Solutions_BA_2405_MT1 - Nov 6 2007 1 The main purpose of...

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Nov 6, 2007 1) The main purpose of generally accepted accounting principles is to: a. make sure that assets are valued at cost and that expenses are "matched" with revenue. b. provide the basic framework for financial reporting that is understood by both the issuer and users of financial statements. c. prepare financial statements that are designed to meet the information needs of the company's management. d. Ensure that the same accounting methods are applied in all countries. 2) The going-concern assumption explains the notion that a business: a. will eventually go out of business. b. will continue long enough to sell its inventory. c. continue long enough to meet its commitments and to use its assets for their intended purposes. d. has an unlimited life if it is organized as a corporation 3) The concept of matching costs and revenue means that: a. Gross profit on sales equals revenue minus expenses. b. The expenses incurred to generate revenue should be in the same time period. c. Revenue is greater than expenses. d. Revenue and expenses are equal 4) Which of the following statements is a characteristic of the LIFO flow method ? a. During a period of increasing prices, LIFO tends to maximize the income taxes to be paid. b. The cost of goods sold is measured in relatively current costs. c. Inventory is valued at relatively current costs. d. All of the above 5) The inventory flow assumption in which all items are assigned the same unit cost is: a. LIFO. b. FIFO. c. Average cost. d. Specific identification. 6) In a period of rising prices, a company is most likely to use the FIFO method of pricing inventory if: a. Each item in the inventory is unique. b. Management wants to assign same costs to items sold and to items remaining in inventory c. Management wants to minimize expenses. d. Management wants to maximize gross profit and net income. 7) An art gallery that sells oil paints is most likely to determine its cost of goods sold using: a. Specific identification.
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b. Average cost. c. First-in, first-out. d. Last-in, last-out. 8) Goods in transit between the buyer and the seller belong to: a. The seller. b. The buyer. c. The freight company. d. The answer depends upon whether the goods were shipped F.O.B. shipping point or F.O.B. destination. 9) The inventory turnover ratio provides an indication of how quickly the average quantity of inventory on hand: a. Spoils. b. Sells. c. Increases. d. Converts into cash. 10) Which of the following types of businesses would you expect to have the highest inventory turnover? a.
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Solutions_BA_2405_MT1 - Nov 6 2007 1 The main purpose of...

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