An asset with a 10-year life has an acquisition cost of 5,000. The firm, using double declining method of depreciation has an accumulated depreciation of 2,440 at the end of year 3 (verify this!). The depreciation expense in year 4 is equal to ________.
Answer(s): C
The book value at the beginning of year 4 = 5,000-2,440 = 2,560. Then, depreciation expense in year 4 = 2/10*book value = 512.
The weighted average method is based on the assumption that the cost of merchandise sold should be calculated using the :
Answer(s): D
Under the weighted average method, inventory is priced at the average cost of the goods available for sale (Beginning inventory plus purchases during the period). The cost for the ending inventory under this method is influenced by all the prices paid during the period.
If a company fails to record a material amount of depreciation in a previous year, this is considered
Answer(s): A
This is neither unusual or a change, but simply an error.
Which of the following is/are current liabilities?
Accounts receivable represent current assets.
Which of the following marketable securities would provide the greatest liquidity and stability?
Answer(s): E
F. S. treasury bills would be the most liquid because the maximum maturity is 182 days (although most treasury bills purchased by firm's have a shorter maturity). In addition, the value of treasury bills would fluctuate less than the value of the common stock of another firm or long-term corporate bonds.
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