ACC 310 Reading Checks
1. Record transactions in the journal (ex. general journal) 2. Post journal entries to the general ledger 3. Prepare and post adjusting journal entries 4. prepare the financial statements 5. Prepare and post closing entries
Beginning with step #1, identify in order the first five major steps in the accounting cycle. Description Post journal entries to the general ledger Prepare and post closing entries Prepare the financial statements Record transactions in the journal (ex. general journal) Prepare and post adjusting journal entries
b. Money orders received from customers d. Foreign currencies on deposit in foreign banks f. Checking and savings accounts
Besides coins and currency, which of the following items are also classified as "Cash" on the balance sheet? (check all that apply) Select one or more: a. Postdated checks received from a customer b. Money orders received from customers c. Travel advance given to an employee d. Foreign currencies on deposit in foreign banks e. Certificates of Deposit (CDs) f. Checking and savings accounts
International Accounting Standards Board
Complete the following sentence: "Whereas the Financial Accounting Standards Board establishes GAAP for U.S. companies, the _______________________ establishes IFRS for many countries outside of the U.S."
a. trade discount
Complete the following sentence: A company which offers a customer a price reduction as an incentive to purchase a higher quantity of inventory is offering the customer a: Select one: a. trade discount. b. sales discount. c. purchase discount.
c. decrease
Complete the following sentence: All else being equal, as the "Allowance for Doubtful Accounts" balance increases, the net realizable value of the company's accounts receivable will: Select one: a. increase. b. stay the same. c. decrease.
c. the "Loss on Write-Down of Inventory" account.
Complete the following sentence: If a company uses the allowance method to write-down its inventory, it will debit ______. Select one: a. the "Cash" account. b. the "Cost of Goods Sold" account. c. the "Loss on Write-Down of Inventory" account. d. the "Inventory" account. e. the "Sales Revenue" account.
a. in the same accounting period as the sale of the product or service occurred.
Costs expected to be incurred related to an assurance-type warranty should be recorded: Select one: a. in the same accounting period as the sale of the product or service occurred. b. in the accounting period in which warranty costs actually occur regardless of when the sale of the product or service occurred.
be overstated
Fill in the blank: In a given year, when cost of goods sold is understated (too low) due to an inventory error, net income will
least likely
Fill-in-the-blank: When an accounting valuation is uncertain or alternative accounting valuations are equally possible, accountants should choose the one that is the __________ to overstate a company's assets and net income in the current period.
a. expensed in the period incurred b. capitalized in the period incurred c. capitalized in the period incurred
For each of the following scenarios, indicate whether the expenditure described should be (1) capitalized or (2) expensed in the period incurred. a. An expenditure which maintains the existing benefits provided by the asset. b. An addition to an existing asset which increases the expected future economic benefits derived from the asset. c. An expenditure which extends the life of the asset.
a. FIFO b. LIFO
For each of the following statements, indicate whether the FIFO, LIFO, or Average Cost method is being described. a. This method assumes the oldest inventory items are sold first. b. This method assumes the oldest inventory items remain in ending inventory.
a. write-down the inventory.
For purposes of applying the lower of cost or net realizable value (LCNRV) rule to inventory balances, if the net realizable value is lower than the inventory's cost, the company should: Select one: a. write-down the inventory. b. not write-down the inventory.
c. applying the rules to each individual inventory item
GAAP permits the LCNRV and LCM rules to be applied to each individual item in inventory, to each major inventory category, or to the total of the inventory balance. Out of these three choices, which is the most common? Select one: a. applying the rules to the total inventory balance b. applying the rules to each major inventory category c. applying the rules to each individual inventory item
b. False
GAAP requires companies to write-down the balance sheet value of their inventory in the period the inventory is sold rather than the period in which the decline in value takes place. Select one: a. True b. False
b. The overdraft amount should be reported as a current liability.
