Lance Berkman is the controller of Saturn, a dance club whose year-end is December 31. Berkman prepares checks for suppliers in December, makes the proper Journal entries, and posts them to the appropriate accounts in that month. However, he holds on to the checks and mails them to the suppliers in January. Requirements What financial ratio(s) is (are) most affected by the action to hold onto the checks until January? What is Berkman’s purpose in undertaking this activity?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question

Lance Berkman is the controller of Saturn, a dance club whose year-end is December 31. Berkman prepares checks for suppliers in December, makes the proper Journal entries, and posts them to the appropriate accounts in that month. However, he holds on to the checks and mails them to the suppliers in January.

Requirements

  1. What financial ratio(s) is (are) most affected by the action to hold onto the checks until January?
  2. What is Berkman’s purpose in undertaking this activity?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Completing the Accounting Cycle
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education