Question 1:

Working Capital. Identify the working capital accounts related to (a) revenues recognized and deferred, (b) cost of goods sold, (c) employee salary and wages, and (d) income tax expense. For each account, indicate whether an increase in the working capital asset or liability would be an addition or subtraction when reconciling from net income to cash flows from operations.

A)Revenues recognized and deferred

>>> Working capital account: Deferred revenue

Increase? Decrease? Addition? Subtraction?

B)Cost of goods sold

Working capital account: Inventory or accounts receivable

Increase? Decrease? Addition? Subtraction?

C)Employee salary and wages

Working capital account: Salary and wages payable

Increase? Decrease? Addition? Subtraction?

D)Income tax expense

Working capital account: Income tax payable

Increase? Decrease? Addition? Subtraction?