Which of the following is/are true under accrual accounting?
Answer(s): C
Accrual accounting follows the Matching Principle, which requires that revenues and gains be recognized when earned and expenses and losses be recognized when incurred. Under this, (I), (II) and (IV) are correct.However, (III) is not necessarily true.
The following data have been extracted from the financial statements of a firm for two years, 1993 and 1994:1993 1994Assets 10,895 12,444Sales 8,465 9,275Inventory 3,126 3,549COGS 7,120 7,387The average inventory processing period for 1994 equals ________.
Answer(s): A
This can be estimated using either net sales (as is the case with receivables) or the cost-of-goods- sold. COGS is preferable since it does not include the profit margins involved in net sales.Therefore, two relevant ratios are:E. Inventory turnover ratio = COGS/average inventory.F. Average inventory processing period = 365/inventory turnover.Typically, average inventory for a given year is taken to be the average of the ending values of the inventory for this year and the last year. For 1994, the average inventory equals (3549+3126)/2 = 3,338. Inventory turnover ratio = 7,387/3,338 = 2.21. Average inventory processing period = 365/2.21 = 164.9 days.
Which of the following groups will have seniority in the event of bankruptcy of a company?
Answer(s): D
Debt holders are paid first.
What does FASB refer to?
The Financial Accounting Standards Board.
A product financing arrangement exists when
The key to product financing is that the purchaser retains very little of the risk because typically whatever does not sell, the seller agrees to buy back at a specified price.
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