a
Introduction:
Interim reporting: Interim report cover a time period of less than a year, interim report can be far a week, a month, a quarter or more than one quarter. Many companies prepare monthly financial statements for internal management purposes. It presents a number of conceptual and measurement issues. Most of these are related to accounting concepts of periodicity and the division of the annual periods. ASC 250 requires three categories of accounting changes: (1) change in accounting principle, (2) change in an accounting estimate, and (3) change in reporting entity.
ASC 270 issued guidelines for the standardization of interim income statements. The standard also defines the income and measurement of costs on an interim basis. It provides guidelines for the annual report disclosures and interim disclosures and adjustments required to make interim figures to annual figures.
To explain: The recognition of revenue, product cost, gains, and losses for interim periods.
b
Interim reporting: Interim report cover a time period of less than a year, interim report can be far a week, a month, a quarter, or more than one quarter. Many companies prepare monthly financial statements for internal management purposes. It presents a number of conceptual and measurement issues. Most of these are related to accounting concepts of periodicity and the division of the annual periods. ASC 250 requires three categories of accounting changes: (1) change in accounting principle, (2) change in an accounting estimate, and (3) change in reporting entity.
ASC 270 issued guidelines for the standardization of interim income statements. The standard also defines the income and measurement of costs on an interim basis. It provides guidelines for the annual report disclosures and interim disclosures and adjustments required to make interim figures to annual figures.
To explain: The difference in determination of cost of goods sold and inventory for interim period report versus annual reports.
c
Interim reporting: Interim report cover a time period of less than a year, interim report can be far a week, a month, a quarter, or more than one quarter. Many companies prepare monthly financial statements for internal management purposes. It presents a number of conceptual and measurement issues. Most of these are related to accounting concepts of periodicity and the division of the annual periods. ASC 250 requires three categories of accounting changes: (1) change in accounting principle, (2) change in an accounting estimate, and (3) change in reporting entity.
ASC 270 issued guidelines for the standardization of interim income statements. The standard also defines the income and measurement of costs on an interim basis. It provides guidelines for the annual report disclosures and interim disclosures and adjustments required to make interim figures to annual figures.
To explain: The interim accounting treatment of period costs such as depreciation.
d
Interim reporting: Interim report cover a time period of less than a year, interim report can be far a week, a month, a quarter, or more than one quarter. Many companies prepare monthly financial statements for internal management purposes. It presents a number of conceptual and measurement issues. Most of these are related to accounting concepts of periodicity and the division of the annual periods. ASC 250 requires three categories of accounting changes: (1) change in accounting principle, (2) change in an accounting estimate, and (3) change in reporting entity.
ASC 270 issued guidelines for the standardization of interim income statements. The standard also defines the income and measurement of costs on an interim basis. It provides guidelines for the annual report disclosures and interim disclosures and adjustments required to make interim figures to annual figures.
To explain: The treatment of long-term contracts, advertising, seasonable revenue flood loss, and annual major repair and maintenance to plant and equipment during the last two weeks in December.
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Chapter 13 Solutions
Advanced Financial Accounting
- Accruing net losses on obsolete inventory is an example of the accounting concept of: a. conservatism b. historical cost c. consistency d. materialityarrow_forwardWhich of the following is accounted for prospectively? Change in reporting entity. Change in the percentage used to determine warranty expense. Correction of an error. Changes from the weighted-average method of inventory costing to FIFO.arrow_forwardPrepare a memorandum containing responses to the following items. a. Describe the cost flow assumptions used in average-cost, FIFO, and LIFO methods of inventory valuation. b. Distinguish between weighted-average-cost and moving-average-cost for inventory costing purposes. c. Identify the effects on both the balance sheet and the income statement of using the LIFO method instead of the FIFO method for inventory costing purposes over a substantial time period when purchase prices of inventoriable items are rising. State why these effects take place.arrow_forward
- An analyst must be familiar with the concepts involved in determining income. The amount of in- come reported for a company depends on the recognition of revenues and expenses for a given time period. In certain cases, costs are recognized as expenses at the time of product sale; in other situations, guidelines are applied in capitalizing costs and recognizing them as expenses in future periods. Explain the rationale for recognizing costs as expenses at the time of product sale. What is the rationale underlying the appropriateness of treating costs as expenses of a period instead of assigning the costs to an asset? Explain. Under what circumstances is it appropriate to treat a cost as an asset instead of as an expense? Explain. Certain expenses are assigned to specific accounting periods on the basis of systematic and rational allocation Identify the conditions necessary to treat a cost as a loss.arrow_forwardProponents of the LIFO Inventory cost flow assumption argue that this costing method is superior to the alternatives because it results In better matching of revenue and expense. Required: a. The recent purchase costs to the Cost of Goods Sold account results in better matching of revenue and expense. O True False b. What is the impact on the carrying value of Inventory in the balance sheet when LIFO rather than FIFO is used during periods of Inflation? O It understates the value of Inventory in the balance sheet. O It overstates the value of Inventory in the balance sheet.arrow_forwardWhich inventory method provides a better matching ofcurrent costs with sales revenue on the income statementbut also results in older values being reported for inventory on the balance sheet?arrow_forward
- Which of the following statements is incorrect? Select one: a. By using the IFRS, goods shipped on consignment from a seller to another company should be included in the inventory of the seller. b. Many argue that LIFO provides a better matching of current costs against revenue from a financial reporting point of view. c. Both IFRS and GAAP account for inventory acquisitions at historical cost and value inventory at the lower-of-cost-or-net-realizable value subsequent to acquisition. d. Both inventory and net income are higher when companies use LIFO in a period of inflation.arrow_forwardWhat is inventory turnover ratio time study observation? Time Formulas and standard data and what are the methods to remove error in time measurement?arrow_forwardDiscuss generally how product and period costs should be recognized at interim dates. Also discuss how inventory and cost of goods sold may be afforded special accounting treatment at interim dates.arrow_forward
- T, F. Under the GAAP rule, inventories can be reported at above cost in the balance sheet. T, F. If ending inventory is overstated due to quantity or cost errors, but purchases are corrected, the effect in income statement is overstatement because of the cost of goods sold that is understated.arrow_forwardWhich of the following statement is not valid as it applies to inventory costing method? A) If inventory quanities are to be maintained, part of the earning must be invested (plowed back) in inventories when FIFO is used during a period of rising prices. B) LIFO tends to smooth ou the net income patterns by matching currents cost of goods sold with current revenue, when inventories remain at costant quantities. C) When a firm using the LIFO method fails to maintain its usual inventory position (reduces stock on hand below customary levels), there may be a matching of old cost with current revenue. D) The use of FIFO permits some control by managment over the amount of net income for a period through controlled purchase, which is not true with LIFO.arrow_forwardRequired: Match the following statements 1-10 the appropriate code letter A-C Statements 1-10 are as follows: Change due to understatement of inventory Change due to charging a new asset directly to an expense account Change from expensing to capitalizing certain costs, due to a change in periods benefited Change from FIFO to average cost inventory procedures Change due to failure to recognize an accrue (un-collected) revenue Change in amortization period for an intangible asset Change in expected recovery of an account receivable Change in the loss rate on warranty costs Change due to failure to recognize and accrue income Change in residual value of depreciable plant asset Codes A-C are as follows: A. Change in accounting policy B. Change in accounting estimate C. Error correction Statements 1-10 Codes A-C (select ONE code per statement) 1 2 3 4 5 6 7 8 9 10arrow_forward
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning