1. which of these indicates an improvement in the management of accounts receivable? a. an extension...

1. which of these indicates an improvement in the management of accounts receivable?
a. an extension of the time taken to collect debts to beyond the normal credit period
b. a increase I'm the average collection time for accounts receivable
c. a change in the average collection period from 36 to 39 days
d. a chnage in the number of times debtors are turned over per year from 10.29 times to 11.61 times

2. which of these is not included in the cost of inventory as defined by ias.102?
a. cost of purchase
b. costs incurred in bring the inventory to its present location and condition
c. gst
d. import duties

3. a major theoretical problem in accounting for inventory is:
a. calculating the costs of purchases
b. allocating costs between costs of sale and stock on hand
c. counting the stock
d. deciding which goods are obsolete

4. which of the following is a disadvantage to business to the lifo method of applying costs to inventory?
a. current income is matched with the most recent costs of acquiring goods
b. it understates the balance sheet value for inventory
c. it is difficult for a computer program to apply the method
d. if it is allowed for tax purposes, in times of rising prices it may result in less tax being paid in the current period

5. if inventory costs are declining, profit will be highest if the inventory method used is:
a. weighted average
b. fifo
c. lifo
d. not possible to answer the question

Solutions

Expert Solution

1) Improvement in the management of account receivable is the increment of ratio of debtors turnover which has increased from 10.29 times to 11.61 times. because it measures the effectiveness in collecting the receivables by the company.

Increasing average collection time is not an improvement also extension of the time taken to collect debt is a disadvantages for the business and increase in average collection period is also not good for the business.

Therefore the correct option is D

2) As per the standard cost which is not to be included in the inventory is the GST amount as all other cost are to be included in the inventory . Duties cost of purchase and cost incurred in bringing the inventory to the present location to be included in the cost of inventory.

Therefore the correct option is C

3) A major theoretical problem in accounting for inventory is to allocate the cost between the cost of sale and stock on hand that is inventory at the end of the year. This accounting is done on the total units sold and total units left in the inventory at the end of the year. Rest all options can be easily done either by the management or the accountant.

Therefore the correct option is B

4) Under LIFO method goods purchased last are sold first. Therefore the ending inventory under this method will be the purchase which has been done in the beginning along with the opening inventory. Usually the cost of goods increases during the year and therefore the inventory shown under this method will be at a lower cost and thus understated the balance sheet value for inventory.

Therefore the correct option is B

5) If the inventory cost are declining and profit will be highest if LIFO inventory method is used as the cost of goods sold under this method will be the lowest because of the declining in inventory cost and hence giving us higher profit.

Therefore the correct option is C

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ekkarill92 answered 1 year ago

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