If a company's cash account is overdrawn (that is, they spent more than they have), where should the amount of the bank overdraft be reported on the financial statements? Select one: a. The overdraft amount should be reported as an expense on the income statement. b. The overdraft amount should be reported as a current liability. c. The overdraft amount should be reported as a loss on the income statement. d. The overdraft amount should be reported as a long-term asset. e. The overdraft amount should be reported as a current asset.
a. Economic entity assumption (also called the reporting entity assumption)
In accounting, a reporting entity, such as a corporation, prepares its own financial records separately from the personal financial records of its owners. Which accounting assumption is being followed when the reporting entity does this? Select one: a. Economic entity assumption (also called the reporting entity assumption) b. Period of time assumption c. Going concern assumption d. Monetary unit assumption
b. Going concern assumption
In accounting, unless told otherwise, we can assume the amounts shown on the financial statements assume the company will continue to operate in the foreseeable future. Which accounting assumption is being followed when the amounts shown reflect this assumption? Select one: a. Economic entity assumption (also called the reporting entity assumption) b. Going concern assumption c. Period of time assumption d. Monetary unit assumption
Assets - debit Losses - debit Liabilities - credit Expenses - debit Revenues - credit Gains - credit
Indicate the normal balance for each of the following types of accounts: normal balance = the side of the t-account which increases an account's balance Assets Losses Liabilities Expenses Revenues Gains
Losses - temporary Expenses - temporary Revenues - temporary Gains - temporary Dividends - temporary Assets - permanent Liabilities - permanent
Indicate whether each of the following types of accounts is a temporary or a permanent account. Losses Expenses Revenues Gains Dividends Assets Liabilities
a. Am asset a company constructs as a discrete project for sale or lease to others. b. An asset a company constructs for its own use.
Interest costs incurred related to which of the following types of assets qualify for interest capitalization? (check all that apply) Select one or more: a. An asset a company constructs as a discrete project for sale or lease to others. b. An asset a company constructs for its own use. c. An asset ready for its intended use at the time of purchase. d. An asset a company manufactures and sells on a routine basis.
a. non-interesting-bearing notes b. interest-bearing notes
Interest income (also known as interest revenue) is earned on which of the following types of notes receivable? (check all that apply) Select one or more: a. non-interest-bearing notes b. interest-bearing notes
a. the lower of cost or net realizable value (LCNRV) rule
Internationally, which rule does IFRS follow with respect to the write-down of its inventories regardless of the inventory cost flow assumption? Select one: a. the lower of cost or net realizable value (LCNRV) rule b. lower of cost or market (LCM) rule
a. The estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.
Under GAAP, for purposes of applying the lower of cost or market (LCM) rule to inventory balances, net realizable value is defined as: Select one: a. The estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. b. The estimated selling price in the ordinary course of business plus reasonably predictable costs of completion, disposal, and transportation. c. The estimated selling price in the ordinary course of business divided by reasonably predictable costs of completion, disposal, and transportation. d. The estimated selling price in the ordinary course of business.
b. the net realizable value less a normal profit margin.
Under GAAP, for purposes of applying the lower of cost or market (LCM) rule to inventory balances, the "floor" is equal to: Select one: a. the net realizable value plus a normal profit margin. b. the net realizable value less a normal profit margin. c. the estimated selling price in the ordinary course of business plus reasonably predictable costs of completion and disposal. d. the net realizable value.
a. When the inventory purchase has shipping terms of F.O.B. shipping point.
When a company is the buyer of inventory, under which condition should freight charges typically become part of the inventory's cost? Select one: a. When the inventory purchase has shipping terms of F.O.B. shipping point. b. When the inventory purchase has shipping terms of F.O.B. destination point.
d. an expense (or loss) account
When a company makes a journal entry to record a contingent liability, which type of account is most likely being debited? Select one: a. a liability account b. a revenue (or gain) account c. an asset account d. an expense (or loss) account
b. an asset account
When a cost is "capitalized", which type of account should be debited at the time the cost is incurred? Select one: a. an expense account b. an asset account c. a revenue account d. a contra-revenue account e. a contra-asset account f. a contra-liability account g. a liability account
b. When the customer forfeits the deposit.
When is a refundable deposit from a customer considered to be revenue? Select one: a. As soon as the customer receives their deposit back from the corporation. b. When the customer forfeits the deposit. c. As soon as the customer pays the deposit to the corporation.
d. At the time of the asset's purchase.
