If a Company Attempts to Artificially Inflate Current Sales and Net

question 33

Multiple Choice

If a company attempts to artificially inflate current sales and net income by shipping goods that have not been ordered,we would expect that the receivables turnover ratio will:

• A)rise and the days-to-collect will rise,all other things equal.
• B)rise and the days-to-collect will fall,all other things equal.
• C)fall and the days-to-collect will fall,all other things equal.
• D)fall and the days-to-collect will rise,all other things equal.

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Definitions:

Cost Reconciliation

The process of ensuring that the costs recorded in the accounting system match the actual expenses incurred, especially in a manufacturing or production process.

February

The second month of the year in the Gregorian calendar, typically consisting of 28 days, except in leap years when it has 29 days.

Weighted-Average Method

A cost-flow accounting method that averages the cost of goods available for sale and assigns an averaged cost to both ending inventory and cost of goods sold.

FIFO Method

A method of inventory valuation where the first items placed in inventory are the first ones to be used or sold.