If purchases were recorded correctly but ending physical inventory is understated, which one of the following situations occurs for the current year? a. Working capital is understated and net income is overstated b. Working capital and net income are understated c. Working capital is overstated and net income is understated. d. Working capital and net income are overstated.

Q: Which should be subtracted from the net income when using the indirect method? A. Loss on sale of…

A: A cash flow statement is a financial statement that summarizes the cash and cash equivalents…

Q: n accounting for by-products, when the by-products are sold for more than the estimated sales value,…

A: There are two options available to the entity. The entity can choose either of the following options…

Q: LIFO, Perpetual and Periodic Riedel Company's inventory records showed the following transactions…

A: The LIFO stands for last in first out , where goods purchase at last are to be sold first.

Q: Which of the following best describes Accrued Liabilities?a. Long-term liabilities.b. Current…

A: Accrued liabilities are also known as outstanding liabilities. It means those liabilities which are…

Q: Which of the following levels of profitability in a multiple-step income statement represents…

A: Gross margin (gross profit): Gross margin is the amount of revenue earned from goods sold over the…

Q: Which of the following statements about merchandisingactivities is true? (More than one answer may…

A: Merchandising activities means activities of purchase and sale of goods that are ready for sale.…

Q: Which income statement account(s) would be affected by a policy choice at the same time as the…

A: Inventory is directly related to the cost of goods sold. To change the policy of valuation of…

Q: Indicate the section of an income statement in which each of the following is shown.a. Loss on…

A: a. Loss on inventory write-down:   - This loss is related to the cost of goods sold (COGS). When…

Q: A decrease in Selling and Administrative Expenses woulddirectly impact what ratio?a. Fixed asset…

A: Answer:

Q: Describe the entry to adjust from cost to net realizable value for inventory write-downs. What…

A: Journal entry: Journal entry is a set of economic events which can be measured in monetary terms.…

Q: The cost of inventory sold during the current year is clansified as atri in the O Liability, Balance…

A: The Inventory sold will create an income for the for the firm. Whereas, the cost of goods that are…

Q: Each of the following errors will overstate net income of current year, except Equipment purchased…

A: Equipment purchased in prior year will decrease the net income of last year. It does not have any…

Q: Which of the following is accounted for as a change in accounting policy? A. A change in the…

A: Change in Accounting Policy means switching from one typebod GAAp method to another Type of GAAP…

Q: Discuss how, in choosing the accounting methods below, the following ratios can be affected – rate…

A: Answer: •The return on assets shows the percentage of how profitable a company's assets are in…

Q: What financial metric measures a company's ability to cover its short-term obligations with its most…

A: Lets understand the basics.The acid-test ratio, also known as the quick ratio, is a financial metric…

Q: The effects of purchasing inventory on credit are to:a. increase assets and increase liabilities.b.…

A: Inventory is the very important asset for the business. It can be purchased in cash or on credit.

Q: Which of the following items would we report in the income statement just before net income? a.…

A: Income statement:   The financial statement which reports revenues and expenses from business…

Q: Which of the following requires an adjustment to the opening balance of retained earnings in the…

A: The term "retrospective effect" refers to the application of a change in principle to financial…

Q: What is the impact on profit for the year if income overstated? a. no effect b. profit will be…

A: Lets understand the basics. If there is error in recording the transaction then adjustment needs to…

Q: Identify at least two situations in which important changesin value are not reported in the income…

A: Definition:

Q: 9. Write-downs of inventories to their net realizable value are recognized a. in profit or loss b.…

A: Inventory: It can be defined as all the goods, items, materials, and merchandise that are held by a…

Q: What is the measurement value of inventory? Select one: a. Expected Value b. Fair Value c.…

A: Inventory are the goods which the businesses held for the sale.

Q: Indicate the effects of the transactions listed, on current assets, current ratios and net income.…

A: Debit what comes in, Credit what goes out. Debit the receiver, Credit the giver. Debit all expenses…

Q: 5. The following items affect the retained earnings account, except Group of answer choices a. net…

A: Retained earnings is the part of stockholders' equity. It is the part of income set aside to be…

Q: How would the following transactions affect the current ratio and the acid-test ratio? (a) Purchase…

A: Current ratio is the ratio between the current assets and current liabilities. It shows the…

Q: Which of the following is not reported in an income statement under IFRS? a.    Discontinued…

A: Definition: Income statement refers to the financial results of business for the period of time.

Q: TRUE OR FALSE? Current Assets differ from Quick assets when it comes to inventory.

A: Total Assets: Total Assets is the summation of short term assets and long term assets where former…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.