When merchandise inventory is purchased under a periodic system, which account is debited?
Answer(s): D
The periodic inventory system records purchases of merchandise inventory in an income statement account called Purchases.
Patterson Company has the following information of one of its vehicles purchased on January 1, 1992:Vehicle cost $50,000Useful life, years, estimated 5Useful life, miles, estimated 100,000Salvage value, estimated $10,000Actual miles driven:1992 30,0001993 20,0001994 15,0001995 25,0001996 12,000No estimates were changed during the life of the asset. The 1996 depreciation expense using the units-of- production method was ________.
Answer(s): B
Under the units-of-production method, periodic depreciation is based on the proportion of expected total production that occurred. For the years 1992 to 1995, the total accumulated depreciation was $36,000 (($50,000-10,000) X (30,000 + 20,000 + 15,000 + 25,000) / 100,000(. Therefore, the remaining depreciation for the last year, 1996, is only $4,000 ($40,000-36,000). Given that the 12,000 miles driven in 1996 exceeded the remaining estimated production of 10,000 miles, only $4,000 can be taken as depreciation in 1996.
Form 10-K is filed with the SEC to update the information a company supplied when filing a registration statement under the Securities Exchange Act of 1934. Form 10-K is a report that is filed
Answer(s): E
Form 10-K is the annual report to the SEC. It must be filed within 90 days after the corporation's yearend. It must contain audited statements.
A thorough analysis of financial statements should include an examination of which of the following sources of information?
Answer(s): A
All of these statements are correct. Management's discussion and analysis, footnotes and Form 10-K reports provide important details as to the company's balance sheet, income statement and overall financial condition; auditors reports will indicate if the financial information that is presented complies with generally accepted accounting principles.
When a firm's inventory undergoes LIFO liquidation under rising prices, it experiences ________.
In LIFO liquidation under rising prices, the quantity of goods purchased during a period is less than the quantity sold. This leads to a sale of goods purchased in prior periods at lower prices (since prices are rising). This understates the cost-of-goods-sold (COGS), thus overstating the income and causing higher taxes than in the absence of the LIFO liquidation. The higher taxes cause a higher cash outflow. (This is an extremely important topic that you should be completely familiar with)
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