ACC 545 Footnotes Preparation and Discussion Week 2 Paper
Balance Sheet Notes Preparation and Discussion
Odette A. Aquino Pérez, Desireé González
And Edwin Reyes
ACC 545
February 19, 2015
Prof. Rafael Marrero, PhD, MBA, CPA
Footnotes Preparation and Discussion
This week paper requires our team to prepare three notes to the balance sheet and income statement. Also, request us to discuss why footnotes are useful and important to financial statements. Below we have included the requested footnotes (prepared based on our experience working with a CPA Firm in public accounting) and our discussion related in relation to the footnotes:
Inventory:
Inventory is stated at the lower of cost or market using the first-in, first-out method of inventory accounting. Inventory includes certain costs associated with the preparation of inventory for resale, including distribution costs, labor, and freight. The Company records a reserve for the anticipated loss associated with selling inventories below cost. This reserve is based on management’s current knowledge with respect to inventory levels, sales trends and historical experience (Lowe’s).
Property and Equipment and Depreciation Policy:
Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged against operations. Renewals and betterment’s that materially extend the life of the assets are capitalized. Depreciation is computed on a straight-line basis over the estimated useful life of the related assets. For income tax purposes, depreciation is computed using the accelerated cost method (AICPA). Major classification and related useful lives are summarized below:
Estimated Accumulated Useful Lives Cost Depreciation Net Value
Land
Building
Furniture & Fixtures
Equipment
Vehicles
- .
25 years 7 years
5 years
5 years
$ 000,000
0,000,000
00,000
00,000
000,000
$ - .
000,000
00,000
Odette A. Aquino Pérez, Desireé González
And Edwin Reyes
ACC 545
February 19, 2015
Prof. Rafael Marrero, PhD, MBA, CPA
Footnotes Preparation and Discussion
This week paper requires our team to prepare three notes to the balance sheet and income statement. Also, request us to discuss why footnotes are useful and important to financial statements. Below we have included the requested footnotes (prepared based on our experience working with a CPA Firm in public accounting) and our discussion related in relation to the footnotes:
Inventory:
Inventory is stated at the lower of cost or market using the first-in, first-out method of inventory accounting. Inventory includes certain costs associated with the preparation of inventory for resale, including distribution costs, labor, and freight. The Company records a reserve for the anticipated loss associated with selling inventories below cost. This reserve is based on management’s current knowledge with respect to inventory levels, sales trends and historical experience (Lowe’s).
Property and Equipment and Depreciation Policy:
Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged against operations. Renewals and betterment’s that materially extend the life of the assets are capitalized. Depreciation is computed on a straight-line basis over the estimated useful life of the related assets. For income tax purposes, depreciation is computed using the accelerated cost method (AICPA). Major classification and related useful lives are summarized below:
Estimated Accumulated Useful Lives Cost Depreciation Net Value
Land
Building
Furniture & Fixtures
Equipment
Vehicles
- .
25 years 7 years
5 years
5 years
$ 000,000
0,000,000
00,000
00,000
000,000
$ - .
000,000
00,000
References: AICPA (2015). Illustrative Financial Statements Prepared Using the Financial Reporting Framework for Small and Medium Entities. Retrieved from: http://www.aicpa.org/InterestAreas/FRC/AccountingFinancialReporting/PCFR/DownloadableDocuments/FRF-SME/FRFforSMEs_Illustrative_Financial_Statements.pdf “Chron” Small Business. (2015). Guide-making Footnotes to Financial Statements. Retrieved from: http://smallbusiness.chron.com/guide-making-footnotes-financial-statements-32007.html Donald E. Kieso Phd and CPA, Jerry J. Weygandt PhD and CPA, and Terry D. Warfield PhD (2013). Intermediate Accounting (15th ed.) Investopedia (2015). Footnotes to the Financial Statementes. Retrieved from: http://www.investopedia.com/terms/f/footnote.asp Lowe’s 2010 Annual Report (2015). Notes to Consolidated Financial Statements. Retrieved from: http://www.lowes.com/AboutLowes/AnnualReports/annual_report_10/financials/notes_to_consolidated_financial_statements.pdf