Scribd
Upload
22 views

Quiz 3 With Solution

Uploaded by

Mohamed Ahmed Abdelaty
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
22 views

Quiz 3 With Solution

Uploaded by

Mohamed Ahmed Abdelaty
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Financial Accounting & Reporting

Course no. 26
Name:
1
1) Company A uses LIFO and Company B uses FIFO for inventory valuation.
Otherwise, the firms are of similar size and have the same revenue and
expense. Assume inflation. In analyzing liquidity and profitability of the two
firms, which of the following will hold true?
a. It is impossible to compare two firms with different inventory methods.
b. Company B will have relatively higher profit and higher inventory turnover.
c. Company B will have relatively higher profit and lower inventory turnover.
d. Company A will have a higher current ratio and acid test ratio, with the same
profit.
e. Company B will have relatively higher profit and a higher
current ratio.

Answer is e

2) If a firm has pledged its receivables and its inventory, then the best
indicator of its short-term liquidity may be indicated by:
a. working capital. b. current ratio.
c. acid-test. d. cash ratio. e. days' sales in receivables.

Answer is d

3) Which of the following does bear on the quality of receivables?


a. Shortening the credit terms
b. Lengthening the credit terms
c. Right of return privilege
d. Lengthening the outstanding period
e. All of the above.

Answer is e

4) - Which of the following is not an acceptable inventory costing method?


a. Specific identification
b. Last-In, First-Out (LIFO)
c. First-In, First-Out (FIFO)
d. Average cost
e. Next-In, First-Out (NIFO)

Answer is e

1
5) Which of the following would best indicate that the firm is carrying excess
inventory?
a. A decline in sales
b. A decline in the current ratio
c. A decline in days' sales in inventory
d. A stable current ratio with declining quick ratios
e. A rise in total asset turnover

Answer is b

6)- Account receivables turnover in days + Inventory turnover in days =


a. working capital.
b. current ratio.
c. acid-test.
d. operating cycle.
e. days' sales in receivables & inventory

Answer is d

7) A Partial Balance sheet for King Corporation at December 31, 2020 is


presented below:

If you know that:


• A/R at December 31, 2019 was $280,000, Net of Allowance of $8,000.

2
• Inventory of December 31, 2019 was $565,000.
• Net Sales during the year were $5,000,000 from which 60% was Credit Sales.
• COGS during the year was $2,100,000 from which 60% was related to Credit
Sales.
Required: Using the above data compute the following:
1) Working Capital

1052000 – 458000 = 594000

2) Days’ Sales in Inventory

Av. Inventory / (net sales/365)


544000 / (5000000/365) = 3.86

3) Current Ratio

1052000/458000 = 2.3

4) A/R Turnover in Times

Credit sales= 5000000 x .6 = 3000000


Av ar =(261000 + 288000)/2 = 274500
AR turnover in times = 3000000/274500 = 11 times

You might also like