Question 5 (40 marks)

Choose the best answer for each of the following questions [20* 2 mark each]:

1. -----------records revenues when earned and expenses when incurred.

1. Materiality Concept
2. Accrual Basis Accounting
3. Time Period Concept
4. Liquidity

2. ----------- A business's activities can be divided into small segments and that financial statements can be prepared for specific periods, such as a month, quarter, or year.

1. Materiality Concept
2. Accrual Basis Accounting
3. Time Period Concept
4. Liquidity

3. ----------- A company must perform strictly proper accounting only for significant items.

1. Materiality Concept
2. Cash Basis Accounting
3. Accrual Basis Accounting
4. Time Period Concept

4. At May 1, 2017, Dietrich Company had beginning inventory consisting of 300 units with a unit cost of 3.50. During May, the company purchased inventory as follows:

600 units at 3.50

900 units at 4.00

The company sold 1,500 units during the month for 6 per unit. Dietrich uses the average-cost method. The average cost per unit for May is

1. 3.50.
2. 3.75.
3. 3.80.
4. 4.00.
5. Another answer.

5. ----------- An inventory system that keeps a running computerized record of merchandise

1. Perpetual Inventory System
2. Merchandise Inventory account
3. Cash Basis Accounting
4. Accrual Basis Accounting

6. Revenue is earned when the business has ________.

1. entered into an agreement with the customer about the goods or services to be delivered
2. prepared a journal entry to record revenue
3. received cash from the customer before goods or services are delivered
4. delivered a good or service to the customer