Q. What is the journal entry for recording the sale of goods for cash?
A.
Debit Cash, Credit Sales Revenue
B.
Debit Sales Revenue, Credit Cash
C.
Debit Accounts Receivable, Credit Cash
D.
Debit Cash, Credit Accounts Receivable
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Solution
When goods are sold for cash, the cash account is debited to increase it, and sales revenue is credited to recognize the income.
Correct Answer:
A
— Debit Cash, Credit Sales Revenue
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Q. Which accounting standard requires companies to recognize revenue when it is earned?
A.
GAAP
B.
IFRS
C.
Both GAAP and IFRS
D.
Neither GAAP nor IFRS
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Solution
Both GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) require revenue to be recognized when it is earned.
Correct Answer:
C
— Both GAAP and IFRS
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Q. Which inventory valuation method is most commonly used for tax purposes in the U.S.?
A.
FIFO
B.
LIFO
C.
Weighted Average
D.
Specific Identification
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Solution
LIFO (Last In, First Out) is commonly used for tax purposes in the U.S. because it can result in lower taxable income during inflationary periods.
Correct Answer:
B
— LIFO
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Q. Which inventory valuation method is most likely to result in lower taxes during periods of rising prices?
A.
FIFO
B.
LIFO
C.
Weighted Average
D.
Specific Identification
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Solution
LIFO (Last In, First Out) results in higher cost of goods sold during periods of rising prices, leading to lower taxable income.
Correct Answer:
B
— LIFO
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Q. Which inventory valuation method uses the most recent costs for ending inventory?
A.
FIFO
B.
LIFO
C.
Weighted Average
D.
Specific Identification
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Solution
LIFO (Last In, First Out) assumes that the most recently purchased items are sold first, thus using the most recent costs for ending inventory.
Correct Answer:
B
— LIFO
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Q. Which of the following is a characteristic of straight-line depreciation?
A.
Variable expense over time
B.
Consistent expense each period
C.
Accelerated expense in early years
D.
No expense in the first year
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Solution
Straight-line depreciation allocates an equal amount of depreciation expense each period over the useful life of the asset.
Correct Answer:
B
— Consistent expense each period
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