FAR — Financial Accounting & Reporting — Quiz 48

Questions in this quiz (10)

1. Which accounting error would overstate ending inventory?

   • Excluding goods in transit owned by the company
   • Including goods held on consignment from another company
   • Recording purchase returns
   • Recording purchase discounts

2. Which accounting error would understate cost of goods sold?

   • Understating ending inventory
   • Overstating ending inventory
   • Overstating purchases
   • Recording freight-in

3. Which financial statement item is affected by inventory valuation methods?

   • Cost of goods sold
   • Accounts payable
   • Cash
   • Notes payable

4. Why is inventory accounting important for financial reporting?

   • It determines employee wages
   • It affects assets, expenses, and net income
   • It eliminates accounting estimates
   • It simplifies financial reporting

5. Which of the following best describes property, plant, and equipment (PPE)?

   • Assets held for resale
   • Long-term tangible assets used in operations
   • Short-term investments
   • Intangible assets

6. Which asset is not depreciated?

   • Equipment
   • Buildings
   • Land
   • Vehicles

7. Which cost is included in the acquisition cost of equipment?

   • Advertising costs
   • Installation and transportation costs
   • Administrative salaries
   • Maintenance costs

8. Which process allocates the cost of a tangible asset over its useful life?

   • Amortization
   • Depreciation
   • Depletion
   • Impairment

9. Which depreciation method allocates equal expense each year?

   • Double-declining balance
   • Straight-line method
   • Units-of-production
   • Sum-of-the-years-digits

10. Which formula calculates straight-line depreciation?

    • (Cost – Salvage Value) ÷ Useful Life
    • Cost × Depreciation Rate
    • Cost ÷ Useful Life
    • Salvage Value ÷ Useful Life