Indicate how accounting for lost and stolen merchandise differs between firms using a perpetual inventory system and those using a periodic inventory system. Which system provides the best way to account for such losses and why?
What will be an ideal response?
In both systems, such losses are not known immediately. In the perpetual system, losses are often discovered only when comparing a physical inventory count with the current balance of the inventory account. An adjusting entry is then made reducing the inventory balance and recording an increase in the cost of goods sold (expense) account. Under a periodic system, losses are not really "discovered" but rather are included in the computation of cost of goods sold after the physical inventory is taken. Periodic systems do not separate the cost of lost, damaged or stolen merchandise from the cost of goods sold.
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Which of the following is a principle of the Code of Ethics of the International Ethics Standards Board for Accountants but not a principle found in the AICPA Professional Code of Conduct?
a. Integrity b. Professional Behavior c. Confidentiality d. Objectivity
Outline the guidelines for discourse ethics.
What will be an ideal response?
An example of a hidden asset to a retailer is _____
a. a depreciated building b. new cash registers c. cash on hand d. accounts receivable
The net income reported on the income statement for the current year was $200,000. Depreciation recorded on plant assets was $38,000. Accounts receivable and inventories increased by $2,000 and $8,000, respectively. Prepaid expenses and Accounts Payable decreased by $1,000 and $11,000, respectively. Using the indirect method, how much would be reported for net cash flows from operating activities
in the statement of cash flows? A) $180,000 B) $200,000 C) $218,000 D) $238,000