Indicate the effects of the transactions listed, on current assets, current ratios and net income. Use (increase) to indicate an increase, (decrease) to indicate a decrease and (no effect) to indicate no effect or an indeterminate effect. A fully depreciated asset is retired. Net income will experience Choose.. Merchandise is sold for cash. Total current assets will, Choose. An increase in inventory turnover ratio signifies Choose. in a firm's efficiency. A fixed asset is sold for more than book value. Net income will Choose.

Indicate the effects of the transactions listed, on current assets, current ratios and net income. Use (increase) to indicate an increase, (decrease) to indicate a decrease and (no effect) to indicate no effect or an indeterminate effect. A fully depreciated asset is retired. Net income will experience Choose.. Merchandise is sold for cash. Total current assets will, Choose. An increase in inventory turnover ratio signifies Choose. in a firm's efficiency. A fixed asset is sold for more than book value. Net income will Choose.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A firm's market-to-book ratio might be greater than 1.0 due to accounting reasons. An example of an accounting reason that would cause the market-to-book ratio to increase is a. straight-line methods of depreciation. b. using LIFO versus FIFO for inventory. c. level 1 fair values. d. off-balance-sheet assets arising from investments in successful research and development programs that are expensed according to conservative accounting principles.
4. Which of the following transactions causes an increase in working capital? a. Sale of merchandise on credit at a price above cost. b. Sale of marketable securities at a price below cost. c. Collection of an account receivable. d. Return to supplier of defective merchandise purchased on credit. Full credit allowed by supplier.
Which method would produce the same unit cost for Inventory and Cost of Good Sold in periods of rising prices? Select one: a. Weighted Average b. FIFO c. LIFO
The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2: Cash Beginning inventory Common stock Retained earnings The following five transactions occurred in Year 2: 1. First purchase (cash) 120 units @ $90 2. Second purchase (cash) 205 units @ $98 3. Sales (all cash) 350 units @ $197 4. Paid $13,950 cash for salaries expense 5. Paid cash for income tax at the rate of 25 percent of income before taxes $16, 800 17,600 (200 units @ $88) 15, 700 18,700 Required a. Compute the cost of goods sold and ending inventory, assuming (1) FIFO cost flow, (2) LIFO cost flow, and (3) weighted-average cost flow. b. Use a vertical model to show the Year 2 income statement, balance sheet, and statement of cash flows under FIFO, LIFO, and weighted average. (Hint: Record the events under an accounting equation before preparing the statements.) Complete this question by entering your answers in the tabs below. Req A Req B1 Cost of goods sold Ending inventory Req…
When inventory is adjusted down, what is the impact on the balance sheet? a. The value of the asset, Merchandise Inventory, is restated at a more conservative number. b. The value of the asset, Merchandise inventory, is increased to reflect a more optimistic outlook. c. The value of the liability, Selling Expense, would be decreased to reflect a more conservative outlook. d. The value of the liability, Operating Expenses, would be increased to reflect the loss. You are an accountant for ACME Corporation working on inventory valuation. What would prevent you from using LCNRV to adjust the value of your inventory? a. If ACME uses NIFO. b. If ACME uses LIFO to cost inventory. c. If ACME uses FIFO to cost inventory. d. If the Cost of Goods Sold exceeds last quarter’s COGS.
Which of the following is true about the quick ratio? a. The quick ratio is calculated by dividing the least liquid of current assets by current liabilities. b. Quick ratios will tend to be much larger than current ratio for manufacturing firms or other industries that have a lot of inventory. c. Inventory, being not very liquid, is subtracted from total current assets to determine the most liquid assets. d. Service firms that tend not to carry too much inventory will see significantly higher quick ratios than current ratios.
When inventory is sold on account, which of the following is true? Operating cash flows are increased at the time of sale. Total assets are increased by the amount of the gross profit. Net income is increased by the amount of the sales price. Revenue is not increased until the cash is received. Both net income and liabilities are increased by the amount of the sales price.
Which of the following statements is true with regard to the gross profit ratio? An increase in cost of goods sold would increase the gross profit ratio (assuming sales remain constant). An increase in the gross profit ratio may indicate that a company is efficiently managing its inventory. An increase in selling expenses would lower the gross profit ratio. a.1 b.2 c.1 and 2 d.2 and 3
What does the inventory turnover period ratio measure? Select one: a.Profitability. b.The average time an organisation holds inventory. c.The liquidity of the firm. d.How much the firm's current assets could decrease and still leave it able to pay its current liabilities.
When a company determines that the net realizable value of its ending inventory is lower than its cost, what would be the effect(s) of the adjustment to write down inventory to net realizable value? a. Decrease total assets. b. Decrease net income. c. Decrease retained earnings. d. All of these answer choices are correct.
Which of the following increases the cash conversion cycle? A.A decrease in inventory turnover B.An increase in the cash discount C.An increase in accounts payable D.A decrease in inventory level
10. Choose the options to correctly complete the following statement. Some balance sheet and income statement accounts that vary directly with sales include: 1. Cost of goods sold II. Depreciation III. Accounts payable IV. Accounts receivable O I, II, III only O I, II, IV only O I, III, IV only O I, II, III, and IV