Practice_Prelim_2_Exam

Practice_Prelim_2_Exam - Name Preliminary Exam 2 April 4...

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Name__________________________ Preliminary Exam 2 April 4, 2006 Question Sheet - Financial Accounting True and False Section: (1 point each) 1. A company offers their credit customers terms of 3/10, n/60. This translates to an annual interest rate of 21.9%. 2. In 2004, PepsiCo's net sales are $29,261 million while their cost of sales is $13,406 million. Their gross profit percentage is 45.8%. 3. When a particular account receivable is determined to be uncollectible, the entry to write off the account requires a debit to the allowance for doubtful accounts. 4. The change in accounts receivable is reported as a cash flow adjustment on the statement of cash flows under operating activities when using the indirect method. 5. A company has beginning inventory of $50,000, ending inventory of $35,000 and purchases of $250,000. Therefore, its cost of goods sold is $265,000. 6. Under FIFO costing, the most recent costs are assigned to ending inventory units. 7. The lower-of-cost-or-market (LCM) rule is used because of the conservatism exception, which is permitted to override the cost principle. 8. If a company's inventory turnover ratio increases from 3.6 to 4.2 times, then it is taking less days for them to sell their inventory. 1
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Name__________________________ Preliminary Exam 2 April 4, 2006 Question Sheet - Financial Accounting 9. An overstatement error in the 2007 beginning inventory would cause an understatement of the 2007 net income. 10. Tangible operational assets differ from intangible operational assets in that intangible assets have physical substance whereas tangible assets have no physical substance. 11. If a second-hand machine is purchased for operational use in a business, all renovation and repair costs on the used machine incurred by the purchaser prior to its operational use should be excluded from the cost of the asset. 12. If an accountant calculates depreciation expense on an asset without taking into account the asset's residual value of $10,000, depreciation expense for the periods will be higher than it should have been. 13. The first step in recording the disposal of a long-lived asset is to update its book value by recognizing depreciation expense for the period of time since the last depreciation adjustment was made. 14. The current ratio is the dollar difference between total assets and total liabilities. 15. Contingent liabilities involving large amounts must be recorded in the accounts and reported on the balance sheet whenever there is even a remote possibility that the loss will materialize later. 2
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Name__________________________ Preliminary Exam 2 April 4, 2006 Question Sheet - Financial Accounting Multiple Choice Section: (2 points each) 16. Which of the following is/are criteria for recording a sale? A) Title and risks of ownership have been exchanged.
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This test prep was uploaded on 02/19/2009 for the course HA 230 taught by Professor Davidlee during the Fall '06 term at Cornell.

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Practice_Prelim_2_Exam - Name Preliminary Exam 2 April 4...

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