The fact that generally accepted accounting principles allow companies flexibility in cho make it difficult for a financial analyst to compare periodic performance from firm to firm. Suppose you were a financial analyst trying to compare the performance of two compar balance depreciation method. Company B uses the straight-line method. You have the f year-end financial statements for Company B: Income Statement Depreciation expense $ 8,000 Balance Sheet Assets: Plant and equipment, at cost Less: Accumulated depreciation Net $ 160,000 (32,000) $ 128,000
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- The fact that generally accepted accounting principles allow companies flexibility in choosing between certain allocation methods can make it difficult for a financial analyst to compare periodic performance from firm to firm. Suppose you were a financial analyst trying to compare the performance of two companies. Company A uses the double-declining- balance depreciation method. Company B uses the straight-line method. You have the following information taken from the 12/31/2024 year-end financial statements for Company B: Income Statement Book Depreciation expense $ 5,000 Balance Sheet Assets: Print Plant and equipment, at cost Less: Accumulated depreciation Net $ 100,000 (20,000) Ferences $ 80,000 You also determine that all of the assets constituting the plant and equipment of Company B were acquired at the same time, and that all of the $100,000 represents depreciable assets. Also, all of the depreciable assets have the same useful life and residual values are zero. Required: 1. In…The fact that generally accepted accounting principles allow companies flexibility in choosing between certain allocation methods can make it difficult for a financial analyst to compare periodic performance from firm to firm. Suppose you were a financial analyst trying to compare the performance of two companies. Company A uses the double-declining-balance depreciation method. Company B uses the straight-line method. You have the following information taken from the 12/31/2024 year-end financial statements for Company B: Income Statement Depreciation expense Balance Sheet Assets: Plant and equipment, at cost Less: Accumulated depreciation Net $ 13,500 $ 135,000 (54,000) $ 81,000 You also determine that all of the assets constituting the plant and equipment of Company B were acquired at the same time, and that all of the $135,000 represents depreciable assets. Also, all of the depreciable assets have the same useful life and residual values are zero. In order to compare performance…The fact that generally accepted accounting principles allow companies flexibility in choosing between certain allocation methods can make it difficult for a financial analyst to compare periodic performance from firm to firm. Suppose you were a financial analyst trying to compare the performance of two companies. Company A uses the double-declining-balance depreciation method. Company B uses the straight-line method. You have the following information taken from the 12/31/2024 year-end financial statements for Company B: Income Statement Depreciation expense $ 11,500 Balance Sheet Assets: Plant and equipment, at cost Less: Accumulated depreciation (46,000) $ 69,000 Net $ 115,000 You also determine that all of the assets constituting the plant and equipment of Company B were acquired at the same time, and that all of the $115,000 represents depreciable assets. Also, all of the depreciable assets have the same useful life and residual values are zero. Required: 1. In order to compare…
- Revenue Recognition: Explain the concept of revenue recognition in accounting. Provide examples of situations where revenue recognition might be challenging, and discuss the importance of adhering to appropriate accounting standards. Depreciation Methods: Compare and contrast the straight-line and declining balance methods of depreciation. Discuss the advantages and disadvantages of each method, and explain how the choice of depreciation method can impact a company's financial statements.Which of the following is NOT an accounting method that could be chosen by a company to increase reported profits in a particular year? a. Understating allowance for doubtful debts b. Classifying longer-term receivables as current assets c. Changing estimates of the useful life of plant and equipment d. Changing inventory valuation methodNumbers and descriptions match what really existed or happened. Economic entity assumption Kodak Company's income is projected to be lower than in previous years, so a switch from accelerated depreciation to straight-line depreciation is made in this year. Going concern assumption Presentation of timely information with predictive and confirmatory value. Monetary unit assumption Stable dollar assumption (do not use historical cost principle). Consistency characteristic The president of Selectron Corporation believes it is not necessary to report financial information on a yearly basis. The president believes that financial information should only be disclosed when significant new information is available related to the company's operations. Periodicity assumption The performance obligation is satisfied. Faithful representation characteristic Walgreen Pharmaceutical Corporation reports information…
- Which of the following statements is true? a. The fixed asset turnover ratio assists managers in determining the estimated future capital expenditures that are needed. b. The average age of the fixed assets is computed by dividing accumulated depreciation by depreciation expense. c. If net sales increases, the fixed asset turnover ratio will decrease. d. A relatively low fixed asset turnover ratio signals that a company is efficiently using its assets.Financial accounting rules require firms to assess whether they will recover carrying amounts of long-lived assets and, if not, to write down the assets to their fair value and recognize an impairment loss in income from continuing operations. Impairment charges often appear as a separate line item on the income statement of companies that experience reductions in the future benefits originally anticipated from the long-lived assets. Conduct a search to identify a firm (other than those given in this chapter) that has recently reported an impairment charge. Discuss how the firm (a) reported the charge on the income statement, (b) determined the amount of the charge, and (c) used cash related to the charge.Change in accounting estimate, as used in the recording and reporting of financial data, does not include a. Change from capitalizing to expensing research and development costs because of the accepted uncertainty of future benefits. b. Change in the estimated useful life of the asset subject to depreciation. c. Change in the number of companies included in the combined financial statements. d. Change in the estimated rate of doubtful accounts
- Consider the following two statements: 1. If a company uses the LIFO cost flow method for its income tax return, it must also use LIFO for its financial statements. II. If a company uses an accelerated depreciation method (i.e., double-declining balance, MACRS) for its income tax return, it can use the straight-line method for its financial statements. Which of the above statements (is) are true? O I only Il only neither statement is true. both I and IIforecasted balance sheet is calculated from asset ratios that management has reviewed and changed based on industry and benchmark averages. An Excel spreadsheet is used for this analysis because changes in assumptions, financing, and ratios can be made to the statements to review alternative scenarios. The impact of these changes on the firm's forecasted financial statements ultimately can be used to improve the firm's operations. Quantitative Problem: At the end of last year, Edwin Inc. reported the following income statement (in millions of dollars): Sales Operating costs excluding depreciation EBITDA Depreciation $4,250.00 3,016.00 $1,234.00 320.00 $914.00 150.00 $764.00 305.60 $458.40 Looking ahead to the following year, the company's CFO has assembled this information: EBIT Interest EBT Taxes (40%) Net income ▪ Year-end sales are expected to be 4% higher than $4.25 billion in sales generated last year. ▪ Year-end operating costs, excluding depreciation, will equal 80% of sales. ■…Listed below are the current Accounting Assumptions and Principles Economic Entity Assumption Monetary Unit Assumption Historical Cost Principle Going Concern Assumption Revenue Recognition Principle Full Disclosure Principle Time Period Assumption Matching Principle Required: For the following situations, identify whether the situation represents a violation or a correct application of GAAP, and which assumption/principle is applicable. g. Buckner Corp is being sued for $1,000,000. There is a probable chance they will lose. The company disclosed this fact in their notes to their financials. Violation: (Yes/No) Applicable Assumption/Principle: h. Nixon Corp records and maintains their books at cost and/or current value, not at a liquidated value.…