Quick ratio = 2.5; what does this mean?

Quick ratio = 2.5; what does this mean? Answer: For every dollar of current liabilities, the business has $2.50 of assets easily turned into...

Current ratio = 3.4; what does this mean?

Current ratio = 3.4; what does this mean? Answer: For every dollar of current liabilities the enterprise has $3.40 of current asset...

Return on owners' equity ratio = 5%; what does this mean?

Return on owners' equity ratio = 5%; what does this mean? Answer: Earning 5% of what they have invested, for every $1 that is invested 5 cents...

Net profit ratio = 10%; what does this mean?

Net profit ratio = 10%; what does this mean? Answer: 10% of net sales is net profit and the remaining 90% is spent on COGS and expense...

Gross profit ratio = 25%; what does this mean?

Gross profit ratio = 25%; what does this mean? Answer: 25% of net sales is gross profit, the remaining 75% is COGS or for every dollar 25 cents...

What does the rate of return on owners equity ratio tell us?

What does the rate of return on owners equity ratio tell us? Answer: It tells us the extent in which the business/company is able to pay investors,...

What does the net profit ratio tell us?

What does the net profit ratio tell us? Answer: It shows how much of each dollar of sales is represented as profit, with a high percentage it means...

What is a balance sheet?

What is a balance sheet? Answer: Shows all the assets the business owns (this is divided into current and non-current assets), the liabilities...

Disadvantages of a sole trader?

Disadvantages of a sole trader? one input means there are no other ideas to be considered debts are all reliable of the owner  hard to get...

Advantages of sole trader?

Advantages of sole trader? Answer: No conflict in making decisions. All money is own profit. Simple and free to start....

What does a partnership agreement include?

What does a partnership agreement include? Answer: How profits are divided. Investment from each partner. Job roles How disputes are resolved? Process...

What are properties of a partnership business?

What are properties of a partnership business? Answer: 2-20 people jointly own the business. They are jointly liable for all the business debts-...

What are the properties of a sole trader business?

What are the properties of a sole trader business? Answer: Operates under own name or registered business name. Owner makes all decisions and runs...

Examples of the Gross Profit Method Include.

Examples of the Gross Profit Method Include. - When inventory has been lost, stolen or destroyed. - Interim reporting to avoid the expense of a physical...

Disadvantages of GPM

Disadvantages of GPM -An estimate of inventory since not validated by physical count and not acceptable under GAAP for annual financial statements. -Uses...

Assume that at the end of 20X1, a company's ending inventory balance is overstated by $3,000. If the company has a 20% average tax rate, how will its income statement and balance sheet be affected in 20X2?

Assume that at the end of 20X1, a company's ending inventory balance is overstated by $3,000. If the company has a 20% average tax rate, how will its...

Assume that at the end of 20X1, a company's ending inventory balance is overstated by $3,000. If the company has a 20% average tax rate, how will its income statement and balance sheet be affected in 20X1?

Assume that at the end of 20X1, a company's ending inventory balance is overstated by $3,000. If the company has a 20% average tax rate, how will its...

If an error has been made causing the a physical inventory count at the end of 20X4 to be incorrect, causing inventory to be understated, how does it affect the following accounts in 20X4?

If an error has been made causing the a physical inventory count at the end of 20X4 to be incorrect, causing inventory to be understated, how does it...

If a company discovers an error in the same accounting period that the error was made, what do you do? What about if a company discovers the accounting error after books closed?

If a company discovers an error in the same accounting period that the error was made, what do you do? What about if a company discovers the accounting...

When is the GP method used? Is it acceptable to record this in the financial statements?

When is the GP method used? Is it acceptable to record this in the financial statements? Answer: - May be used when it is impossible or impractical...

Can Inventory Be Valued Above Cost? If so, how?

Can Inventory Be Valued Above Cost? If so, how? Yes; This exception must be justified by: - An inability to determine appropriate costs - Immediate...

What is a major criticism of the LCM method? What principle does it follow?

What is a major criticism of the LCM method? What principle does it follow? Answer: - Major criticism of LCM is that it is applied only in one direction—inventory...