When should an asset retirement obligation (ARO) related to the purchase of PP&E be initially capitalized? Select one: a. Never b. At the time of the asset's disposal. c. Over the life of the asset. d. At the time of the asset's purchase.
c. transposition error
When two digits in a number are mistakenly reversed (ex. "890" is mistakenly written as "980"), an accountant will often call this a(n): Select one: a. disposition error. b. omission error. c. transposition error. d. preposition error.
b. perpetual system
Which inventory system allows a company's managers to know the cost of its inventory on hand at any time? Select one: a. periodic system b. perpetual system
a. periodic system b. perpetual system
Which inventory system(s) require(s) a company to take a physical count of inventory on hand at least once a year? (check all that apply) Select one or more: a. periodic system b. perpetual system
b. the lower of cost or market (LCM) method
Which inventory valuation method applies if a company uses the LIFO cost flow assumption? Select one: a. the lower of cost or net realizable value (LCNRV) method b. the lower of cost or market (LCM) method
b. Losses d. Expenses
Which of the following decreases a company's net income? (check all that apply) Select one or more: a. Gains b. Losses c. Revenues d. Expenses
b. the LIFO method
Which of the following does IFRS not allow? Select one: a. the net method for recording purchase discounts b. the LIFO method c. the periodic inventory system d. the perpetual inventory system e. the FIFO method f. the average cost method
a. source documents b. the financial statements c. records used to organize and store accounting information d. the accounting
Which of the following is (are) a component(s) of an accounting system? (check all that apply) Select one or more: a. source documents b. the financial statements c. records used to organize and store accounting information d. the accounting equation
a. Measurement characteristics used to measure and report the transactions, events, and arrangements which affect financial statements b. Fundamental principles of accounting c. Definitions of basic financial statement elements e. Objectives of financial reporting
Which of the following is established by Statements of Financial Accounting Concepts? (check all that apply) Select one or more: a. Measurement characteristics used to measure and report the transactions, events, and arrangements which affect financial statements b. Fundamental principles of accounting c. Definitions of basic financial statement elements d. Qualities of useful financial accounting information e. Objectives of financial reporting
b. Cash and other assets which are expected to be converted into cash or consumed within one year or the operating cycle, whichever is longer.
Which of the following is the best definition of a current asset? Select one: a. Cash and other assets which are expected to be converted into cash or consumed within one year or the operating cycle, whichever is shorter. b. Cash and other assets which are expected to be converted into cash or consumed within one year or the operating cycle, whichever is longer.
d. Purchases - Purchase Discounts - Purhase Returns and Allowances + Freight-In
Which of the following is the best formula for determining a company's "net purchases"? Select one: a. Purchases - Purchase Discounts - Purchase Returns and Allowances b. Purchases - Purchase Discounts - Purchase Returns and Allowances - Freight-In c. Purchases + Purchase Discounts + Purchase Returns and Allowances + Freight-In d. Purchases - Purchase Discounts - Purchase Returns and Allowances + Freight-In
b. vacation pay c. sick pay
Which of the following items qualify as a "compensated absence"? (check all that apply) Select one or more: a. long-term fringe benefits b. vacation pay c. sick pay d. stock options
b. the direct write-off method
Which of the following methods is not generally accepted for recording bad debts? Select one: a. the allowance method b. the direct write-off method
b. Dollar-Value LIFO Method
Which of the following methods requires a company to keep less detailed inventory records with respect to physical quantities on hand and their respective costs? Select one: a. LIFO Method b. Dollar-Value LIFO Method
d. FASB
Which standard-setting body issues the Statements of Financial Accounting Concepts (SFAC) that form the basis of GAAP in the United States? Select one: a. IASB b. SEC c. IRS d. FASB
a. the periodic inventory system
Which type of inventory system does not record the cost of the inventory sold at the time of sale? Select one: a. the periodic inventory system b. the perpetual inventory system
e. The Financial Accounting Foundation (FAF)
Who appoints the board members of the FASB? Select one: a. The Emerging Issues Task Force (EITF) b. The President of the United States c. The Financial Accounting Standards Advisory Council d. The current chairperson for the SEC e. The Financial Accounting Foundation (FAF)
a. A current liability is one expected to be satisfied or met within one year or the normal operating cycle, whichever is longer.
With respect to determining whether a given liability should be classified on the balance sheet as being "current" or "long-term", which of the following is the correct definition of liability classified as being "current"? Select one: a. A current liability is one expected to be satisfied or met within one year or the normal operating cycle, whichever is longer. b. A current liability is one expected to be satisfied or met within one year or the normal operating cycle, whichever is shorter.
a. It should capitalize the leasehold improvements and decreciate them over their economic life or the life pf the lease, whichever is shorter.
