Chapter 10, Problem 27P

a.

To determine

Show how these events affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model.

b.

To determine

Explain the reasons behind the Company A’s recognition of cost of goods sold that had no impact on cash flow.

c.

To determine

Prepare a schedule of cost of goods manufactured and sold, a formal income statement, and a balance sheet for the year.

d.

To determine

Distinguish between the product costs and the upstream costs that Company A incurred.

e.

To determine

Explain the manner in which the company president could be correct and the reasons behind the production manager be biased in the assessment of the option to buy the inventory.