7. When inventory prices are decreasing, which inventory valuation method would

Question

7. When inventory prices are decreasing, which inventory valuation method would give you the lowest cost of goods sold.

A. FIFO B. LIFO C. WEIGHTED AVERAGE D. NIFO

8. The gross method of recording a sales when a cash discount is offered violates the: A. Matching Principle B. Cost Principle C. Revenue Principle D. None of the Above 9. The net method of recording a sales when a cash discount is offered violates the: A. Matching Principle B. Cost and Revenue Principle C. The Revenue Principle D. None of the above

10. The Allowance method of recording Bad Debt Expense is required because of the: A. Matching Principle B. Matching and Cost Principle D. Materiality Principle C. None of the above

11. The Direct method of recording bad debts can be used if: A. The amount is large B. the Materiality Principle can be used C. the Revenue Principle is not violated D. all of the above

12. In times of rising prices, which inventory method would you want to use if you were an CEO interested in saving taxes: A. LIFO B. Average C. FIFO D. None of the above

13. Which method is used to expense natural resoures: A. Depletion B. Amortization C. Depreciation D. Write off method

14. Which accounting method would a corporation have to use to record transactions concerning the other corporation if the holds 28% of the outstanding common stock of that corporation: A. The Cost method B. The Fair Market Value method C. The Consolidated method D. The Equity method

15. Amortization is a method used to expense: A. land B. operating assets. C. intangible assets D. natural resources.

Explanation / Answer

7. B. LIFO- If prices are decreasing LIFO results in lower cost of goods sold & hence higher Net Income 8. A. Matching Principle- Recording gross may result in not recording the expense of discounts at the matching time when revenue was generated. 9. B. Cost and Revenue Principle- As sales is recorded net of discounts and also the cost/expense-ie. Discounts is not recorded. 10. A. Matching Principle- Matching of revenue generated with the costs incurred for that generation, in the same period 11 C. the Revenue Principle is not violated- Expense relating to the generation of tis revenue is recorded in the same period 12. B. LIFO- Because issues to production are made at LIFO prices, COGS is high, so. Net Income is low and hence results in reduced taxes. 13. A. Depletion- Natural resources are physically consumed. 14 .D. Equity method- because this means significant influence. 15. C.- Intangible assets

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