When the cost of the inventory exceeds the expected benefits, between the LCM & LCNRV method, which one is better and why? What financial statement does it reflect?

When the cost of the inventory exceeds the expected benefits, between the LCM & LCNRV method, which one is better and why? What financial statement...

The allowance account (indirect method) is reported in which financial sheet? How about the direct method (loss account)?

The allowance account (indirect method) is reported in which financial sheet? How about the direct method (loss account)? Answer: - allowance account...

Therefore, applying the lower of cost or market rule to groups of inventory will usually result in what relative to what?

Therefore, applying the lower of cost or market rule to groups of inventory will usually result in what relative to what? Answer: In higher inventory...

In a given year, when cost of goods sold is understated (too low) due to an inventory error, net income will be ______________ (overstated/understated/no effect).

In a given year, when cost of goods sold is understated (too low) due to an inventory error, net income will be ______________ (overstated/understated/no...

Assume a company recorded the purchase of inventory on account twice instead of once in its accounting system. Assuming its ending inventory is correctly stated, what will be the effect, if any, on net income in the year the error first occurred?

Assume a company recorded the purchase of inventory on account twice instead of once in its accounting system. Assuming its ending inventory is correctly...

After applying the lower-of-cost-or-market (LCM) method, if a company writes-down its inventory, the effect on the accounting equation is:

After applying the lower-of-cost-or-market (LCM) method, if a company writes-down its inventory, the effect on the accounting equation is: a. a...

If physical count is not correct, which accounts will be affected?

If physical count is not correct, which accounts will be affected? Answer: COGS, EI & Invento...

If an error has been made causing the EI of 20X3 to be overstated, how does it affect the following accounts in 20X4?

If an error has been made causing the EI of 20X3 to be overstated, how does it affect the following accounts in 20X4? - BI: - NP: - EI: - COGS: -...

If an error has been made causing the EI of 20X3 to be overstated, how does it affect the following accounts in 20X3?

If an error has been made causing the EI of 20X3 to be overstated, how does it affect the following accounts in 20X3? - BI: - NP: - EI: - COGS: -...

If an error has been made causing an overstatement of inventory in 20X3, how does it affect the following accounts in 20X4?

If an error has been made causing an overstatement of inventory in 20X3, how does it affect the following accounts in 20X4? - BI: - NP: - EI: - COGS: -...

If an error has been made causing an overstatement of inventory in 20X3, how does it affect the following accounts in 20X3?

If an error has been made causing an overstatement of inventory in 20X3, how does it affect the following accounts in 20X3? - BI: - NP: - EI: - COGS: -...

What are reasons that inventory errors can occur?

What are reasons that inventory errors can occur? Answer: - physical inventory count is wrong - purchases, purchase discounts, purchase returns and...

Why does the EI cost per GL and the EI cost per the physical count differ?

Why does the EI cost per GL and the EI cost per the physical count differ? Answer: The physical coun...

Why does a company that uses perpetual system still conduct a physical inventory count?

Why does a company that uses perpetual system still conduct a physical inventory count? Answer: Because of accounting errors and/or inventory...

Which inventory system must take an inventory count in order to determine the cost of EI?

Which inventory system must take an inventory count in order to determine the cost of EI? Answer: perpetual & period...

In order to "come up" with COGS, what should the company know?

In order to "come up" with COGS, what should the company know? Answer: - gross profit percentage rate - net sales to dat...

In order to use the Gross Profit Method, what are things the company should know? What can the company "come up" with and what can they solve for?

In order to use the Gross Profit Method, what are things the company should know? What can the company "come up" with and what can they solve for? Answer: Company...

True or False: An auditor may apply the gross profit method to check the reasonableness of the reported cost of a company's inventory.

True or False: An auditor may apply the gross profit method to check the reasonableness of the reported cost of a company's inventory. Answer:&n...

For purposes of applying the gross profit method, the gross profit rate is calculated as follows:

For purposes of applying the gross profit method, the gross profit rate is calculated as follows: a. net sales - cost of goods sold b. gross profit...

