Tracy company reports the following in its statement of cash flows:Net Income $1,000Depreciation and Amortization 350Decrease (Increase) in Accounts receivable (10)Decrease (increase) in inventory 200Decrease (increase) in prepaid expenses 80Increase (decrease) in trade payables (300)Increase (decrease) in taxes payable 75Cash Flow from operations 1,395Tracy used the indirect method of determining cash flow from operations (CFO), had they used the direct method
Answer(s): B
The method does not affect the CFO.
Financial accounting data has some inherent limitations. Which of the following are limitations?
Answer(s): D
All of the responses can be considered limitations of financial accounting data.
Which of the following is/are component(s) of Shareholder's equity?
Answer(s): C
All of the selections appear in the Shareholders' Equity section of the balance sheet.
Which inventory costing method is most useful in estimating the amount of inventory lost or destroyed by theft, fire, or other hazards?
The historical relationship between cost of goods sold and sales is applied to sales of the current period as a way of estimating COGS during the current period. COGS is then subtracted from the cost of goods available for sale to get the estimated cost of the ending inventory.
Firm A uses the completed contract method and an otherwise identical Firm B uses percentage-of- completion method for revenue recognition in a project. Then, during the project,
Under the completed contract method, revenues and expenses are recognized only after the contract has been fulfilled. During all intermediate periods, costs are reported as inventory while revenues are treated as advances from customers. On the other hand, in the percentage-of-completion method, revenues are recognized in proportion to the percentage of the project completed, as measured by the costs incurred or engineering estimates available. Therefore, a firm shows higher assets and liabilities under completed contract method but lower equity than under percentage-of-completion.
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