When Preparing a Reconciliation of Net Income to Cash from Operations

question 43

Multiple Choice

When preparing a reconciliation of net income to cash from operations, an increase in the ending inventory over the beginning inventory will result in an adjustment to reported net income because:

• A) Cash is increased because inventory is a current asset.
• B) Inventory is an expense deducted in computing net earnings, but is not a use of cash.
• C) The net increase in inventory is part of the difference between cost of goods sold and cash paid to suppliers.
• D) All changes in noncash accounts must be disclosed.

Apply standard cost variances to affect the Cost of Goods Sold.

Understand the concept of standard cost system and its application in the manufacturing industry.

Analyze how variances are calculated within standard costing systems, including material, labor, and overhead variances.

Apply knowledge of accounting transactions to record the purchase and usage of raw materials, direct labor, and manufacturing overhead under a standard cost system.

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Definitions:

Negotiation

The process whereby parties discuss their differences and attempt to reach a mutually agreeable resolution.

Indorses

Endorses or signs the back of a financial instrument (such as a check) to transfer rights to another party.

Credit Union

A member-owned financial cooperative that provides banking services, including savings and loan facilities, to its members.

Shelter Principle

The principle that the holder of a negotiable instrument who cannot qualify as a holder in due course (HDC), but who derives his or her title through an HDC, acquires the rights of an HDC.