1. D. - because it is a prepaid expected to be converted into cash within one year.

2. I think the answer is C. - because it is an operating account.

3. A. - cost of sales would be lower using FIFO.

4. B. - Dollar value LIFO groups similar items of inventory into pools.

5. B. - Have no effect of total current assets.

Hi Astone, Correct me if I am wrong…..

1. Of the following items, the one that should be
   classified as a current asset is
   a. Trade installment receivables normally collectible in 18 months – Instalment receivable always reflect as a part of Current Assets irrespective of time period. I have never seen any Instalment receivable in the Fixed Assets area. So in my opinion this should be the C.A.
   b. Cash designated for the redemption of callable preferred stock – This is , in my opinion, Restricted Cash for Preferred stock.
   c. Cash surrender value of a life insurance policy of which the company is beneficiary – this is also a L.T Activity.
   d. A deposit on machinery ordered, delivery of which
   will be made within six months – irrespective of period, Restricted cash for Tangible Assets should be reflected in the Fixed assets area.

Answer A looks to me more correct

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2    Assume - Jamison Corporation’s inventory cost on its statement of financial position was lower using first-in, first-out than last-in, first-out

Let’s Suppose               FIFO    LIFO

                                         $7        $7       

                                         $6        $6

                                         $5        $5

So FIFO inventory cost is lower than the LIFO & Purchases going down during the period.

Answer B looks to me more correct

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