Exam 9: Working Capital

Which of the following is not true regarding the Work-in-Process Inventory account?

Of the three cost-flow assumptions, when prices fall FIFO results in balance sheet figures that are _____, cost of goods sold will _____, and _____ reported net income

A firm with assets that will convert to cash within the next 12 months, less than its obligations to pay cash in this same interval, has

The U.S.taxing authorities permit a firm to use LIFO for tax purposes as long as it also uses LIFO for financial reporting purposes.

The principle for cost inclusion is that the balance sheet amount for inventory should include all costs incurred to

LIFO inventory layers

Unrealized holding gain denotes the difference between the

Of the three cost-flow assumptions, LIFO has the highest cost of goods sold when inventory costs are rising and the lowest cost of goods sold when inventory costs are falling.

Prepare journal entries for the following transactions related to a manufacturing operation. a. The firm acquires manufacturing equipment for $45,000 cash. b. The firm purchases raw materials costing $36,000 on account. c. The firm issues raw materials costing $15,000 to the production department. d. Payroll of $35,000 is paid: $20,000 to direct factory workers and $15,000 to sales personnel. e. Utilities of $1,000 are paid: $300 for manufacturing equipment, $500 for factory building, and $200 for the administrative offices. f. Depreciation on the building and equipment is as follows: Factory building $4,550, manufacturing equipment $500, and sales and administration building $1,000. g. Units completed and transferred to finished goods total $37,000. h. Cost of goods sold for the period is $40,000.

The requirement that U.S.firms using LIFO for tax reporting purposes must also use LIFO for financial reporting purposes is called the _____ rule.

Why might inventories increase in market value subsequent to acquisition?

Sparkle Industries began a period with 2,000 pounds of sugar and purchased 4,500 pounds during the period.Sparkle used 5,300 pounds during the period. How many pounds of sugar remain at the end of the period?

Which of the following is/are not true regarding the Raw Materials Inventory account?

In periods of falling purchase prices and increasing inventory quantities, LIFO results in a _____ than either FIFO or the weighted-average cost-flow assumption.

One year is the conventional cutoff for distinguishing a current and a noncurrent asset or liability, because the operating cycle for most firms is one year or less.

Firms do not use LIFO because it

What does it mean for a firm to reverse a portion of a previously accrued charge, such as the expense creating a warranty liability or a restructuring liability? What is the effect of a reversal on the firm's income statement, balance sheet, and statement of cash flows in the period of the reversal?

Albion Company sells merchandise with a one year warranty. In 2013, sales consisted of 2,500 units. It is estimated that warranty repairs will average $20 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014. In the 2013 income statement, Albion should show warranty expense of:

IFRS permits firms to reverse previous impairments, up to the amount of the original acquisition cost of the inventory, if the circumstances that caused the inventory impairment no longer exist.

Of the three cost-flow assumptions, FIFO results in balance sheet figures that are closest to current cost because the latest purchases dominate the ending inventory amounts.