A common size balance sheet shows all quantities as a percentage of ________ while an income statement uses ___________ as the base amount.
Answer(s): B
A common size balance sheet shows all quantities as a percentage of assets while an income statement uses sales as the base amount.
Which of the following are considered when applying generally accepted accounting principles.
Answer(s): C
The rules or standards of accounting determine such matters as how assets are measured, when liabilities are incurred, when income is recognized as earned, and when expenses and losses accrue.
At the end of a fiscal period, any revenue that has been earned but not received should be credited to an appropriate:
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
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.
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?
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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