Arena, Inc. uses the direct method to prepare its statement merchandise inventory of cash flows. Use the following information r
eported for 2019 to compute the amount of cash paid for Cost of Goods Sold, $140,000 Merchandise Inventory, beginning balance. $26,000 Merchandise Inventory, ending balance, $68,000 Accounts Payable, beginning balance, $7.700 Accounts Payable, ending balance, $5,300 O A. $179.600 O B. $182,000 O C. $98,000 O D. $184,400 Click to select your answer
1 answer:
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Answer:
(1) understated
(2) understaded
(3) unchanged
Explanation:
The amount of equivalent units will be higher as the ending inventory of work in process will be above of what it should be.
As we have more equivalent untis the cost per equivalent unit will be lower:
So both, conversion cost and total cost per equivalent untis will e lower than it should be as are getting divided over a larger amount.
the physical amount of units worked during the month and those which are complete will not be affected as the percentage of completion is an accounting tool to calculate the cost not to count the amount of units in possession