Lower inventory requirements means less capital requirements, and less time between paying for raw materials (parts) and receiving the proceeds of sale of the finished product.
However, see
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Managing Working Capital. A new computer system allows your firm to more accurately monitor inventory and anticipate future inventory shortfalls. As a result, the firm feels more able to pare down its inventory levels. What effect will the new system have on working capital and on the cash conversion cycle?
2 answers
During 2012, the company completed the following selected transactions. Journalize each transaction. Explanations are not required.
a. Issued for cash 1,300 shares of preferred stock at par value.
b. Issued for cash 2,400 shares of common stock at a price of $5 per share.
c. Net income for the year was $74,000, and the company declared no dividends. Make the closing entry for net income.
2. Prepare the stockholders’ equity section of the Lincoln-Priest balance sheet at December 31, 2012.
a. Issued for cash 1,300 shares of preferred stock at par value.
b. Issued for cash 2,400 shares of common stock at a price of $5 per share.
c. Net income for the year was $74,000, and the company declared no dividends. Make the closing entry for net income.
2. Prepare the stockholders’ equity section of the Lincoln-Priest balance sheet at December 31, 2012.