made. True False 5. All changes reported using the retrospective approach require prior period adjustments. True False 6. All changes in estimate are accounted for retrospectively. True False 7. A change to the LIFO method of valuing inventory usually requires use of the retrospective method. True False 8. Both changes in reporting entities and material error corrections are reported prospectively. True False 9. A change in reporting
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Case 3-6 Accounting Standards A. Given the income statement effects of LIFO versus FIFO‚ how will the balance sheet inventory amounts differ between General Motors and Ford versus Honda and Daimler-Benz? In other words‚ will inventory be reported amounts representing recent costs or older historical costs? In your opinion‚ which balance sheet amounts would be more useful to financial statement users in making decisions to buy or sell shares of a company’s stock? Inventory is an asset that
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However‚ because of tax law requirements‚ if a company uses this assumption for tax purposes it must also use it for its financial statements. Whole Foods Market uses LIFO (Last-in‚ First-out) method to determine cost. It does not coincide with the actual movement of goods. LIFO is used during inflation to defer income tax payments. Under LIFO the goods in inventory at the beginning of the period are assumed to remain in the ending inventory
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In the United States‚ the Financial Accounting Standards Board (FASB) has been the organization that establishes standards that govern the preparation of financial statements‚ known as the United States Generally Accepted Accounting Principals (US GAAP). Many countries have established their own national accounting standards as well; however‚ as international business and trade increases‚ so does the need for a common set of accounting standards. In response to this need‚ the International Accounting
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There are various methods in the accounting world used to keep track of inventory and cost of goods used. FIFO stands for first in first out method which is the opposite of LIFO‚ last in first out. Both methods have disadvantages and advantages when it comes to tax time or preparing a financial statement for the investors. As the name suggest‚ FIFO will account inventory that came in first will be sold first. This method is effective for companies selling products with expiration dates. Obviously
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system‚ and the physical count at December 31 indicates that 112 units of inventory are on hand. Requirements: 1. Determine the ending inventory and cost-of-goods-sold amounts for the December financial statements under the average cost‚ FIFO‚ and LIFO methods. 2. Sales revenue for December totaled $23‚000. Compute 25th Century’s gross profit for December under each method. 3. Which method will result in the lowest income taxes for 25th Century? Why? Which method will result in the highest net
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given the opportunity to choose the topic of discrimination. I conducted some mild research in order to find a certain case that pertained to the topic of discrimination. After completing my research‚ I found a case that involves litigation against Walgreen Co. in the form of discrimination. The case is titled Raspardo vs. Carlone and I will be providing background information on the case‚ the main arguments from the parties involved‚ the laws applied to the case and how they apply and the managerial
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Summit Distributors was in danger of violating loan covenants because of slow economic activity and forecasted losses and was faced with a choice. Changing the inventory valuation method from LIFO to FIFO would avoid default but would require higher future income taxes. Not changing could mean default on covenants‚ renegotiating loan terms at less favorable interest rates‚ or possible bankruptcy. Therefor even if we assumed no cash- flow consequences associated with the change‚ the answer would
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(FIFO); last-in‚ last-out (LIFO); and average costs are the methods used in cash flow assumptions. Using the FIFO method‚ cost of the ending inventory is determined “by taking the unit cost of the most recent purchase and working backward until all units of inventory have been costed” (Kimmel‚ 2012). Therefore‚ the first goods that are bought are the first goods to be sold. With FIFO‚ the ending inventory reflects the prices of the most recent units purchased. Using the LIFO method‚ the cost of the
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Plagiarism Statement Declaration Form Semester : 2 Course Code and Title :ABFA 1023 FUNDAMENTALS OF ACCOUNTING Declaration We confirm that we have read and shall comply with all the terms and condition of TAR College’s plagiarism policy. We declare that this assignment is free from all forms of plagiarism and for all intents and purposes is our own properly derived work. We further confirm that the same work‚ where appropriate‚ has been verified by antiplagiarism Software ____________________________________
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