When Preparing a Statement of Changes in Financial Position Using

question 38

Multiple Choice

When preparing a statement of changes in financial position using the cash basis for defining funds, an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because

• A) Funds were increased since inventory is a current asset
• B) The net increase in inventory reduced cost of goods sold but represents an assumed use of cash
• C) Inventory is an expense deducted in computing net earnings, but is not a use of funds
• D) All changes in noncash accounts must be disclosed under the all financial resources concept

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Definitions:

Situational Favorableness

The degree to which circumstances or conditions are advantageous for achieving a desired outcome.

Position Power

The authority and influence bestowed by a person's role or position within an organization.

Formal Post

An official position or job within an organization, often with specific duties and responsibilities.

Vroom-Yetton-Jago Normative Decision Model

A framework that helps leaders determine the level of involvement of subordinates in the decision-making process.