What is the equation for GP % of sales?

What is the equation for GP % of sales? Answer: GP % as a percentage of sales = (Sales - CGS) ÷ Sales ...

What is the equation for COGS?

What is the equation for COGS? Answer: BI + NP - EI = C...

True or False: The gross profit method for estimating inventory may not be used if the inventory or its records have been destroyed.

True or False: The gross profit method for estimating inventory may not be used if the inventory or its records have been destroyed. Answer:&nbs...

When can the company use Gross Profit Methods for estimating the cost of ending inventory?

When can the company use Gross Profit Methods for estimating the cost of ending inventory? Answer: If the company has a fairly consistent gross...

Assuming the FIFO method is used, for purposes of applying the lower-of-cost-or-market (LCM) to inventory balances, "market value" is referring to:

Assuming the FIFO method is used, for purposes of applying the lower-of-cost-or-market (LCM) to inventory balances, "market value" is referring to: a....

Under IFRS, for purposes of applying the lower-of-cost-or-market (LCM) to inventory balances, "market value" is referring to:

Under IFRS, for purposes of applying the lower-of-cost-or-market (LCM) to inventory balances, "market value" is referring to: a. the current replacement...

Under GAAP, for purposes of applying the lower-of-cost-or-market (LCM) to inventory balances, net realizable value is defined as:

Under GAAP, for purposes of applying the lower-of-cost-or-market (LCM) to inventory balances, net realizable value is defined as: a. The estimated...

Under GAAP, for purposes of applying the lower-of-cost-or-market (LCM) to inventory balances, the "floor" is equal to:

Under GAAP, for purposes of applying the lower-of-cost-or-market (LCM) to inventory balances, the "floor" is equal to: a. the net realizable value...

What type of account is allowance to reduce inventory to market?

What type of account is allowance to reduce inventory to market? Answer: Contra-asset to inventory account. ...

What is the JE for indirect method?

What is the JE for indirect method? DEBITED - loss on write-down of inventory to market (i.e. loss on market valuation) CREDITED - allowance to reduce...

How does the IRS require it? Is it different for tax rules?

How does the IRS require it? Is it different for tax rules? Answer: 1 - each individual item in inventory 2 - by each major category of inventory 3...

What are the year end steps for applying the LCM method?

What are the year end steps for applying the LCM method? Answer: 1. perform any other necessary adjustments on inventory account (DVL must have...

What is the equation for calculating floor?

What is the equation for calculating floor? Answer: Floor = NRV - Profit Marg...

Why is imposing floor important?

Why is imposing floor important? Answer: Having floor helps smooth out earnings over tim...

What is the floor and what is it defined as in terms of NRV?

What is the floor and what is it defined as in terms of NRV? Answer: Floor = lower limit on designated market value Defined as NRV of inventory LESS...

What is the equation for calculating ceiling?

What is the equation for calculating ceiling? Answer: ceiling = NRV; ceiling/NRV = selling price - disposal cost ...

What is the ceiling and what is it defined as in terms of NRV?

What is the ceiling and what is it defined as in terms of NRV? Answer: Ceiling = upper limit on designated market value. Defined as NRV of inventory...

If the true replacement cost is below the ceiling and the floor, then compare _________.

If the true replacement cost is below the ceiling and the floor, then compare _________. Answer: floor amount (designated market value) to inventory...

If the true replacement cost is above the ceiling and the floor, then compare _________.

If the true replacement cost is above the ceiling and the floor, then compare _________. Answer: Ceiling amount (designated market value) to...

If the true replacement cost is between the ceiling and the floor, then compare _________.

If the true replacement cost is between the ceiling and the floor, then compare _________. Answer: True replacement cost (designated market...

What is the designated market value? What is it ultimately compared to?

What is the designated market value? What is it ultimately compared to? Answer: - often ceiling and floor, when designated as replacement cost are...

Is it simple to compare original cost to replacement cost? Why so or why not?

