The Effect of Accounting Methods on Financial Statements: Q: 1a) Explain how two identical companies using the same accounting methods could show different net incomes because they used different inventory methods. Q: 1b) Give a hypothetical mathematical example of this occurring. Q: 2) A company has seen in the past that some of their credit customers never pay. Does this affect the financial statements for the current year?

The Effect of Accounting Methods on Financial Statements: Q: 1a) Explain how two identical companies using the same accounting methods could show different net incomes because they used different inventory methods. Q: 1b) Give a hypothetical mathematical example of this occurring. Q: 2) A company has seen in the past that some of their credit customers never pay. Does this affect the financial statements for the current year?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 13MC: What information can best be elicited from a receivable ratio? A. company performance with current...

See similar textbooks

Similar questions

Which of the following is not a way to manage earnings? A. Change the method for bad debt estimation. B. Change the figure for the uncollectible percentage. C. Under the balance sheet aging method, change the past-due categories. D. Change the dates of common stock issuance.
which of the following is FALSE regarding a firm's financial statements? Inventory is part of current assets Accounts receivable represents the value of goods that were sold to customers, for which the company has not yet been paid The balance sheet shows the value of a company's assets and liabilities at a point in time The income statement shows a company's income and expenses over a period of time the balance sheet and income statement information can be used to calculate the market value of the common stock
When a company has net income, what happens to its assets and/or to its liabilities? 2. Why must a company that gives a guaranty or warranty with its product or service show an expense in the year of sale rather than in a later year when a repair or replacement is made? 3. Is accrual accounting more closely related to a company’s goal of profitability or liquidity? 4. Under normal circumstances, will the carrying value of a long-term asset be equal to its market value?
a. What do the accounting policies say in the annual report (footnotes) regarding the cost of revenue? What are the drivers to the cost of revenue and the trends? b. Are there any trends in sales and marketing expenses or research and development? Are these amounts reasonable for the type of business? c. Compare general and administrative expenses to similar companies. Are they reasonable? d. What is the ratio of net interest income (expense) to income from operations? Is this a safe ratio for the company? Why or why not?
Based on a change in economic conditions, Company X has determined that its allowance for doubtful accounts needs to increase. What type of accounting change is this? accounting policy accounting error accounting estimate
Which of the following assumptions is embodied in the AFN equation? a. All balance sheet accounts are tied directly to sales. b. Common stock and long-term debt are tied directly to sales. c. Last year's total assets were not optimal for last year's sales. d. Fixed assets, but not current assets, are tied directly to sales. e. Accounts payable and accruals are tied directly to sales.
The balance in retained earnings is not affected by Choose net income. aluation of a company's ability to pay current net loss. issuance of common stock. dividends.
How does the accrual basis of accounting provide different results when compared with the cash basis? Which provides a better picture of a company’s performance? Why?
50) Which of the following is true of the acid-test ratio? A) It measures a company's ability to pay its current liabilities. B) It measures the ability of the company to earn net income. C) It measures a company's ability to meet its short-term obligations with cash and cash equivalents. D) It indicates how much cash could be realized by selling the inventory. OA. It measures a company's ability to pay its current liabilities. OB. It measures the ability of the company to earn net income. OC. It measures a company's ability to meet its short-term obligations with cash and cash equivalents. D. It indicates how much cash could be realized by selling the inventory.
Under standard accounting rules, it is possible for a company’s liabilities to exceed its assets. When this occurs,the owners’ equity is negative. Can this happen with market values? Why or why not?
explain how the accounts receivable and inventory should be valued on the financial statements. if the business was to apply the correct measurement basis, determine the effect on: (1) profit and (2) assets. explain the difference between cash and accrual basis methods of accounting and how each method would produce different profit or loss for any given period. Explain why its preferred to use accrual-based accounting method, especially for mid and large size organisations.
TRUE OR FALSE?The cumulative effect of change in accounting policy is shown in the income statement.