Planning Systems, Inc The Firm Has Beginning Inventories as Follows

question 127

Multiple Choice

Planning Systems, Inc. has forecast the following unit sales and production for the next year, by quarter: $$\begin{array} { l l l l l } & 1 ^ { \text {st } } & 2 ^ { \text {nd } } & 3 ^ { \text {rd } } & 4 ^ { \text {th } } \\\text { Production } & 150 & 160 & 140 & 100 \\\text { Sales } & 120 & 140 & 150 & 120\end{array}$$ The firm has beginning inventories as follows: $$\begin{array} { l l } \text { Finished goods } & 50 \text { units } \\\text { Direct material A } & 100 \\\text { Direct material B } & 100\end{array}$$
A finished unit requires one unit of material A and two units of material B. There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories.
What is the ending finished goods inventory for quarter 2?

• A) 50
• B) 70
• C) 80
• D) 100

Recognize and account for gains and losses on the exchange of plant assets with commercial substance.

Determine the cost components and proper accounting treatment for land purchases and related expenditures.

Explain and calculate depletion of natural resources.

Apply various methods of depreciation and amortization for tangible and intangible assets.

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Definitions:

Indirect Method

A way of reporting net cash flow from operating activities in the statement of cash flows by adjusting net income for changes in working capital items and non-cash transactions.

Statement of Cash Flows

This financial statement provides an overview of a company's cash inflow and outflow over a period, detailing sources and uses of cash from operating, investing, and financing activities.

Operating Activities

Operating activities refer to the day-to-day functions involved in running a business, which are directly related to its primary activities and include generating revenue and paying expenses.

Depreciated Equipment

Equipment whose value has been reduced over time due to wear and tear or obsolescence, reflecting its reduced utility.