Question

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20. Use the data below to answer the following questions: Date Expiation Units Unit Cost Total Cost Jan. 1 Beginning inventory 500 $40 $20,000 May 9 Purchase 350 $41 $14,350 Sep25 Purchase 200 $42 8,400 Nov 5. Purchase 700 $43 $30,100 1,750 $72,850 Assume the company uses LIFO and 1,110 units were sold during the period. Calculate cost of goods sold a) $44,900 b) 27,950 c) 26,150 d) 46,700 21. Which of the following is false regarding the notes to a company's financial statements ? a) The notes to the financial statements are an important part of the financial statements b) Financial statements are required, while the notes to the financial statements are optional c) The notes to the financial statements include additional details about information found in the financial statements d) One example of a note is a summary of the firm's key accounting policies 22. Conservatism in accounting context means: a) Companies are required to follow strictly GAAP for those transactions that are material b) A company should choose the alternative that will result in reporting less net income or less assets c) A company should disclose all information that is important to an investor or creditor d) When an asset is purchased, it is recorded at its cost. 23. When a company receives cash in advance of providing goods and/or services: a) Cash decreases and revenues decrease b) Cash increases and liabilities increase c) Liabilities increase and revenues increase d) Cash increases and revenues increase

Answer 1

20. Under LIFO method, Cost of goods sold is calculated at the valued of inventory which was last purchased.

• Cost of goods sold for 1110 units= 700*$43+200*$42+210*$41= $47110

21. Financial statements are required while notes to accounts are optional is FALSE. Notes to accounts are integral part of financial statements which give additional details about the company and should not be ignored.

22. Conservatism means company should alternative that reports less net income and or less net assets. This is because  All probable losses are recorded when they are discovered, while gains can only be registered when they are fully realized.

23. When a company receives cash in advance, cash increases and liabilities increase. the journal entry for the same would be

• Cash
• Advance (liability)