When the FIFO method is used, ending inventory units are priced at the:
Answer(s): B
The first-in-first-out (FIFO) method is based on the assumption that the costs of the first items acquired should be assigned to the first items sold, therefore ending inventory on hand is based on the most recent prices.
The following account is affected when recording a return of inventory to the vendor under a perpetual inventory system:
Answer(s): A
When inventory is purchased, Merchandise Inventory is debited, and credited when returned. The periodic system records purchases in an account called Purchases and returns are booked to Purchases Returns and Allowances.
Property, Plant & Equipment has all of the following characteristics except:
Answer(s): D
They are typically the largest of the operating assets. Included in this category would be heavy equipment and machinery as well as real estate and buildings used in the business.
Which of the following is/are true about turnover ratios?
The receivables turnover is the ratio of net sales to average receivables. If this ratio is high, then it indicates that the receivables are relatively low compared to sales. This could happen if the credit policy is stringent, forcing fewer sales on credit. The inventory turnover is the ratio of net sales to average inventory. A low value for this ratio indicates that the firm is maintaining a high level of inventory to maintain the sales. This might be an indicator (though not necessarily) that capital is being locked up in excess inventory. The payables turnover ratio is the ratio of the cost of goods sold to average trade payables. A high ratio implies that the payables are not very high compared to the COGS. This will happen when the firm is paying off its payables debt at a quick pace.
The "Management Discussion and Analysis" section of the stockholder's report need not contain which of the following?
Companies are encouraged, but not required, to provide forward-looking information i.e. they need not extrapolate past trends into the future to draw conclusions about the firm's prospects.
Post your Comments and Discuss CFA CFA I exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the CFA I content, but please register or login to continue.