QUESTIONS AND ANSWERS FOR FINANCIAL ACCOUNTING 1

1. Current assets include cash and all other assets expected to become cash or be consumed:
Within one year or one operating cycle, whichever is longer.
2. The allowance for uncollectible accounts is a:Contra asset account
3. The net assets of a corporation are equal to:Shareholders’ equity
4. Which of the following transactions has no effect on the profit presented in the income
statement for the period? Paying dividends to shareholders
5. Cash flows from investing activities do not include:Proceeds from issuing bonds.
6. In a perpetual inventory system, the cost of inventory sold: Debited to cost of goods sold.
7. When a company purchases inventory on credit:Its quick ratio decreases.
8. Which of the following is not true about net operating cash flow?It is a measure used in
accrual accounting and is recognized as the best predictor of future operating cash
flow
9. What is the effect on each of the following accounts of the collection of an account
previously written off?Allowance for uncollectible accounts: unchanged: Accounts
Receivable: unchanged -> DR 111,112/CR 711
10. Adjustment entries before closing the income statement are made based on which
accounting principle:Matching
11. In case of liquidation of fixed assets that are still of use value and cash collection, the
following accounts shall be recorded:Increase income, increase costs
12. If a company has gone bankrupt, its financial statements likely violate: The going concern
assumption.
13. Inventory does not include: Equipment used in the manufacturing of assets for sale.
14. Rent collected in advance is:A liability account in the statement of financial position.
15. The difference between single-step and multiple-step income statements is primarily an
issue of: Reporting (presenting)


16. In comparing the direct method with the indirect method of preparing the statement of cash
flows: Only operating activities are presented differently.
17. A company reported cost of goods sold of $2,000,000 this year. The inventory account
increased by $200,000 during the year to an ending balance of $400,000. What was the

cost of merchandise that the company purchased during the year?$2,200,000.
(2,000,000+200,000)
18. Inventory was acquired in 2013 at a cost of $40,000. A qualified appraiser placed its value
at $48,000, and a recent firm offer for the inventory was for a cash payment of $46,000.
The inventory should be reported in the financial statements at: $40,000. (the min of cost
and NRV)
19. Accounts receivable are normally reported at the: Net amount to be received.
20. At the beginning of October, the company shipped out the shipment for sale with a total
selling price of VND 100,000,000. Due to a promotion program, the company offers
customers a maintenance voucher with a period of 12 months from the beginning of
October. Knowing this maintenance service has a reasonable value of VND 1,200,000. On
the year-end income statement, revenue from sales and services is present in the amount
(unit: VND): 99.110,672 (= 98,814,229 + 1,185,770*3/12)
● ALLOCATE: 100,000,000
●
101,200,000

250/253 %

98,814,229

1,200,000
3/253 %
100 %
100,000,000

1,185,770

21. Time of reversal of provision for impairment of Inventories: At the end of the accounting
period when preparing the financial statements

22. Revenue should not be recognized until: The risks and rewards of ownership have
transferred from seller to buyer.
23. An asset that is not expected to be converted to cash or consumed within one year or the
operating cycle is: Goodwill.
24. Company X has determined its year-end inventory on a FIFO basis to be $600,000 at cost.
Information pertaining to that inventory is as follows: Selling price: $620,000; Disposal
costs: 30,000. What should be presented as this company inventory on the Statement of


Financial position? $590,000 (the min of cost and NRV)
25. Which of the following is NOT part of the Income statement:Prepaid expenses
26. Under VAS, operating cash flows would include: Interest paid.
27. Accrued expenses: Result from services received before payment.
28. Which of the following defines “liabilities”?Present obligation that is expected to result
in an outflow of economic benefits.
29. At the end of the financial year, the company has a bond payable of VND 1,000,000,000
with a term of 5 years. The bonds are paid periodically each year in equal amounts and the
first payment is due at the end of March of the following year. Information on payable
bonds is presented in the statement of financial position as follows (unit: thousand dong):
Short-term liabilities: 200,000 and Long-term liabilities: 800,000 VND
30. Balance at the beginning of the period: cost of goods A: 100 unit * 100,000 VND,
provision has been made for 100 unit * 30,000 VND/ unit. In the period the enterprise sells
60 unit, unit price is 80,000 VND (0% VAT), at the time of sale, accountants determine
cost and revenue, respectively: 6,000,000; 4,800,000 VND (provision of inventory not
effect on selling)
31. Schneider Ltd had salaries payable of $60,000 and $90,000 at the end of 2012 and 2013,
respectively. During 2013, Schneider recorded $620,000 in salary expenses in its income
statement. Cash outflows for salaries in 2013 were: $590,000. (=620-(90-60))
32. The enterprise liquidated one production equipment with the original cost of 164,000,000
VND, accumulated depreciation is 153,000,000 VND. Income from selling this equipment