Wolfpack Corp. leases office space in a large building in downtown Raleigh. Wolfpack (the lessee) has signed a lease contract to use this space for 5 years. At the beginning of the lease, Wolfpack spent $10,000 in leasehold improvements. How should these Wolfpack account for these improvements? Select one: a. It should capitalize the leasehold improvements and decreciate them over their economic life or the life of the lease, whichever is shorter. b. It should not capitalize any of the leasehold improvement costs - rather, it should expense the costs in full in the period incurred. c. It should capitalize the leasehold improvements but should not depreciate them in any way. d. It should capitalize the leasehold improvements and decreciate them over their economic life or the life of the lease, whichever is longer.
b. 2%
Wolfpack Corp. sold inventory on account with terms 2/15, n/45. What is the sales discount percentage being offered to the customer if they pay within the discount period? Select one: a. 45% b. 2% c. 20% d. 30% e. 15% f. 13%
d. Building 25,000 Sales Revenue 25,000
A person donated a building with a value of $25,000 to a business in downtown Raleigh. This donation is not a part of the business's on-going operations, and the person donating this property is not an owner of the business. Which of the following shows the correct journal entry the business should make when it receives this building? Select one: a. Building25,000 Accumulated Depreciation 25,000 b. Building25,000 Common Stock 25,000 c. Building25,000 Gain on Receipt of Donated Property 25,000 d. Building25,000 Sales Revenue 25,000
a. have been incurred but not yet paid
Accrued liabilities result when expenses: Select one: a. have been incurred but not yet paid. b. have been paid but not yet incurred.
e. a decrease to total assets and a decrease to total stockholders' equity.
After applying the lower of cost or market (LCM) rule, if a company writes-down its inventory, the effect on the accounting equation is: Select one: a. a decrease to total assets and an increase to total liabilities. b. a decrease to total assets and a decrease to total liabilities. c. a increase to total assets and an increase to total liabilities. d. a decrease to total liabilities and a decrease to total stockholders' equity. e. a decrease to total assets and a decrease to total stockholders' equity. f. an increase to total assets and a decrease to total stockholders' equity.
c. sinking fund
A cash account into which a company deposits cash for a specific future purpose is often referred to as a: Select one: a. current fund. b. floating fund. c. sinking fund. d. liquid fund.
a. The company's obligation is based on services the employee has already performed. b. The payment amount can be reasonably estimated. c. The obligation related to rights that either vest or accumulate. d. Payment for the compensated absence is probable.
A company should accrue a liability for its employees' compensated absences if the following condition(s) is(are) met: (Check all that apply) Select one or more: a. The company's obligation is based on services the employee has already performed. b. The payment amount can be reasonably estimated. c. The obligation related to rights that either vest or accumulate. d. Payment for the compensated absence is probable.
b. beginning inventory + net purchases.
A company's cost of goods available for sale is equal to: Select one: a. net purchases + ending inventory. b. beginning inventory + net purchases. c. beginning inventory + ending inventory. d. beginning inventory - net purchases. e. cost of goods sold.
a. a liability determined by operating activities b. a contingent liability c. a contractual liability d. a liability determined by operating activities e. a contractual liability
A given current liability tends to fall into one of three groups: a contractual liability, a liability determined by operating activities, and a contingent liability. For each of the following liabilities, indicate which one of these three groups the liability best falls under. a.Income taxes payable b.Warranties payable c.Accounts payable d.Unearned Revenues e.Property taxes payable
a. Working-in-process inventory b. Finished goods inventory c. Raw materials inventory
A manufacturing company has which of the following types of inventory accounts? (check all that apply) Select one or more: a. Work-in-process inventory b. Finished goods inventory c. Raw materials inventory
d. a line of credit
An agreement between the corporation and a creditor allowing the corporation to borrow up to a prearranged limit is commonly referred to as: Select one: A. deferred revenue. B. a loss contingency. C. commercial paper. D. a line of credit. E. a refundable deposit.
b. Net income will be overstated.
Assume a company failed to record the purchase of inventory on account, and also assume its ending inventory is correctly stated. What will be the effect, if any, on net income in the year the purchases error occurred? Select one: a. Net income will be understated. b. Net income will be overstated. c. Net income will not be affected.
a. FIFO b. LIFO c. FIFO
Assuming inventory costs are rising over time, for each of the following statements, indicate whether the FIFO, LIFO, or Average Cost method is being described. a. This method produces the highest income income taxes. b. This method produces the lowest cost of ending inventory. c. This method produces the lowest cost of goods sold.
b. The rate the employee earns in the period.
