Acc557 Financial Accounting: Week 5 Study Guide (Chapters 5 and 6)

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Acc557 Financial Accounting
Week 5 - Chapters 5 and 6

Multiple Choice Question 104
The credit terms offered to a customer by a business firm are 2/10, n/30, which means that
two sales returns can be made within 10 days of the invoice date and no returns thereafter.
the customer must pay the bill within 10 days.
the customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice date.
the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date.

Multiple Choice Question 133
If cost of goods sold is $420,000 and the gross profit rate is 40%, what is the gross profit?

IFRS Multiple Choice Question 251
Under IFRS, companies must classify income statement items by
nature or function.
date incurred.

Multiple Choice Question 47
An enterprise which sells goods to customers is known as a
service firm.

Multiple Choice Question 80
McIntyre Company made a purchase of merchandise on credit from Marvin Company on August 8, for $8,000, terms 3/10, n/30. On August 17, McIntyre makes the appropriate payment to Marvin. The entry on August 17 for McIntyre Company is:
Accounts Payable 8,000
Cash 8,000

Accounts Payable 7,760
Cash 7,760

Accounts Payable 8,000
Inventory 240
Cash 7,760

Accounts Payable 8,000
Purchase Returns and Allowances 240
Cash 7,760

Multiple Choice Question 113
The respective normal account balances of Sales Revenue, Sales Returns and Allowances, and Sales Discounts are
credit, debit, debit.
credit, credit, credit.
credit, debit, credit.
debit, credit, debit.

Multiple Choice Question 138
On a classified balance sheet, inventory is classified as
a long-term investment.
a current asset.
an intangible asset.
property, plant, and equipment

Multiple Choice Question 75
Which of the following statements is true regarding inventory cost flow assumptions?
A company may never change its inventory costing method once it has chosen a method.
A company must use the same method for domestic and foreign operations.
A company may use more than one costing method concurrently.
A company must comply with the method specified by industry standards.

Multiple Choice Question 120
Inventory is reported in the financial statements at
the higher-of-cost-or-market.
the lower-of-cost-or-market.

Multiple Choice Question 54
Nick's Place recorded the following data:
Units Unit
Date Received Sold On hand Cost
1/1 Inventory 600 $2.00
1/8 Purchased 1,000 1,600 2.40
1/12 Sold 1,200 300

The weighted average unit cost of the inventory at January 31 is:

Multiple Choice Question 131
A company uses the periodic inventory method and the beginning inventory is overstated by $7,000 because the ending inventory in the previous period was overstated by $7,000. The amounts reflected in the current end of the period balance sheet are
Assets Owner’s Equity
Correct Correct
Understated Understated
Overstated Correct
Overstated Overstated

IFRS Multiple Choice Question 229
The major IFRS requirements related to accounting for and reporting inventories are
the same as GAAP with a couple of exceptions.
the same as GAAP.
completely different fom GAAP.
not comparable to GAAP.

IFRS Multiple Choice Question 243
Inventory written down under lower-of-cost-or market may be written back up to original cost in a subsequent period under
Yes Yes
No Yes
No No
Yes No

IFRS Multiple Choice Question 238
The only acceptable cost flow assumptions under IFRS are
FIFO and average.
LIFO and average.
FIFO, LIFO and average.

Multiple Choice Question 117
The manager of Brick Company is given a bonus based on income before income taxes. Net income, after taxes, is $5,600 for FIFO and $4,900 for LIFO. The tax rate is 30%. The bonus rate is 20%. How much higher is the manager's bonus if FIFO is adopted instead of LIFO?
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