in the form of scrap is collected in cash 2,500,000 VND. Accountants record this entry as
follows (unit: thousand dong): Dr 811: 11,000, Dr 214: 153,000/ Cr 211: 164,000 and Dr
111:2,500/ Cr 711:2,500
33. Office equipment has original cost of 170,000,000 VND, accumulated depreciation is
34,000,000 VND. So, information about office equipment on the Financial Statement is
presented as follows: Tangible fixed assets: VND 136,000,000.- Cost: 170,000,000 VND,
- Accumulated depreciation: (34,000,000 VND)


34. During the year, company K wrote off bad debts of 4,000. Before this entry, the balance of
accounts receivable from customers was 50,000 and the balance of provision account for
bad debts was 4,500.net bad debts after write-off of receivables is: 45,500. (write off not
effect on bad debt expense)
35. In the Statement of Financial Position at the end of its first year of operations, Company D
reported an allowance for uncollectible accounts of $82,000. During the year, Company D
wrote off $32,000 of accounts receivable they had attempted to collect and failed. Credit
sales for the year were $2.200,000, and cash collections from credit customers totaled
$1.950,000. What bad debt expense would company D report in its first-year Statement of
Profit or Loss? $114,000 (82+32)
36. At the end of the year, the accountant determines the amount of bad debts that need to be
made provision to be 30 million dong, knowing the opening balance of account 2293 is 10
million dong, the following accounts shall be recorded: Dr 642/Cr 2293 20 million dong
37. Telcoba Ltd's trial balance included the following account balances at December 31, 2019:
Accounts receivable: $10,000: Inventories 40,000; Patent: 12.000; Investments: 30,000;
Prepaid insurance: 6,000; Note receivable, due 2022:50,000. Investments consist of
treasury bills that were purchased in December and mature in next February. Prepaid
insurance is for the next two years. What amount should be included in the current asset
section of Telcoba's December 31, 2019, statement of financial position? $83,000
38. At the end of June, the company shipped 12,000,000 worth of tools to the management
department with an estimated useful life of 12 months. Recorded accounting (accounting

period calculated according to the calendar year):

Dr 242: 12,000,000/ Cr 153:

12,000,000 and at the end of amortization period Dr 642: 6,000,000 / Cr 242:
6,000,000
39. At the end of the month, the accountant gathers the cost of significant repairs. Fixed assets
at the sales department include: materials used: 500,000. Cash spent: 1.100.000 (including
10% VAT). The repair has not been completed, the accountant records (unit: thousand
dong): Dr 2413: 1.500, Dr 133: 100/Cr 152: 500, Cr 111: 1,100
40. How many sub-statements does a typical financial statement have?4 (Financial position,
income statement, notes and cash flow)


41. Who are the main users of the financial accouting information?extenal (investor, creditor,
author, customer,..)
42. Which statement shows how a company uses money? cash flow statement
43. Managers only uses managerial accounting information for running their businesses -> No
(FALSE)
44. Which circular could be applied for all kinds of companies? Cir 200
45. Balance sheet is the another name of: Statement of financial position
46. Which statement shows how a company earns money? Income statement
47. Which documents are applied only for Small and Medium enterprises? Cir 133
48. Financial statements are prepared by: Accounting department
49. Which statements show financial situation of a company: all the financial statement
50. Which legal documents could be applied for all kinds of companies? ALL (Cir 200, Vas,
accounting law)
51. Liquidity refers to: The readliness of asset to be converted to cash
52. Intangible assets usually are reported in the statement of financial position as current
assets: FALSE

53. The ultimate responsibility for the financial statements lies with the auditors: FALSE
54. Which is the shareholders' equity account in the statement of financial position? Issued
capital
55. Long – term assets include machinery, equipment and inventories: False
56. All current assets are either cash or assets that will be converted into cash or consumed
within twelve months or operating cycle, if that is longer than one year -> TRUE
57. The statement of financial position reports a company’s financial position at a point in
time-> TRUE
58. Assets do not include: Issued capital