At the end of the current accounting period, when a company accrues an expense for a compensated absence expected to occur in a future accounting period, which compensation rate is most often used? Select one: a. The rate the employee is expected to earn in future accounting periods. b. The rate the employee earns in the current period.
a. Income Statement b. Balance Sheet c. Statement of Cashflows d. Statement of Shareholders' Equity
Match each of the following descriptions to their financial statement. a. Summarizes the results of operating activities for the period. b. Summarizes the amounts of the assets, liabilities, and shareholders' equity at a point in time. c. Summarizes the cash receipts and cash disbursements during the period. d. Summarizes how shareholder equity claims changed during the period.
a. Accrued Expense b. Deferred Revenue c. Deferred Expense d. Accrued Revenue
Match the definition on the left with the correct term on the right. a. A cost that has been incurred for which cash has not yet been paid. b. Cash has been received before the related revenue has been earned. c. Cash has been paid before the related expense has been incurred. d. An amount that has been earned for which cash has not yet been received.
a. Should b. Should c. Should d. Should e. Should
On 1/1/X1, ABC Corp. purchased a parcel of land as the site for a new building. Below are various costs incurred related to this new land. Required: Indicate whether the cost should or should not be capitalized as part of the cost of the new land. Item Should or Should NOT be included as part of the land's cost: a.The land's contract price b.Commissions paid related to the land purchase c.Costs related to surveying the land d.Past due property taxes paid as part of the acquisition cost e.Costs related to demolishing an old building on the land. Note: The old building was demolished soon after as the land was purchased and never used by ABC Corp.
a. its original maturity date is three months or less.
On its balance sheet date, a company may generally classify a highly liquid, low risk, investment as a cash equivalent when: Select one: a. its original maturity date is three months or less. b. its original maturity date is less than twelve months. c. its original maturity date is six months or less. d. its original maturity date is three years or less. e. its original maturity date is four months or less.
a. timing differences b. errors
Prior to performing a bank reconciliation, a company's cash balance according to its bank statement will usually differ from its cash balance according to its accounting records due to which of the following? (check all that apply) Select one or more: a. timing differences b. errors
a. True
True or False: The accounts receivable subsidiary ledgers should be the source used by a company when preparing an aging analysis of its accounts receivables. Select one: a. True b. False
b. False
True or False: The gross profit method for estimating inventory may not be used if the inventory or its records have been destroyed. Select one: a. True b. False
b. False
True or False:Petty cash funds are often used to pay for purchases which are large in amount. Select one: a. True b. False
a. Verifiability b. Understandability c. Timeliness d. Comparability
The FASB has identified "enhancing" characteristics to the two fundamental characteristics of financial information. These "enhancing" characteristics are: (check all that apply) Select one or more: a. Verifiability b. Understandability c. Timeliness d. Comparability
a. free of error c. neutral representation d. complete representation
The FASB has identified common components of the fundamental characteristics of relevance and faithful representation. FASB has identified three components for each characteristic. Out of the six components listed below, which three are paired with the characteristic of faithful representation? Select one or more: a. free of error b. predictive value c. neutral representation d. complete representation e. confirmatory value f. materiality
c. materiality d. predictive value e. confirmatory value
The FASB has identified common components of the fundamental characteristics of relevance and faithful representation. FASB has identified three components for each characteristic. Out of the six components listed below, which three are paired with the characteristic of relevance? Select one or more: a. free of error b. neutral representation c. materiality d. predictive value e. confirmatory value f. complete representation
a. a company which uses the LIFO method for income tax purposes to also use the LIFO method for financial reporting purposes.
The LIFO conformity rule requires: Select one: a. a company which uses the LIFO method for income tax purposes to also use the LIFO method for financial reporting purposes. b. a company which uses the LIFO method for income tax purposes to use the FIFO method for financial reporting purposes. c. a company which uses the LIFO method for financial reporting purposes to also use the LIFO method for income tax purposes. d. a company which uses the LIFO method for financial reporting purposes to actually sell its inventory in a LIFO pattern.
d. Generally Accepted Accounting Principles
The acronym "GAAP" stands for: Select one: a. Generally Allowable Accounting Principles b. General Accounting and Auditing Principles c. Generally Accepted Auditing Principles d. Generally Accepted Accounting Principles
a. International Reporting Standards
The acronym "IFRS" stands for: Select one: a. International Financial Reporting Standards b. Internal Financial Reporting Standards c. Intercontinental Financial Reporting Standards
a. The transaction, event, or arrangement obligating the company has already occurred. b. The company has little or no discretion to avoid the future sacrifice of economic benefits. c. It must involve a present obligation that will be settled by a probable future sacrifice involving the transfer of assets, provision of services, or other use of assets at a specific or determinable date.
