Reference no: EM13791169

1. The method of depreciation that allocates the cost of an asset to its useful life is _________.

• straight line
• accelerated
• FIFO
• cost basis

2. The LIFO Conformity rule states that if a company uses LIFO for tax purposes, it must also use it for:

• balance sheet reporting.
• cash reporting.
• financial reporting.
• liability reporting.

3. Which of the following would rarely be classified as a current asset?

• Prepaid insurance
• Goodwill
• Marketable securities
• Work in progress

4. Natural resources are also called _________.

• wasting assets
• real assets
• net assets
• gross assets

5. Solvency refers to the ability of a company to meet its:

• long term obligations.
• leased payments.
• short term obligations.
• cash obligations.

6. Liquidity provides flexibility to:

• take advantage of changing market conditions.
• react to strategic actions by competitors.
• All of the above
• None of the above

7. FIFO provides a better ending inventory figure more closely reflecting:

• current assets.
• current costs.
• current liabilities.
• current inventory.

8. Which of the following is not considered an intangible asset?

• Goodwill
• Customer lists
• Prepraid advertising expenses
• Memberships

9. Goodwill is:

• the excess of the purchase price of net assets over the book value of net assets.
• the excess of the appraised value of net assets over the book value of net assets.
• the excess of the purchase price of net assets over the fair value of net assets.
• the excess of the appraised value of net assets over the fair value of net assets.

10. One advantage of LIFO over FIFO under normal conditions is that:

• it reports higher retained earnings.
• it results in higher cash flows.
• it results in higher cash ratios.
• it results in higher gross margins.