na: 1. The term \"market\", as used in the expression \"lower-of cost-or- 2. Amo
ID: 2481864 • Letter: N
Question
na: 1. The term "market", as used in the expression "lower-of cost-or- 2. Amortization is the pro rata allocation of the cost of a natural resource to 3. Merchandise inventory is presented on the balance sheet in the intangible 4. If a plant asset is sold for less than its book value, a loss should be recorded. means replacement cost not retail price. market," expense. assets section. 5. The cost of a patent should be charged to expense over a period of 20 years or its useful life whichever period is longer. The financial statements of two companies in the same industry may not always be comparable because of differences in accounting methods used al statements of two companies in the same industry may not 6. always be comp When the LIFO method is used, Cost of Merchandise Sold is charged with the cost of the most recently acquired goods. 7.Explanation / Answer
1.Wrong : Market price means retail price not replacement cost.
2.wrong: Amoritization means allocation of cost of an intangible asset over a period of time.
3.Wrong: Merchandise inventory means selleable stock of the company.It is shown in the balancesheet in the current assets. Intangibles are the assets that are not physical in nature.
4. Correct:If plant asset is sold less than its book value,difference between the book value and Sale price is the loss to be recorded in the books.
5.Wrong:The patents should be charged to expense over their useful life only.
6. Correct: Financial statements may not be comparable . But we can ascertain the impact of change in method on the financial statement then compare it.
7. Correct:LIFO means last in First out. That means goods acquired recently will be sold first.
8. Correct: The Capital lease is a lease considered to have the economic characterstics of asset ownership. Acapital lease would be considered as purchased asset for accounting purposes.
9.Wrong: Interest bearing note is a note that requires the principal plus interest to be repaid at maturity. The maturity value of interest bearing note can not be less than face value
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