Exam 9: Working Capital

The current-noncurrent distinction refers to whether a firm will convert an asset to cash, or consume it, or sell it within one operating cycle and whether a firm will pay or otherwise settle a liability within one operating cycle.

Describe cash and cash equivalents.

The inventory record for a particular item for Year 2 appears below. Inventory, January 1, Year 2 20,000 \ 0.20 \ 4,000 Purchases: March 2 4,000 .24 \ 960 April 30 3,000 .28 840 June 15 6,000 .32 1,920 September 30 2,000 .26 520 December 15 1.000 .20 200 Total purchases 16.000 \ 4,440 Total available for sale 36,000 \ 8,440 Units sold 28,000 Refer to the Inventory Record example.The cost of goods sold for year 2 under weighted-average cost-flow assumption is (rounded to the nearest dollar):

Which of the following is/are not true regarding inventories when their replacement cost declines below acquisition cost?

During 20x4, all sales and purchases at Virginia Corporation were on credit.At December 31, 20x4, Virginia Corporation shipped goods to the New York Corporation but failed to record the sale.As a result, before making any corrections to the accounting records

Terrace Inc.uses the periodic LIFO cost flow assumption.During the period 23 units were sold at a price of $30 per unit.Transportation costs on the purchases totaled $252. \# of units Unit cost Beginning balance 10 \ 25 Purchase 1 15 22 Purchase 2 9 20 Purchase 3 12 25 Required: Prepare the journal entries to record the purchases and any adjusting entries for the end of the period.

Winner Company's beginning and ending inventories for the fiscal year ended September 30, Year 5, are October 1, Year 4 September 30. Year 5 Raw materials \ 15,000 \ 22,000 Work-in-process 40,000 35,000 Finished goods 8,000 12,000 $\text { Production data for the fiscal year ended September } 30 \text {, Year } 5 \text {, are }$ Raw materials purchased \ 80,000 Purchase discounts 1,000 Direct labor 100,000 Manufacturing overhead 75,000 Assume Winner Company treats all raw materials as direct materials once they enter the production process.Thus, no raw materials are treated as manufacturing overhead. (CMA adapted, Dec 95 #29) Refer to the Winner Company example.The total value of inventory to be reported on the balance sheet as of September 30, Year 5, for Winner Company is

Bargain Inc.'s beginning inventory is $20,000 and purchases for the year are $80,000.A physical inventory shows that $15,000 of the inventory remains at year end.How much is recorded as cost of goods sold for the year?

Which of the following is/are not true regarding inventory?

Which of the following is/are false regarding a merchandising firm?

Layman's Fine Jewelry uses the LIFO cost flow assumption and has a beginning inventory which includes four LIFO layers as follows: Beginning inventory \# of units Unit cost Year 1 layer 150 \ 50.00 Year 2 layer 100 60.00 Year 3 layer 50 65.00 Year 4 layer 200 75.00 During Year 5, Layman purchased 4,000 units and sold 4,250.Layman has to decide whether to purchase 250 additional units now at a price of $140 per unit or wait until February and pay $120 per unit due to an off-season discount promotion by the supplier. What is the cash cost to Layman's Fine Jewelry under each alternative? Assume that the tax rate is a flat 30%. Alternative A = Buy now Alternative B = Buy in February

Given the following information, compute cost of goods sold and ending inventory for months 1 through 4 using both the FIFO and LIFO cost flow assumptions.Assume that a periodic inventory method is used and that the books are closed monthly. \# of units Unit cost Beginning inventory 0 Purchases: Month 1 5 1.00 Month 1 15 1.10 Month 1 3 1.05 Withdrawals: Month 1 13 Purchases: Month 2 10 1.10 Month 2 15 1.05 Withdrawals: Month 2 20 Purchases: Month 3 10 1.05 Month 3 5 1.10 Month 3 2 1.15 Withdrawals: Month 3 25 Purchases: Month 4 15 1.05 Month 4 5 1.10 Withdrawals: Month 4 20

Which of the following is a product cost?

Describe the similarities and differences between the allowance method for uncollectibles and the allowance method for warranties.

A department store had items in its inventory at the end of the year that had a recorded book value of $10,000 and, because of fashion changes, a market value of only $7,000.The department store failed to write down these inventory items to market value.To keep the obsolete condition of the inventory items away from its auditors, the firm shipped the goods to a remote warehouse.The effect of this error was to

The measurement of cash is the present value of future cash flows of the instruments included in this category.

During May, Claremore sold 500 portable CD players for $50 each. Each CD player cost Claremore $25 to purchase and carried a one-year warranty. If 10 percent typically need to be replaced over the warranty period, what amount should Claremore debit Product Warranty Expense for in May?

The acquisition cost of manufactured inventories does not include which category of costs?

The inventory equation describes changes in inventory.The following equation measures all quantities in physical units:

Using these abbreviations--DL = Direct Labor, MO = Manufacturing Overhead, DM = Direct Materials, WIP = Work-in-Process, FG = Finished Goods, COGS = Cost of Goods Sold--how would you represent the flow of manufacturing costs through the accounts? (Use + to mean "add to" and → to mean "is transferred to.")