method the ending balance in the allowance account is equal to the

Answer 26

total estimated uncollectible amount.

Question 27

A contingent liability that is probable but cannot be reasonably estimated should be

Answer 27

disclosed in the financial statements but not recorded as an adjustment in the financial statements.

Question 28

In a 10-Q if a company operates in an industry that is not subject to seasonal fluctuations what period of the balance sheet is the company required to present?

Answer 28

• the most recent quarter end AND the end of the preceding fiscal year

Question 29

a change in depreciation is a change in principle and estimate so you handle

Answer 29

prospectively

Question 30

permanent fund are used to report resources that are

Answer 30

legally restricited to the extent income and not principle

Question 31

amortization of a bond discount is reported in what section of the statement of cash flows?

Answer 31

the operating

Question 32

How should notes payable be reported on the financial statements?

Answer 32

the face amount less a discount on the liability

Question 33

How do you calculate the double declining method?

Answer 33

purchase price x (2/n)

Question 34

Whenever stock is donated would stockholders equity decrease?

Answer 34

No, because there is no cost to the corporation

Question 35

How do you calculate the book value per common share?

Answer 35

common stockholder equity / common shares outstanding

Question 36

valuation allowance is recognized when

Answer 36

it is more likely then not that a deferred tax asset will no be realized

Question 37

a change in depreciation is considered a change in

Answer 37

in method and estimate and should be treated as a change in estimate which is treated prospectievly

Question 38

any costs incured to acquire and make ready a plant asset should be-

Answer 38

capitalized