Correct! Nice to see you on this forum as well, Herbert.

Correct Answer: B

Explanation: Working capital is equal to current assets - current liabilities. The refinancing of $50,000 of short term debt with long term debt decreases current liabilities and increases long term debt. The decrease in short term debt decreases current liabilities causing working capital to go up. The prepayment of $50,000 of next year's rent increases and decreases current assets, thus causing no change in working capital. The acquisition of land through the issuance of common stock has no effect on current assets or current liabilities, therefore no change in working capital. The purchase of temporary investments for cash increases and decreases current assets, thereby not changing working capital.

Today's question: AUD

A limitation on the scope of an auditor's examination sufficient to preclude an unqualified opinion will usually result when management:

A)   Presents financial statements that are prepared in accordance with the cash receipts and disbursements basis of accounting.

B)   States that the financial statements are not intended to be presented in conformity with generally accepted accounting principles.

C)   Does not make the minutes of the Board of Directors' meetings available to the auditor.

D)  Asks the auditor to report on the balance sheet and not on the other basic financial statements.

Today’s question: REG

Under the Sales Article of the UCC, which of the following statements is correct regarding the warranty of merchantability arising when there has been a sale of goods by a merchant seller?

A)   The warranty must be in writing.

B)   The warranty arises when the buyer relies on the seller's skill in selecting the goods purchased.

C)   The warranty cannot be disclaimed.

D)   The warranty arises as a matter of law when the seller ordinarily sells the goods purchased.