In Han, Kang & Lee, LLC, the Main Accounting Issue

question 15

Multiple Choice

In Han, Kang & Lee, LLC, the main accounting issue being discussed with the client is:

• A) Whether to write-down inventory by 20 percent
• B) Whether to increase the value of inventory by 20 percent
• C) Whether to record an expenditure of $2 million as a capital expense and not operating expense
• D) Whether to inform the audit committee of fraud

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Definitions:

Operating Cycle

The average time period it takes for a business to convert its inventory into cash through sales.

Business Entity

An organization that engages in economic activities, recognized as a separate legal entity from its owners.

Less than Six Months

A term used to describe a period or duration that does not exceed six months.

More than One Year

Refers to a time frame in accounting and finance that indicates durations or periods extending beyond a twelve-month or one-year period.