59. Accrued salaries and wages in a statement of financial position represent salary and wages
that have been earned by employees but not yet paid -> TRUE
60. Cash equivalents would include Cash which is not available for current operations ->
FALSE
61. Prepaid expenses are classified as current assets if the services purchased are expected to
expire within twelve months or the operating cycle, if that is longer. -> TRUE
62. The balance of net receivables represents the amount expected to be collected -> TRUE
63. The statement of financial position reports: Assets and equities at a point in time
64. Why do many Income statements distinguish between Revenue and Other Incomes
(Gains)? Help analysts better predict the future cash-flows
65. On the SCF, Cash received from sales of products to customers is reported as: Cash flows
from operating activities
66. There are two methods for reporting operating activities: Indirect and Direct
67. A practice which a company pursuing its distributors to purchase more of its product than
necessary near the end of a reporting period is called:Channel stuffing
68. What is the purpose of the statement of cashflows? To summarize the cash inflows and
cash outflows in a period
69. On the SCF, Cash received from the capital contribution is reported as: Cash flows from
financing activities

70. Cash flows are classified into 3 sections on the Statement of Cashflows. These 3 sections
are: Operating, Investing, Financing activities
71. What is the purpose of the income statement? To summarize the profit-generating
activities occurring in a period
72. What is the purpose of the Statement of Cash flows? Provide relevant information
about the amount of cash and cash equivalents which are received and paid for a
period of time


73. On the SCF, Cash received from sales of long-term assets used in the business is reported
as: Cash flows from investing activities
74. A manufacturing company sells its product (which costs 60 millions VND) to a customer
for 100 millions VND cash. The amount of 100 millions VND is classified as: REVENUE
75. A manufacturing company sells its product (which costs 60 millions VND) to a customer
for 100 millions VND cash. The amount of 60 millions VND is classified as: Expenses
76. Matching principle influences revenue the most
77. Revenue is: Economic interests that a company earns during a period
78. In the income statement, revenue is measured by: Unit of currency
79. Which documents affect service revenue in Vietnam: VAS 14
80. Which documents affect revenue in Vietnam: VAS 14, VAS 15, CIR 200
81. Customer loyalty program requires company to: Deferred revenue to a later period
82. ROA is calculated by: Returns divided by Average balance of assets
83. Unit of turnover is: NUMBER OF TIME
84. Another name of return: profit
85. Why should we use the average of Equity when calculating ROE? In order to make
equity best fit to returns
86. In a good system of internal control, the person who initiates a transaction should be
allowed to effectively control the processing of the transaction through its final inclusion
in the accounting records. -> FALSE
87. Which of the following does not change the balance in accounts receivables? BAD DEBT

EXPENSE, RECOVERY
88. The allowance for uncollectible account is a: Contra asset account
89. A Company should provide for bad debts on an accounts receivable balance when it
is portable that the account receivable balance has been uncollectible


90. The receivables turnover ratio provides a way for an analyst to assess the effectiveness of a
company in managing its investment in receivables -> FALSE
91. From a financial accounting perspective, the main purposes of a system of internal
control are to improve the accuracy and reliability of accounting information to
safeguard assets
92. Cash may not include: Restricted cash
93. Cash equivalents would include Cash which not available for current operations: FALSE
94. Cash equivalents would include investments in marketable equity securities as long as
management intends to sell the securities in the next three months: FALSE
95. VAS allows an overdraft in a cash account at one bank to be offset against a positive
balance in the account at another bank for purposes of reporting cash on the company’s
Statement of Financial Position: FALSE
96. Account receivable are normally reported at the: net amount to be received
97. Account 152 is used to record: in-stock materials
98. We ___ inventories accounts when receiving trade discounts: credit
99. A set of tools are issued from the warehouse to be used up in 1 accounting period for
administrative operation. Journal entry for this transaction is: DR 642/CR 153
100.

Which cost should be excluded from Inventory? Freight-out (distribution cost)

101.

Inventories includes: Goods used for sales /Partially finished goods waiting for

completion and eventually sale / Materials used in production process
102.

We ___ inventories accounts when returning goods to the supplier: CREDIT

103.

A set of tools are issued from the warehouse to be used in 3 accounting periods for

administrative operation. Journal entry for this transaction is: DR 242/CR 153
104.

