Question 8 (40 marks)

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

1. Accrued expense is classified as a(n) ________ account.

1. liability
2. asset
3. revenue
4. Equity

2. Ted's Used Cars uses the specific identification method of costing inventory. During March, Ted purchased three cars for $8,000, $10,000, and $13,000, respectively. During March, two cars are sold for $15,000 each. Ted determines that at March 31, the $13,000 car is still on hand. What is Teds gross profit for March?

1. $6,000.
2. $12,000.
3. $7,000.
4. $9,000.
5. Another answer.

3. Which of the following statements is not correct with respect to inventories?

1. The LIFO method assumes that the costs of the earliest goods acquired are the last to be sold.
2. It is generally bad business management to sell the most recently acquired goods first.
3. Under LIFO, the ending inventory is based on the latest units purchased.
4. All statements are correct.