Question

QUESTION 1

Concerning accounting for warranties, which of the following statements is true?

		The expense warranty accrual method is the only method accepted for federal income tax purposes.
		The modified cash basis is the method used for for tax reporting.
		The sales warranty accrual method uses a percentage of completion approach to warranty revenue recognition.
		The modified cash basis recognizes warranty expense when cash is received on the sale.

QUESTION 2

Which of the following is the most appropriate way to display liabilities on the balance sheet?

		nearness to maturity
		relative likelihood of payment
		alphabetically by payee
		all of the above

QUESTION 3

Which of the following would not be an acceptable method of presenting current liabilities on the balance sheet?

		alphabetically
		in order of their average time to maturity
		in order of their liquidation preference
		in order of their amount (largest to smallest)

QUESTION 4

Which of the following statements is not true?

		Loss contingencies should be disclosed if there is just a reasonable possibility of a loss.
		Indirect guarantees should normally be disclosed by footnote, not by accrual.
		In the case of loss contingencies, accrual can be made even if the exact payee and payment date are not known.
		Losses may be accrued for unasserted claims and other potential unfiled lawsuits.

QUESTION 5

The operating cycle is typically defined as the time it requires to convert

		cash to inventory to receivables
		raw materials to finished goods
		finished goods to receivables to cash
		cash to inventory to receivables to cash

Answer 1

1) Answe: the sales warranty accrual method uses a percentage of completion approach to warranty revenue recognition

Explanation

The sales warranty accrual method uses the percentage of completion approach to warranty revenue recognition is the true statement remaining statements are not true

2) Answer; nearness to meturity

Explanation

Generally liabilities are presented on the balance sheet on the basis of nearness to meturity

3)answer :in order of their liquidation performance

Explanation

Current assets are presented on the balance sheet based on the liquidation performance ( converting into cash )

4) Answer : indirect guarantees should normally be disclosed

by footnotes not by accrual

Explanation

Actually indirect guarantees should normally be disclosed by accrual.

5) Answer : cash to inventory to receivable to cash

Operating cycle generally begins with cash and it the continuous process.