#1
What is the primary objective of inventory management?
Minimizing storage costs
Maximizing inventory turnover
Minimizing stockouts
Maximizing ordering costs
#2
Which financial statement is affected by the revenue recognition principle?
Balance Sheet
Income Statement
Statement of Cash Flows
Statement of Changes in Equity
#3
What is the purpose of using the perpetual inventory system?
To record inventory transactions only at the end of each accounting period
To maintain continuous and up-to-date records of inventory levels and transactions
To calculate the average cost of inventory
To value inventory using specific identification
#4
Which financial statement reports the ending inventory balance?
Income Statement
Balance Sheet
Statement of Cash Flows
Statement of Stockholders' Equity
#5
What is the primary disadvantage of using the FIFO method of inventory valuation?
It results in higher taxable income during periods of rising prices
It does not reflect the actual flow of goods in the business
It can lead to obsolescence of inventory
It requires complex record-keeping
#6
Which financial statement would show the effect of revenue recognition on a company's financial position?
Income Statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows
#7
Which accounting method records inventory at the cost price until it's sold?
FIFO (First In, First Out)
LIFO (Last In, First Out)
Weighted Average Cost
Specific Identification
#8
Under the accrual basis of accounting, when should revenue be recognized?
When cash is received
When services are rendered or goods delivered, regardless of when cash is received
When services are rendered or goods delivered only if cash is received simultaneously
When the company decides to recognize it
#9
Which inventory costing method assumes that the most recent items purchased are the first to be sold?
FIFO (First In, First Out)
LIFO (Last In, First Out)
Weighted Average Cost
Specific Identification
#10
Which revenue recognition principle emphasizes recognizing revenue when it's earned and reasonably measurable, regardless of when cash is received?
The Matching Principle
The Revenue Realization Principle
The Conservatism Principle
The Materiality Principle
#11
Which inventory costing method results in a higher ending inventory value during periods of rising prices?
FIFO (First In, First Out)
LIFO (Last In, First Out)
Weighted Average Cost
Specific Identification
#12
According to the revenue recognition principle, when should revenue be recognized for the sale of goods?
At the time of cash collection
At the time the goods are ordered
At the time the goods are shipped or delivered
At the time the customer places the order
#13
In which situation would the completed contract method for revenue recognition be appropriate?
When the outcome of a contract can be reliably estimated
When the contract involves construction and has predictable outcomes
When the contract spans multiple reporting periods and its outcome cannot be reliably estimated
When revenue and costs can be reliably measured
#14
Under the installment sales method, when is revenue recognized?
At the time of delivery
At the time of sale
Over the collection period as cash is received
At the end of the installment period
#15
In which situation would the percentage-of-completion method for revenue recognition be most appropriate?
When the outcome of a contract cannot be reliably estimated
When the contract has predictable outcomes and spans multiple periods
When the contract is short-term and straightforward
When the contract involves services that are difficult to measure
#16
Under the cost recovery method for revenue recognition, when is revenue recognized?
At the time of sale
When cash is collected
When costs incurred are recovered
At the end of the accounting period
#17
In which situation would the cost recovery method for revenue recognition be used?
When revenue can be reliably estimated
When revenue and costs can be reliably measured
When the outcome of a contract cannot be reliably estimated
When revenue is recognized based on a fixed percentage of total revenue