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?
$128,000
$160,000
$110,000
$88,000
4. In a period of rising prices, which inventory method is best to use for tax purposes?
FIFO
Average cost
Specific Identification
LIFO
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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The solution explains some multiple choice questions in accounting
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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 ...
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