MATCHING ____ 1. Accelerated Depreciation ____ 2. Double Declining-Balance Metho
ID: 2426994 • Letter: M
Question
MATCHING
____ 1. Accelerated Depreciation
____ 2. Double Declining-Balance Method
____ 3. FIFO Method
____ 4. Internal Control System
____ 5. LIFO Method
____ 6. Periodic System
____ 7. Perpetual System
____ 8. Sarbanes-Oxley Act
____ 9. Straight-Line Method
____ 10. Time Value of Money
A. Policies and procedures necessary to ensure the safeguarding of an entity’s assets, the reliability of its accounting
records, and the accomplishment of overall company objectives..
B. An inventory costing method that assigns the most recent costs to ending inventory.
C. An inventory costing method that assigns the most recent costs to cost of goods sold.
D. The system in which the Inventory account is updated at the end of the period.
E. The system in which the Inventory account is increased at the time of each purchase of merchandise and
decreased at the time of each sale.
F. A method by which the same dollar amount of depreciation is recorded in each year of asset use.
G. The concept that indicates that people should prefer to receive an immediate amount at the present time over an
equal amount in the future.
H. An act of Congress in 2002 intended to bring reform to corporate accountability and stewardship in the wake of a
number of major corporate scandals.
I. A term that refers to several methods by which a higher amount of depreciation is recorded in the early years of
an asset’s life and a lower amount is recorded in the later years.
J. A method by which depreciation is recorded at twice the straight-line rate, but the depreciable balance is reduced
in each period.
SHORT ANSWER
Please give a brief answer to each of the following questions.
1. 1.Why are shipping terms such as FOB shipping point or FOB destination point, important in deciding ownership of inventory
at the end of the year?
2. 2. An effective system of internal control is critical to protecting a company’s investment in three of its major assets: cash,
accounts receivable, and inventory. For each of the three assets, describe briefly how a company might protect that asset.
W 3. What is a cash equivalent? Why is it included with cash on the balance sheet?
4. 4 Define the term goodwill. Give an example of a transaction that would result in the recording of goodwill on the balance
sheet.
5. 5 What is a contingent liability? Give an example of a contingent liability.
Explanation / Answer
Answers are matched as follows:
MATCHING
____ 1. Accelerated Depreciation Matched answer is I
____ 2. Double Declining-Balance Method Matched Answer is J.
____ 3. FIFO Method Matched answer is B
____ 4. Internal Control System Matched answer is A
____ 5. LIFO Method Matched answer is C
____ 6. Periodic System Matched answer is D
____ 7. Perpetual System Matched answer is E
____ 8. Sarbanes-Oxley Act Matched answer is H
____ 9. Straight-Line Method Matched answer is F
____ 10. Time Value of Money Matched answer is G
A. Policies and procedures necessary to ensure the safeguarding of an entity’s assets, the reliability of its accounting records, and the accomplishment of overall company objectives..
B. An inventory costing method that assigns the most recent costs to ending inventory.
C. An inventory costing method that assigns the most recent costs to cost of goods sold.
D. The system in which the Inventory account is updated at the end of the period.
E. The system in which the Inventory account is increased at the time of each purchase of merchandise and decreased at the time of each sale.
F. A method by which the same dollar amount of depreciation is recorded in each year of asset use.
G. The concept that indicates that people should prefer to receive an immediate amount at the present time over an equal amount in the future.
H. An act of Congress in 2002 intended to bring reform to corporate accountability and stewardship in the wake of a number of major corporate scandals.
I. A term that refers to several methods by which a higher amount of depreciation is recorded in the early years of an asset’s life and a lower amount is recorded in the later years.
J. A method by which depreciation is recorded at twice the straight-line rate, but the depreciable balance is reduced in each period.
Brief answer to each of the following questions are as follows:
In case of FOB shipping point buyer bear the shipping cost and in case of FOB destination seller bear the cost. In case of FOB shipping point ownership of inventory is of buyer as soon as the product leaves seller’s shipping point whereas in case of FOB destination ownership is with seller till goods reach the buyer place
2. Company protect its three assets such as cash, accounts receivable and inventory by keeping a proper check and valuation of the assets time to time.
In every 2-3 months internally figures are checked and stock is verified.
3. Cash and cash equivalents includes all the currency, coins, checks received but not yet deposited, savings accounts, money market accounts, and short-term, highly liquid investments with a maturity of three months or less at the time of purchase.
It is included with cash as cash equivalents are easily convertible into cash.
4. Goodwill is the excess of purchase price over the fair market value of a company’s identifiable assets.
For example: Company A acquires company B. Asset value of company B is 5 million dollars but
the fair value of assets is 8 million dollar. In this case 3 million dollar is the goodwill reported in
balance sheet.
5. A contingent liability is a liability that depends on a future event which may occur or not occur.
For example, a parent guarantee her daughter’s car loan. If she will not pay her instalment then only he will be liable to pay. So this is a contingent liability.
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