Question

278. In a period of rising costs, which inventory valuation method would a company likely choose if they want to have the highest possible balance of inventory on the balance sheet?
     1. Weighted-average cost.                                        B) FIFO.

C) LIFO.                                                                    D) Periodic.

279. Which of the following is a negative sign that a company is not selling its inventory quickly?
     1. A high inventory turnover ratio.
     2. Both a high inventory turnover ratio and a low average days in inventory.
     3. A low average days in inventory.
     4. A low inventory turnover ratio.

Sales revenue $440,000 Advertising expense 60,000 Interest expense 10,000 Salaries expense 55,000 Utilities expense 25,000 Income tax expense 45,000 Cost of goods sold 180,000

298) What is net income?

A) $120,000.                    B) $65,000.                      C) $110,000.                    D) $60,000.

299. When a firm gets riskier what will happen to its bonds
     1. the stated interest rate of the bonds will go down
     2. the stated interest rate of the bonds will not change
     3. there is no definite answer
     4. the stated interest rate of the bonds will go up
300. For a journal entry with only two lines, the following entry is valid: Decrease in Owners' Equity, Increase in Dividends.
     1. False                                                                     B) True

Answer 1

A)FIFO

Inventory purchased first will be sold first and hence, inventory balance in balance sheet would be later purchased items having higher costs

Which of the following is a negative sign that a company is not selling its inventory quickly?

D. · A low inventory turnover ratio.

Inventory turnover ratio = Cost of goods sold/Average Inventory

A low ratio means huge inventory pile up

Net income = 65,000

i.e. B

i.e. Sales – All expenses

B. · the stated interest rate of the bonds will not change

The expected rate will change and value of bonds will decrease

But no change in stated rate of interest

For a journal entry with only two lines, the following entry is valid: Decrease in Owners' Equity, Increase in Dividends.

Decrease in Equity is debited and increase in Dividend is credited

Hence, the answer is B)True