Account 151 is used to record: Goods in transit at the end of the month

105.

We ___ inventories accounts when receiving goods: DEBIT


106.

Accounts

used

to

record

cost

of

manufacturing

inventories

are:

621,622,627,154,155
107.
ABC company ships $10,000 of merchandise to XYZ company on November 28
and the merchandise arrives at XYZ's warehouse on December 1. Shipping terms state that
XYZ takes on ownership of the merchandise as soon as they leave ABC's shipping dock.
XYZ should record an inventory on: NOVEMBER 28
108.
ABC ships $10,000 of merchandise to XYZ on November 28 and the merchandise
arrives at XYZ's warehouse on December 1. Shipping term states that ownership transfer
to the buyer as soon as the shipment arrives at the buyer. XYZ should record an inventory
on: DECEMBER 1
109.
ABC ships $10,000 of merchandise to XYZ on November 28 and the merchandise
arrives at XYZ's warehouse on December 1. Shipping term states that ownership transfer
to the buyer as soon as the shipment arrives at the buyer. On November 28, XYZ should
record this merchandise as: XYZ should not record until the shipment arrives
110.
A company should provide for bad debts on an accounts receivable balance when it
is probable that the accounts receivable balance has been uncollectible: FALSE
111.

The balance of net receivables represents the amount expected to be collected:
TRUE
112.
What differentiate the International standards from VAS in accounting method for
property, plant and equipment?
·
Under international standards both the cost model and revaluation model
are allowed
·
Under international standards, tests for impairment when events or
changes in circumstances indicate that book value may not be recoverable.
·

Both are correct.

113.
Any change in depreciation method or depreciation estimation should be applied:
prospectively
114.
How the cash flows of a company is affected by the depreciation of an fixed asset
which is used for administrative purposes? Asset decrease, expense increase.
115.
How the financial status of a company is affected by the depreciation of an fixed
asset which is used for administrative purpose? Asset decrease, expense increase.
116.
Under VN regulation, Account 214 ending balance shows: accumulated
depreciation


117.

Under VAS, which asset should not be depreciated/ amortized? Permanent land
use right.
118.
Which depreciation method is based on activity level of fixed asset? Units – of –
production.
119.
Which time-based depreciation method results in greater amounts in the early years
and less each succeeding year of the asset’s life? Declining balance.
120.
Which depreciation method results in the same amount of depreciation in each year
of the asset’s life? Straight line
121.

Under VAS, which depreciation method is not allowed? Sum of the year digits

122.
Under VAS, the total amount which should be depreciated during useful life of an
asset is: cost less (-)residual value at the end of its useful life
123.

Depreciation, depletion and amortization are cost allocation processes.

124.
Subsequent expenditures should be capitalized in the value of a fixed asset when It
is probable that the expenditures increase the future economic benefit of the asset
125.
Expenditures which are incurred after a fixed asset is recognized in the financial
statement (called “subsequent expenditures”) are always capitalized in the value of the
asset? FALSE.
126.

Donated assets are recorded at: fair value

127.

Tangible fixed assets exclude: patent

128.
The initial cost of property, plant, and equipment includes all the identifiable
expenditures necessary to bring the asset to its desired condition and location for use.
TRUE.
129.
Property, plant, and equipment and intangible assets are long – term, revenue
producing assets TRUE.
130.
Property, plant, and equipment, investment property and intangible assets are: long
term revenue-producing assets.
131.
The fixed- assets turnover ratio provides: the amount of sales generated per
dollar of fixed assets.
132.
When selling fixed assets funded by long-term loans, the remaining value of fixed
assets will be subtracted from the original loans FALSE.
133.

Under VAS, development expenditures are capitalized if certain criteria are met.

134.

On the statement of financial position, section “fixed assets” excludes :

Inventories.
135.
The cost of repairing tangible fixed assets for sale, knowing that these assets were
previously used for business activities, is recorded into the account: 811
136.
Accrued salaries and wages in a statement of financial position represent salary and
wages that have been earned by employees but not yet paid TRUE.
137.

The statement of financial position reports: assets and equities at a point in time

138.
The ultimate responsibility for the financial statements lies with the auditors
FALSE
139.

Assets do not include: investments

140.
Which is a shareholders’ equity account in the statement of financial position?
Issued capital
141.
Intangible assets usually are reported in the statement of financial position as
current assets: FALSE
142.