Is it simple to compare original cost to replacement cost? Why so or why not? Answer: No b/c replacement cost is limited to a number that must...

In the LCM method, how does GAAP define the market and the replacement cost?

In the LCM method, how does GAAP define the market and the replacement cost? Answer: GAAP defines replacement cost generally replaces/reproduces...

What is the JE for recording the DIRECT method of the LCNRV method? Which accounts are affected by this?

What is the JE for recording the DIRECT method of the LCNRV method? Which accounts are affected by this? Answer: COGS (debited) - XX Inventory (credited)...

In other words, how can you mathematically express if a write down is required of inventory with the LCNRV method?

In other words, how can you mathematically express if a write down is required of inventory with the LCNRV method? Answer: cost > net realizable...

What is the Net realizable value?

What is the Net realizable value? Answer: The estimated selling price of the inventory in the ordinary course of business - predictable costs of...

Describe the LCNRV.

Describe the LCNRV. Answer: LCNRV requires companies to compare their inventory cost to its net realizable value AT year end. If net realizable...

LCM is where ________ equals _______.

LCM is where ________ equals _______. LCM is where market = replacement cost limited by ceiling and floor. ...

This meant that the new ASU released DID NOT affect which costing methods? How were they affected before vs. after 2016?

This meant that the new ASU released DID NOT affect which costing methods? How were they affected before vs. after 2016? Answer: - LIFO & Retail...

This meant that the new ASU released affected which costing methods? How were they affected before vs. after 2016?

This meant that the new ASU released affected which costing methods? How were they affected before vs. after 2016? Answer: - Affected Specific ID,...

The new ASU 2015 - 11 required companies with fiscal years beginning after 2016 to apply the _____________ method if they used an inventory method other than these two methods: ______ and _____.

The new ASU 2015 - 11 required companies with fiscal years beginning after 2016 to apply the _____________ method if they used an inventory method other...

Prior to 2016, GAAP required companies to use which method? Did it matter before then what inventory costing method was used? When did this change? What changed this?

Prior to 2016, GAAP required companies to use which method? Did it matter before then what inventory costing method was used? When did this change?...

As an application of _________ principle, inventory costs should be written down when the inventory's future cash flows are expected to be LESS than the inventory's cost.

As an application of _________ principle, inventory costs should be written down when the inventory's future cash flows are expected to be LESS than...

A high R2 measure in regression analysis is preferred because:

A high R2 measure in regression analysis is preferred because:  A. it indicates a good fit of the regression line through the data points. B....

Which of the following is not an issue in the collection of data for cost estimation?

Which of the following is not an issue in the collection of data for cost estimation?  A. Outliers. B. Missing data. C. Mismatched time periods. D....

Which of the following tools is not associated with cost estimation?

Which of the following tools is not associated with cost estimation?  A. Least-squares regression. B. Multiple regression. C. Inversion equations. D....

Waller Enterprises has determined that three variables play a key role in determining company revenues. To arrive at an objective forecast of revenues for the next accounting period, Waller should use:

Waller Enterprises has determined that three variables play a key role in determining company revenues. To arrive at an objective forecast of revenues...

Checkers Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the primary cost driver is machine hours?

Checkers Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturing overhead:...

In regression analysis, the variable that is being predicted is known as the:

In regression analysis, the variable that is being predicted is known as the: A. independent variable. B. dependent variable. C. explanatory variable. D....

Which of the following methods of cost estimation relies on only two data points?

Which of the following methods of cost estimation relies on only two data points?  A. Least-squares regression. B. The high-low method. C. The...

The nonstatistical method of cost estimation that calls for the creation of a scatter diagram is the:

The nonstatistical method of cost estimation that calls for the creation of a scatter diagram is the:  A. least-squares regression method. B....

Which of the following statements about the visual-fit method is (are) true?

Which of the following statements about the visual-fit method is (are) true? The method results in the creation of a scatter diagram. The method is...

The high-low method and least-squares regression are used by accountants to:

The high-low method and least-squares regression are used by accountants to:  A. evaluate divisional managers for purposes of raises and promotions. B....

