Question

-if a company's selling price for inventory falls below the cost of the inventory, the value of the inventory asset is adjusted. TRUE-FALSE

-Units of production is the most accurate depreciation method. TRUE - FALSE

-Double declining balance depreciation calculates depreciation expense by multiplying the cost less residual value by a depreciation rate. TRUE-FALSE

-Warranty costs are depreciated over the life of the warranty. TRUE - False

-Warranties offered by a company on its products are liabilities. TRUE - False

-Which of the following differences on a bank reconciliation does not require the company to make an adjusting journal entry? A: Bank service charges B: Interest earned C: EFT collection from a customer D: Outstanding checks.

- Corny Inc. has the following information for its bank account in the month of May: Blance in cash T-Account, May 31 $5575 outstanding checks 584 deposits in transit 2500 bank service charges 75 interest earned on account 25 what is corny’s correct amount of cash at may 31? A: 5500 B:5525 C:5550 D:7466

Answer 1

1. As per principle of conservatism and accounting standards for valuation of inventories, the valuation of inventory asset is required to be adjusted if its net realisable value falls below its cost. Thus, the statement is TRUE.

2. There are various methods of accouting for depreciation, depending upon the policy of the company, and the category of assets which are required to be depreciated, methods of depreciation are Straight line method, Written down value method, units of production method, double declining balance method etc. Thus, the statement is FALSE.

3. Double declining balance method is a form of an accelerated depreciation method in which the asset value is depreciated at twice the rate it is done in the straight-line method. Hence, this statement is FALSE.

4. Warranty is depreciated as and when warranty claims are received. Hence, this statement is FALSE.

5. Warranties offered by a company on its products are liabilities because the company expects to incur for products already shipped or services already provided. Hence, the statement is TRUE.

6. Answer is B- 5575-75+25 = 5525 as per cash basis.