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.