Which of the following techniques is not used to analyze cost behavior?

Which of the following techniques is not used to analyze cost behavior?  A. Least-squares regression. B. High-low method. C. Visual-fit method. D....

High-tech automation combined with a downsizing of a company's hourly labor force often results in:

High-tech automation combined with a downsizing of a company's hourly labor force often results in:  A. increased fixed costs and increased...

Which of the following would not typically be classified as a discretionary fixed cost?

Which of the following would not typically be classified as a discretionary fixed cost?  A. Equipment depreciation. B. Employee development (education)...

Amounts spent for charitable contributions are an example of a(n):

Amounts spent for charitable contributions are an example of a(n):  A. committed fixed cost. B. committed variable cost. C. discretionary fixed...

Committed fixed costs would include:

Committed fixed costs would include:  A. advertising. B. research and development. C. depreciation on buildings and equipment. D. contributions...

Which of the following is not an example of a committed fixed cost?

Which of the following is not an example of a committed fixed cost?  A. Property taxes. B. Depreciation on buildings. C. Salaries of management...

Property taxes are an example of a(n):

Property taxes are an example of a(n):  A. committed fixed cost. B. committed variable cost. C. discretionary fixed cost. D. discretionary variable...

Costs that result from an organization's ownership or use of facilities and its basic organizational structure are termed:

Costs that result from an organization's ownership or use of facilities and its basic organizational structure are termed:  A. discretionary...

A variable cost that has a definitive physical relationship to the activity measure is called a(n):

A variable cost that has a definitive physical relationship to the activity measure is called a(n):  A. discretionary cost. B. engineered cost. C....

Within the relevant range, a curvilinear cost function can sometimes be graphed as a:

Within the relevant range, a curvilinear cost function can sometimes be graphed as a:  A. straight line. B. jagged line. C. vertical line. D....

Within the relevant range of activity, costs:

Within the relevant range of activity, costs:  A. can be estimated with reasonable accuracy. B. can be expected to change radically. C. exhibit...

The relevant range is that range of activity:

The relevant range is that range of activity:  A. where a company achieves its maximum efficiency. B. where units produced equal units sold. C....

Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range of activity?

Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range of activity?  A. Semivariable cost. B....

Richard Hamilton has a fast-food franchise and must pay a franchise fee of $35,000 plus 3% of gross sales. In terms of cost behavior, the fee is a:

Richard Hamilton has a fast-food franchise and must pay a franchise fee of $35,000 plus 3% of gross sales. In terms of cost behavior, the fee is a:  A....

A mixed cost is often known as a:

A mixed cost is often known as a:  A. semivariable cost. B. step-fixed cost. C. variable cost. D. curvilinear cost. E. discretionary cost. Answer: A....

A cost that has both a fixed and variable component is termed a:

A cost that has both a fixed and variable component is termed a: A. step-fixed cost. B. step-variable cost. C. semivariable cost. D. curvilinear cost. E....

Each of Davidson's production managers (annual salary cost, $45,000) can oversee 60,000 machine hours of manufacturing activity. Thus, if the company has 50,000 hours of manufacturing activity, one manager is needed; for 75,000 hours, two managers are needed; for 125,000 hours, three managers are needed; and so forth. Davidson's salary cost can best be described as a:

Each of Davidson's production managers (annual salary cost, $45,000) can oversee 60,000 machine hours of manufacturing activity. Thus, if the company...

A review of Parry Corporation's accounting records found that at a volume of 90,000 units, the variable and fixed cost per unit amounted to $8 and $4, respectively. On the basis of this information, what amount of total cost would Parry anticipate at a volume of 85,000 units?

A review of Parry Corporation's accounting records found that at a volume of 90,000 units, the variable and fixed cost per unit amounted to $8 and $4,...

Which of the following financial attributes should not be used to measure inventory?

Which of the following financial attributes should not be used to measure inventory? A. Historical cost B. Current replacement cost C. Net realizable...

Net realizable value is used to measure which inventory?

