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Q.1. The Acme Medical Equipment Company has used the Last-In First-Out (LIFO) inventory method for the...

Q.1. The Acme Medical Equipment Company has used the Last-In First-Out (LIFO) inventory method for the 15 years they have existed. Acme's operation has grown substantially, and the CEO believes that the company should now use the FIFO inventory method for this coming year end. This action meets the requirements for consistency.

True

False

Q.2. If the euro is trading at 1.2500 in U.S. dollars (this exchange rate is for illustration only), and you were spending your U.S. dollar in Europe in part of the “euro area,” then to buy products priced in euros, it would take:

A.

one-third again as much (1.33) in U.S. dollars.
B.

one-quarter again as much (1.25) in U.S. dollars.
C.

three-quarters again as much (.75) in U.S. dollars.
D.

None of these is correct.

Q.3. True or False? The line chart is one of four basic chart styles.

True

False

Solutions

Expert Solution

Q.1. The Acme Medical Equipment Company has used the Last-In First-Out (LIFO) inventory method for the 15 years they have existed. Acme's operation has grown substantially, and the CEO believes that the company should now use the FIFO inventory method for this coming year end. This action meets the requirements for consistency.

False

Consistency requires that the same method be followed year after year so that comparisons of financial results and financial position is possible on a fair basis. Changing from LIFO to FIFO will mean change in accounting method and hence violation of the consistency principle.

Consistency principle allows changes in accounting policy only if it would improve financial reporting due to changed circumstances and would fair.

Q.2. If the euro is trading at 1.2500 in U.S. dollars (this exchange rate is for illustration only), and you were spending your U.S. dollar in Europe in part of the “euro area,” then to buy products priced in euros, it would take:

B.

one-quarter again as much (1.25) in U.S. dollars.

Q.3. True or False? The line chart is one of four basic chart styles.

True

jeff jeffy answered 3 months ago
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