QUESTION: 1673

At the end of a fiscal period, any revenue that has been earned but not received should be credited to an appropriate:

expense account
revenue account
liability account
asset account

Answer(s): B

Explanation:

Revenue should be recognized in the period in which it is earned and is credited to the appropriate revenue account.

A firm uses LIFO for inventory costing. The beginning inventory balance of the firm was 700. During the period,

it purchased inventory worth 320 and sold goods worth 270. The market value of the inventory at the end of the period was 650. The total inventory expense during this period was ________.

Answer(s): A

Explanation:

In this problem, you have to recognize the fact that inventory is valued at the end of an accounting period at the lower of cost or market (LCM). The write-down that occurs if the market value is lower than cost is charged to the income. In this case, the COGS equals 270 (given). If the LCM were ignored, the ending inventory would have been valued at 700 + 320 - 270 = 750. However, due to the lower market value of 650, inventory gets written down to 650 and the loss of 100 in inventory is charged to income. Thus, the total inventory expense equals 270 + 100 = 370.

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QUESTION: 1675

Tasty Food, Inc.'s statements have overstated accounts payable by 400 and understated the accounts receivables by 225. Then, which of the following is/are true?

Its income is correctly stated.
II. Its income is overstated by 175.
III. Its current assets are overstated by 225.
IV. Its operating cash flows are overstated by 175.
II, III and IV
I & III
I & IV
II & IV

Answer(s): C

Explanation:

Current assets are understated by 225. The reported income is not affected since the errors are in the balance sheet items. The operating cash flow is overstated by 400-225=175. Note that current liability is overstated by 400.

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QUESTION: 1676

On Jan 1, a firm had 700 stocks outstanding. On May 1, it issued 300 more shares. On October 1, it repurchased 100 shares. If the firm's net income was 12,000 and it paid a preferred dividend of 1,400, its reported EPS is ________.

12
10.6
11.77
12.1

Answer(s): D

Explanation:

For a simple capital structure, EPS = (Net Income - Preferred stock dividends)/weighted # of common shares To calculate the weighted # of shares, note that 600 shares remained outstanding for 12 months, 100 shares for 9 months and 300 shares for 8 months. Therefore, weighted shares = 12/12*600 + 9/12*100 + 8/12*300 = 875. EPS = (12,000 - 1,400)/875 = 12.11.

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QUESTION: 1673

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QUESTION: 1674

Explanation:

QUESTION: 1675

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QUESTION: 1676

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