Net realizable value is used to measure which inventory? A. Agricultural inventory B. Minerals C. Commodities held by broker-traders D. All of these...

Net realizable value is the general rule for valuing which inventory?

Net realizable value is the general rule for valuing which inventory? A. Commodities held by broker-traders B. Computer components held for sale C....

Commodity broker-traders

Commodity broker-traders A. Produce commodities such as rice, corn or precious metals B. Hold inventory primarily to sell in the near term and generate...

Commodities of broker-traders are measured at

Commodities of broker-traders are measured at A. Fair value B. Fair value less cost of disposal C. Cost D. Current replacement cost Answer: B....

An example of an inventory accounting policy that should be disclosed is

An example of an inventory accounting policy that should be disclosed is  A. Effect of inventory profit caused by inflation B. Classification...

When portion of inventory has been pledge as security for s loan

When portion of inventory has been pledge as security for s loan A. The value of the inventory pledged should be deducted from the debt B. An equal...

If a material amount of inventory has been ordered through a formal purchase contract at the end of reporting period for future delivery at firm prices

If a material amount of inventory has been ordered through a formal purchase contract at the end of reporting period for future delivery at firm prices A....

The credit balance that arises when a loss on a purchase commitment is recognized should be

The credit balance that arises when a loss on a purchase commitment is recognized should be A. Presented as a current liability B. Suntracted from...

When the cost of goods sold method is used to record inventory at net realizable value

When the cost of goods sold method is used to record inventory at net realizable value A. There is a direct reduction in the selling price B. A loss...

Which method may be used to record a loss due to a price decline in the value of inventory?

Which method may be used to record a loss due to a price decline in the value of inventory? A. Loss method B. Sales method C. Cost of goods sold...

Lower of cost and net realizable value as it applies to inventory is best describes as the

Lower of cost and net realizable value as it applies to inventory is best describes as the A. Reporting of a loss when there is a decrease in the...

Lower of cost and net realizable value

Lower of cost and net realizable value A. Gives the lowest valuation if applied to the total inventory B. Gives the lowest valuation if applied to...

LCNRV of inventory

LCNRV of inventory A. Is always either the net realizable value or cost B. Should always be equal to net ralizable value C. May sometimes be less...

Which of the following statements is true regarding inventory write down and reversal of write down?

Which of the following statements is true regarding inventory write down and reversal of write down? A. Rversal of inventory writedown is prohibited B....

Which statement is incorrect regarding LCNRV?

Which statement is incorrect regarding LCNRV? A. Net realizable value is the selling price kess estimated cost to complete and estimated cost of...

Which of the following is not an acceptable method of applying the LCNRV?

Which of the following is not an acceptable method of applying the LCNRV? A. Inventory location B. Group method C. Individual item D. Total inventory Answer: A....

Inventories are usually written down to net realizable value

Inventories are usually written down to net realizable value A. Item by item B. By classification C. By total D. By segment Answer: A. Item...

Net realizable value is

Net realizable value is A. Current replacement cost B. Estimated selling price C. Estimated selling price less estimated cost to complete D. Estimated...

Inventory should be measured at

Inventory should be measured at A. Lower of cost and fair value B. Lower of cost and net ralizable value C. Lower of cost and net selling price D....

How should import duties be dealt with when valuing inventory at LCNRV?

How should import duties be dealt with when valuing inventory at LCNRV? A. Added to cost B. Ignored C. Deducted in arriving at net realizable value D....

How should prompt payment discount be dealt with when valuing inventory at LCNRV?

How should prompt payment discount be dealt with when valuing inventory at LCNRV? A. Added to cost B. Ignored C. Deducted in arriving at net realizable...

How should trade discounts be dealt with when valuing inventory at LCNRV?

How should trade discounts be dealt with when valuing inventory at LCNRV? A. Added to cost B. Ignored C. Deducted in arriving at net realizable value D....

How should sale staff commission be dealt with when valuing inventory at LCNRV?

How should sale staff commission be dealt with when valuing inventory at LCNRV? A. Added to cost B. Ignored C. Deducted in arriving at net realizable...