Long- term assets include machinery, equipment and inventories FALSE

143.
145. The statement of financial position reports a company’s financial position at a
point in time TRUE
144.
All current assets are either cash or assets that will be converted into cash or
consumed within twelve months or the operating cycle, if that is longer than one year
TRUE
145.

Assets do not include: Issued capital

146.
Cash equivalents would include Cash which is not available for current operations:
FALSE
147.
Intangible assets usually are reported in the statement of financial position as
current assetsL TRUE
148.
Which is a shareholders’ equity account in the statement of financial position?
Dividends payable
149.

Assets acquired a lump sum purchased are valued based on: The relative fair value

150.

rent collected in advance is an asset: a liability account in the SoFP

151.
In the DuPont formula, return on asset equal: Profit margin on sales x Assets

turnover
152.

Cost of inventories equal : plus freight in, less purchase discount


153.
For a typical manufacturing, the most common critical point for recognizing
revenue on the date is: the product is delivered
154.
when receiving the seller’s invoice of rebate of purchase goods in stock, the buyer
record: Dr 331/ Cr 156, Cr 133
155.
The ending balance of account 1381 will be presented in the SoFP in which items:
shortage of assets awaiting resolution
156.

The equity of the business will be reduced when: distributed profit by cash

157.
The enterprise buys used fixed assets, the agreed purchase price is 200 ml, VAT
10% is deducted paid by cash bank. Assume TSCĐ have a useful life of 10 years,
depreciation 10%. The initial cost of this asset is: 200 ml
158.
The item “Long term spare parts equipment” in the SoFP is presented in:
noncurrent assets
159.
The item inventories (code 141) on the SoFP, reflects the value if inventory
according to: original cost
160.

if the provision of inventories to be made at the end of accounting period is larger
than the provision for devaluation of inventories recorded at the opening thí period: Dr 632
/Cr 2294
161.
The enterprise buys a fax machine used at the management department with a value
of 30 ml, estimated to be used for 5 years. The machine will be recorded on: Ac 211
162.

VAS 01 can be used in place of specific accounting standards: FALSE

163.
The monthly depreciation of a fixed asset for the selling department is 65,500,000.
Thí asset is formed from the owner's equity. Double entry: DR 641/ CR 214
164.
“Undistributed profit after tax” reflects the amount of profit or loss after tax
that has not been finalized or not distributed at the reporting time
165.
The buyer will record the missing goods for unknown reason when purchasing
goods by the method of receiving goods at the seller;s warehouse to the account: Acc 138
166.
The enterprise receives a fixed asset with a purchase price of 100 ml VND before
tax, 10% VAT (deductible), paid by cash bank. The asset is financed from long term loans.
Accountants record : Dr 211=100, Dr 133=10/Cr 112= 110
167.
Basis accounting principles include: accrual basis, going concern, historical cost,
matching, consistency, prudence, materiality
168.

After removing a part of the production line, it will reduce the output as well as the

future performance of this line -> reduce initial of fixed asset
169.
According vas 14, revenue from service provision is recognized when bla bla how
many conditions are satisfied? 4
170.
The buyer will record the missing goods for unknown reason when purchasing
goods by the method of CIF to the account: no recording
171.
Depreciation of fixed assets used for the selling department will affect : Net
operating profit (or loss)
172.

Trade discount -> Revenue deductions

173.
Revenue on the IS includes : revenue from sales, financial income, revenue from
service provision
174.
when classifying financial statements according to the reporting time, they can
classify into: annual, interim, special case
175.
NOT part the income statement: Undistributed after tax profit (Retained
earnings)

Note:
➔
➔
➔
➔

➔

● Cách xác định các nguyên tắc:
Liên quan tới revenue, expense: matching
Liên quan tới allowance, provision : Prudence
Liên quan tới at the time of lập giao dịch: accrual
liên quan tới lựa chọn chính sách kế tốn, phương pháp tính và thay đổi chính sách:
nhất quán consistently
Liên quan tới độ quan trọng lớn nhỏ của thông tin: trọng yếu (materiality)
Vd: việc lập dự phòng khoản phải thu: nguyên tắc chính là prudence, ngun tắc phụ
là matching (vì nó có liên quan tới chi phí)
Có 2 loại accounting: financial accounting và management accounting
● FA: internal và external (tập trung chủ yếu vào external)
● MA: internal

Luật pháp VN về kế toán theo thứ tự thấp dần: Law -> Standards -> regime -> circular
Law: cao nhất, là nền tảng foundation cho standards và regime
Hướng dẫn lập BCTC: Cir.200

Chế độ kế toán dành cho MỌI DN: cir.202


Chế độ kế toán cho DN NHỎ VÀ VỪA: cir.133
7 nguyên tắc: accrual, going concern, cost, matching, consistence, prudence, materiality ->
using for recording
BCTC bắt buộc phải thỏa mãn các yêu cầu sau:
1.
2.
3.
4.

