In the Space Below,state Whether Each Situation Is a Deferral

question 146

Essay

In the space below,state whether each situation is a deferral or an accrual.
______
a.
Unrecorded interest on savings bonds is $765.
______
b.
Property taxes that have been incurred but that have not yet been paid or recorded amount to $1,034.
______
c.
Legal fees of $2,890 were collected in advance. By year end, 70 percent were still unearned.
______
d.
Prepaid Insurance had a $900 balance prior to adjustment. By year end, 25 percent was still unexpired.
______
e.
Salaries earned by employees by year end but not yet paid or recorded amounted to $1,655.
______
______ f. Services totaling $690 have been performed but not yet recorded or billed.

Identify the various methods of inventory valuation and their effects on net income and taxes.

Calculate inventory costs using different methods (FIFO, LIFO, Average Cost).

Understand the implications of errors in inventory reporting on financial statements.

Analyze the effects of rising and falling prices on inventory valuation and company profitability.

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Definitions:

Acid-Test Ratio

A liquidity ratio that measures a company's ability to pay off its current liabilities with quick assets.

Company's Liquidity

The ability of a company to meet its short-term financial obligations by quickly converting assets into cash without significant loss.

Gross Margin Ratio

A financial metric that measures a company's financial health by dividing its gross profit by net sales, indicating the percentage of sales revenue remaining after deducting the cost of goods sold.

Profitability

The ability of a business to generate earnings compared to its expenses and other costs incurred during a specific period.