Answered: In all cases, an entity shall measure…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

True or False:

1. In all cases, an entity shall measure agricultural produce at the point of harvest at fair value less cost to sell

2. PAS 41 reflects the view that the fair value of agricultural produce at the point of harvest can always be measured reliably

Multiple Choice

1. If there is a change from double declining balance to straight line method

A. The accumulated depreciation is adjusted to its appropriate balance through retained earnings based on the straight-line method

B. The accumulated depreciation is not adjusted but the remaining carrying amount is allocated over the remaining life using the straight-line method

C. The accumulated depreciation is adjusted to its appropriate balance through net income based on the straight-line method

D. The accumulated depreciation is not adjusted but the remaining carrying amount is allocated over the original life using the straight-line method

2. Any cash discount available on a credit purchase, whether taken or not, is a/n _____________ the asset’s invoice price to arrive at the asset’s purchase price.

A. addition to but is oftentimes ignored

B. none of the choices is true

C. deduction from

D. addition to

3. If a unit of inventory has declined in value below the original cost, but the market value exceeds the net realizable value, the amount to be used for purposes of inventory valuation is

A. Net Realizable Value

B. Original Cost

C. Market Value

D. Net Realizable Value less a normal profit margin

An asset was constructed for an entity’s own use. The asset was financed with specific new borrowing. The interest cost incurred during the construction period as a result of expenditures for the asset is

A. a part of the historical cost of acquiring the asset to be written off over the term of the borrowing used to finance the construction of the asset.

B. recorded as a deferred charge and amortized over the term of the borrowing.

C. taken as an interest expense in the construction period.

D. a part of the historical cost of acquiring the asset to be written off over the estimated useful life of the asset.

5. Which statement is true when accounts receivables are factored without recourse?

A. The transaction may be accounted for either as secured borrowing or sale.

B. The accounts receivable is used as collateral

C. The factor assumes the risk of collectability and absorbs any credit losses in collecting the accounts receivable.

D. The financing cost should be reported ratably over the collection period.

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