The employer's portion of FICA tax combined with federal and state unemployment taxes (FUTA and SUTA) are referred to as a company's: Select one: a. tax withholdings. b. payroll taxes. c. compensated absences. d. income taxes.
a. tax withholdings.
The employer's portion of FICA tax combined with federal and state unemployment taxes (FUTA and SUTA) are referred to as a company's: Select one: a. tax withholdings. b. payroll taxes. c. compensated absences. d. income taxes.
b. includes the interest on the note.
The face value amount for a non-interest-bearing note payable: Select one: a. does not include interest on the note. b. includes the interest on the note.
a. revenues
The inflows of assets or the settlement of obligations from selling goods and services to customers is called: Select one: a. revenues. b. expenses. c. dividends. d. retained earnings.
c. liabilities
The probable future sacrifices of economic benefits arising from present obligations of a company to transfer assets or provide services in the future to other entities as a result of past transactions or events are called: Select one: a. shareholders' equity. b. assets. c. liabilities.
a. True
The process of formally recording and reporting an item in the financial statements is commonly referred to as "recognition". Select one: a. True b. False
a. True
True or False:Thurman Corp. consigns a portion of its inventory to various stores along the East Coast. Any unsold inventory items at year-end should be reported as part of the consignor's inventory cost. Select one: a. True b. False
a. True
True or False: A permanent account is one whose account balance at the end of one period is carried forward to the next period. Permanent accounts should not be closed out. Select one: a. True b. False
b. False
True or False: Accounting standards require companies to only use the historical cost amounts on their year-end financial statements. Select one: a. True b. False
b. False
True or False: All contingent liabilities should be recorded and recognized in the liability section of the balance sheet. Select one: a. True b. False
b. False
True or False: Assuming a company is not using the specific identification method for determining the cost of its inventory, GAAP requires a company to choose a cost flow assumption which most closely resembles the physical flow of its inventory. Select one: a. True b. False
b. False
True or False: Companies should report the value of dividends payable in shares of stock rather than cash in the current liability section of their balance sheet. Select one: a. True b. False
b. False
True or False: GAAP requires a company to know the specific identity (ex. name) of the recipient before the settlement of the liability. Select one: a. True b. False
b. False
True or False: If debits equal credits on a trial balance, we can assume each account's balance is error-free. Select one: a. True b. False
a. True
True or False: In the United States, the system of interrelated objectives and fundamental concepts which dictate the nature, function, and limits of financial accounting and reporting is known as the Conceptual Framework. Select one: a. True b. False
b. False
True or False: Interests costs related to inventory which is routinely manufactured should be included in the cost of that inventory. Select one: a. True b. False
a. True
True or False: Land held for resale to customers should be classified as inventory rather than PP&E. Select one: a. True b. False
b. False
True or False: Short-term debt that is expected to be refinanced on a long-term basis may be excluded from the current liability classification if the company has either the intent or ability to refinance the obligation on a long-term basis. Select one: a. True b. False
a. True
True or False: The primary objective of financial reporting is to provide information to potential and existing creditors and investors which is useful in their decision-making processes. Select one: a. True b. False
a. True
True or False: The term liquidity refers to how quickly a company can convert its assets into cash in order to pay operating costs and liabilities as they become due. Select one: a. True b. False
b. False
True or False: All else being equal, the lower the estimate of bad debts becomes, the lower the net realizable value of a company's accounts receivables. Select one: a. True b. False
a. True
True or False: An auditor may apply the gross profit method to check the reasonableness of the reported cost of a company's inventory. Select one: a. True b. False
a. True
True or False: In order to speed up the cash collection of its accounts receivable, a company may finance its receivables by entering into a factoring arrangement. Select one: a. True b. False
b. False
True or False: Once the FASB has issued an Exposure Draft, the public is no longer permitted to comment on the proposed Accounting Standards Update. Select one: a. True b. False
a. True
True or False: Since 2002, the FASB and the IASB have been working towards converging their two sets of accounting standards. Select one: a. True b. False
a. True
True or False: The SEC requires U.S. companies who issue publicly traded securities within the U.S. capital markets to follow GAAP. Select one: a. True b. False