Question

1. Cash flows from financing activities include:

Multiple Choice

• Lending.

• Salaries paid.

• The sale of land.

• Dividends paid.

2. A company has the following inventory information for the year:

January 1 Beginning inventory = 100 units @ $10
March 15 Purchased 500 units @ $12
September 20 Purchased 800 units @ $15
Total sales for the year = 1,200 units

The company reports cost of goods sold of $16,000. Which inventory cost method is the company using?

Multiple Choice

• The answer cannot be determined with the information given.

• Weighted-average.

• LIFO.

• FIFO.

3. What type of company purchases raw materials and makes goods to sell?

Multiple Choice

• Merchandiser.

• Retailer.

• Wholesaler.

• Manufacturer.

4. The direct write-off method is used for tax purposes but is generally not permitted for financial reporting.

T or F?

Answer 1

1)

Dividends paid is the correct answer.

Financial activities includes raising capital and also dividends paid. Lending and sale of land is an investing activity, whereas salaries paid is operating activity.

2)

FIFO method is the correct answer.

Units sold = 1200

Applying FIFO,

Cost of goods sold = (100 * $10) + (500 * $12) + (600 * $15)

= $16,000

3)

Manufacturer is the correct answer.

In manufacturing industry, raw materials are purchased, processed and converted to final finished products.

Wholesale, retail and merchandise involves purchase and sell of finished goods.

4)

True.

The direct write off method of bad debts is used for the tax purposes but is generally not permitted for financial reporting. Allowance method should be followed the firm to determine and write off the bad debts which is probable and has reasonable estimate of uncollectible, as per accounting methods.

Should you have any query, please comment.

Good luck!