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    Multiple Choice Accounting Questions

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    1. Which of the following terms best describes the assumption made in applying the four inventory methods?
    Cost flow
    Goods flow
    Asset flow
    Physical flow

    2. An understatement of year 1's beginning inventory will:
    Cause year 2's margin to be overstated
    Cause year 1's cost of goods sold to be understated
    Cause year 2's gross margin to be understated
    Have no effect on year 1's gross margin

    3. A retail store has goods available for sale of $2 million at retail and $1,100,000 at cost, and ending inventory of $160,000 at retail. What is the estimated cost of ending inventory?

    4. In a period of rising prices, which inventory method is best to use for tax purposes?
    Average cost
    Specific Identification

    5. Cash consists of all of the following except.
    Deposits in savings accounts
    Money orders from customers
    Compensating balances
    IOU's from customers

    6. An NSF check should appear in which section of the bank reconciliation?
    Deduction from the balance per books
    Deductions from the balance per banks
    Addition to the balance per books
    Addition to the balance per bank

    7. The matching rule
    Results in the recording of a known amount for bad-debt losses
    Necessitates the recording of an estimated amount for bad debts
    Requires that all bad-debt losses be recorded when an individual
    customer defaults
    Is violated when the allowance method is employed

    8. One might infer from a debt balance in Allowance for Uncollectable Accounts that
    A posting error has been made
    Uncollectable Accounts Expense has been overestimated
    The accounts receiving aging method apparently being used
    More has been written off than had been estimated

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    Solution Preview

    1. Cost flow - The four inventory methods assume different cost flows that is how the costs should flow from inventory to cost of goods sold

    2. Cause year 1's cost of goods sold to be understated - Cost of goods sold = Beginning Inventory + Purchases - Ending Inventory. So if beginning inventory is understated, the cost of goods sold would also be ...

    Solution Summary

    The solution explains some multiple choice questions in accounting