Which of the following statements regarding inventory accounting systems is true?
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1 .Toigo Co. purchased merchandise from a vendor in England on November 20 for 500,000 British pounds. Payment was due in British pounds on January 20. The spot rates to purchase one pound were as follows:November 20 USD 1.25December 31 1.20January 20 1.17How should the foreign currency transaction gain be reported on Toigo's financial statements at December 31?
A A gain of USD25,000 as a separate component of stockholders' equity. B A gain of USD40,000 in the income statement. C A gain of USD25,000 in the income statement. D A gain of USD40,000 as a separate component of stockholders' equity.
2 .A business interest that constitutes a large part of an individual's total assets should be presented in a personal statement of financial condition as:
A A single amount equal to the proprietorship equity. B A single amount equal to the estimated current value of the business interest. C A separate listing of the individual assets and liabilities at cost. D Separate line items of both total assets and total liabilities at cost.
3 .Tinsel Co.'s balances in allowance for uncollectible accounts were USD70,000 at the beginning of the current year and USD55,000 at year end. During the year, receivables of USD35,000 were written off as uncollectible. What amount should Tinsel report as uncollectible accounts expense at year end?
A USD50,000 B USD15,000 C USD20,000 D USD35,000
4 .The following information relates to Jay Co.'s accounts receivable for Year 2:Accounts receivable, 1/1/Year 2USD650,000Credit sales for Year 22,700,000Sales returns for Year 275,000Accounts written off during Year 240,000Collections from customers during Year 22,150,000Estimated future sales returns at 12/31/Year 250,000Estimated uncollectible accounts at 12/31/Year 2110,000What amount should Jay report for accounts receivable, before allowances for sales returns and uncollectible accounts, at December 31, Year 2?
A USD925,000 B USD1,125,000 C USD1,200,000 D USD1,085,000
5 .Based on a physical inventory taken on December 31, Chewy Co. determined its chocolate inventory on a FIFO basis at USD26,000 with a replacement cost of USD20,000. Chewy estimated that, after further processing costs of USD12,000, the chocolate could be sold as finished candy bars for USD40,000. Chewy's normal profit margin is 10% of sales. Under the U.S. GAAP lower of cost or market rule, what amount should Chewy report as chocolate inventory in its December 31 balance sheet?
A USD24,000 B USD20,000 C USD26,000 D USD28,000
7 .On December 31, Year 1, an entity revalued its machinery. On that date, the entity gathered the following information to aid in the revaluation:Historical costUSD500,000Accumulated depreciation140,000Fair value420,000On December 31, Year 1, the entity will report:
A A revaluation gain of USD60,000 in other comprehensive income. B A revaluation loss of USD80,000 on the income statement. C A revaluation gain of USD60,000 on the income statement. D A revaluation loss of USD80,000 in other comprehensive income.
8 .Rye Co. purchased a machine with a four-year estimated useful life and an estimated 10% salvage value for USD80,000 on January 1, 1992. In its income statement, what would Rye report as the depreciation expense for 1994 using the double-declining-balance method?
A USD20,000 B USD18,000 C USD9,000 D USD10,000
9 .Newt Co. sold a warehouse and used the proceeds to acquire a new warehouse. The excess of the proceeds over the carrying amount of the warehouse sold should be reported as a(an):
A Extraordinary gain, net of taxes. B Reduction of the cost of the new warehouse. C Gain from discontinued operations, net of income taxes. D Part of continuing operations.
10 .When should a long-lived asset be tested for recoverability?
A When the asset's fair value has decreased, and the decrease is judged to be permanent. B When events or changes in circumstances indicate that its carrying amount may not be recoverable. C When the asset's carrying amount is less than its fair value. D When external financial statements are being ...