Faithful
relevance
verifiable, understandable, timeliness
consistency, comparable

VAS income statement:
Revenues

A

sales deductions

B

Net revenues

C =A-B

Cost of sales

D

Gross profit

E=C-D

Financial income

F

Financial expenses

G

in which, financial H
interest
Selling E

I

G&A

J

Net operating profit

K=E+F-G-I-J
(excluded H)

other income

L

other E

M

results
activities

of

Accounting
Before tax

other N=L-M
profit O=K+N

CIT

P=O x tax rate (20%)

Net income

=O-P


Income Statement: summarize the profit - generating during period
Cash flow statement: the cash receipts and cash disbursements during period
-> cả hai giúp đánh giá khả năng sinh lời của công ty, liệu cơng ty có đủ tiền để trả cho mình
khơng
IS có thu nhập từ 2 hoạt động: HĐ thường xun (bán hàng dịch vụ+hđ tài chính,..): có khả
năng kinh tế future ; Hđ bất thường (lâu lâu xảy ra): economic benefit short time
1.
2.

Dividends : financing activities
Nguyên tắc ghi nhận REVENUE:
Sales for goods, service: VAS 14, Construction: VAS 15

Đối với sales goods: có 5 điều kiện cần thỏa mãn, trong đó chuyển giao quyền sở hữu
và rủi ro là quan trọng nhất
3. Các trường hợp đặc biệt khi ghi nhận dthu, để ý: quyền sở hữu và rủi ro, các cơng
việc hồn thành bao nhiêu thì ghi nhận bấy nhiêu, mua hàng khuyến mãi, tặng kèm
hay khách hàng truyền thống
Tài khoản 131: Debit: trade receivable (current assets), credit: prepaid expense (liability)
Chiết khấu thanh tốn (khi mình trả tiền đc giảm): 635 ; chiết khấu thương mại (cost
deductions): 521
Internal control:
1.
2.
3.
4.

who handle cash not be involved or have access to record
all expenditures should be approved by authorized
Hạn chế trả tiền = 111, nên sd 112
định kỳ so sánh số dư trên sổ sách và thực tế

Nguyên giá = cost + các chi phí có liên quan tới việc mua hàng hóa - deduction

-

-

Kế toán TSCĐ: dùng VAS 03 và 04
Các hoạt động mua bán TSCĐ với mục đích dành cho quỹ phúc lợi (welfare fund)
(khơng dùng vào HĐKD) thì khơng được khấu trừ thuế GTGT mà gộp thuế GTGT
vào nguyên giá.
VN dùng 3 pp khấu hao: straight-line, declining balance, component (không đc dùng

sum of the year’s digits)
Tiền thuê đất được phân bổ dần vào chi phí kinh doanh 62*, 64* KHƠNG ghi nhận
là TSCĐ vơ hình.
Chi phí phát sinh đem lại lợi ích được ghi nhận là chi phí SXKD trong kỳ hoặc được
phân bổ dần trong thời gian tối đa KHÔNG QUÁ 3 NĂM.


-

Phát hiện thiếu TSCĐ và được xử lý ngay thì khơng sử dụng acc 1381.
Thuế GTGT khơng tính trên đất.
Inventory: VAS 02
Inventory tính theo original cost nhưng trình bày trên BCTC theo giá thấp hơn giữa
original cost và NRV.
FIFO: khi giá cả đang tăng thì giá trị HTK cuối kỳ > PP average-cost.

=> the average-cost results in lower income taxes (lower net income) during time of rising
prices.

inventory error

COGS

net income

understates beginning inv.

understated

overstated

overstates beginning inv.

overstated

understated

understates ending inv.

overstated

understated

overstates ending inv.

understated

overstated

Khấu hao = (cost - giá trị thanh lý)/ useful life