Question

1)A bank reconciliation is an analysis of the difference between the financial accounting records and the bank records to ensure the accurate ending cash balance.

True

False

2)The estimated value of sales returns should reduce gross sales in the period items are sold, not in the later period items are returned.

True

False

3)The lower-of-cost-or-market rule must be applied to each individual inventory item but not to groups of items

True

False

4)Which of the following assets would be classified as property, plant, and equipment?

Natural gas reserves expected to produce for more than a decade

Office building to be demolished in nine months

Financial securities expected to produce significant returns for the next seven years

Land held as a long-term investment

5)Since the purpose of depreciation is to match the total cost of the asset with the benefits to be derived from the asset, the costs of repairs and maintenance associated with the asset should be considered when choosing a depreciation method.

True

False

6)When goods are shipped FOB shipping point, the buyer has economic control of the inventory and must record the goods in its inventory accounts as soon as the goods are shipped.

True

False

Answer 1

Ans 1

False

Reason:-

It ensures correct reporting of ending bank balance in books as per bank statement.

Ans 2

True

Reason:-

It helps in correct reporting of revenue so that there is no mismatch of profit.

Ans 3

False

Reason:-

Lower of cost or market value also applies to group of items.

Ans 4

Natural gas reserves expected to produce for more than a decade

Logic:-

Natural gas reserves comes under the category of property because it gives benefits to an organization for more than a year.

Ans 5 False

Reason:-

Maintenance cost is transferred to profit and loss account as expenditure.

Ans 6 True

Logic:-

Under FOB as soon as goods are shipped, risk and ownership in assets is transferred to buyer.

Please hit like and in case of doubt, please comment.