Milestone Three

docx

School

Southern New Hampshire University *

*We aren’t endorsed by this school

Course

610

Subject

Accounting

Date

Apr 3, 2024

Type

docx

Pages

Uploaded by berkheiserkailyn

Milestone Three: Adjusting Entries and Communication Kailyn Berkheiser October 31 st 2023 ACC 610 Financial Reporting Southern New Hampshire University

2 Adjusting Entries Depreciation is the procedure by which the cost of a plant asset is spread out over the number of accounting periods during which it will be employed (Kuligowski, 2023). Depreciation can be calculated if the acquisition price, expected useful life, residual value, and depreciation method have all been established. The depreciation method a firm uses affects the calculation of revenue, the value of its assets, and the rate of return on those assets. Depreciation is calculated using a straight-line method at Target for both its physical assets and their corresponding machinery. They apply ratios that are based on the average age, predicted total useful life, or estimated time after acquisition of the thing or structure. This can vary depending on the object or structure. When it comes to figuring out how much tax to pay on their revenue, they use an accelerated method of depreciation. Expenses such as general repairs, maintenance fees, supplier charges, and payroll costs are incurred whenever they are needed. The straight-line method is one that is used to assist in spreading out the cost of an asset equally over the course of its life, which will result in monetary gain for the company (Wahlen, 2017). Journal entries of a special type called "adjusting entries" are generated at the end of each accounting period to adjust the final amounts in various general ledger accounts. This is done to guarantee that the stated amounts in those accounts are correct. The adjusting entry will always have many types of entries, such as a prepayment, accrual, and a revenue or cost account. What are called "prepaid expenses" are those that are paid for in advance but not used until a later date. Since insurance policies are often purchased well in advance of the coverage start date, they make a great illustration of a pre-paid expense. In accounting, a prepayment is a payment made in advance of the time when the money is actually spent. When calculating net worth, it is customary to deduct the effects of adjusting entries.

3 Communication TO: Brian Cornell, CEO FROM: Kailyn Berkheiser DATE: 11/02/2023 RE: Transition Financial Statements from GAAP to IFRS Dear Mr. Cornell, I felt it was important to talk about the benefits and drawbacks of shifting Target to IFRS from GAAP accounting. GAAP is in use at Target right now, and it's generally considered to be more rule-based than IFRS, which is more principle-based. In 2005, despite majority of the United States continued to adopt GAAP, IFRS emerged as the more commonly accepted accounting standard. Adopting IFRS principles into our accounting system would be a huge improvement. A bit more leeway is built into IFRS than GAAP. Therefore, rather than blindly adhering to so-called "rules," accountants can now lend their vast expertise and good judgment in support of these initiatives. Now that LIFO is outlawed, the firm may choose to use Average Cost instead. In this way, the corporation can utilize the typical selling price of its stock on hand. A extremely inefficient and costly technique of tracking inventory costs is the average cost. It's also practical for the massive amounts of goods that retailer Target gets.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

4 Another perk would be that the business might approach problems in novel ways. Once a problem has been reported, the value cannot be changed to reflect GAAP if the defect has been recorded. The corporation could revise the impairment statement as required by IFRS. The product might then be valued more precisely in the marketplace. The adoption of IFRS does come with some drawbacks. There are substantial expenses associated with putting Fraser into action, but the potential rewards could be worthwhile. IFRS is open to manipulation because its foundation is principles, which can be construed in several ways. A company's financial statements might reflect the results of a variety of procedures. At the moment, Congress, the SEC, and court rulings all have the authority to set accounting rules in the United States, hence they are not solely under the control of the FASB. Finally, due to a lack of reliable income, IASB depends primarily on contributions from businesses in a variety of countries. Kailyn Berkheiser Target Brands, Inc.

5 TO: Brian Cornell, CEO FROM: Kailyn Berkheiser DATE: 11/02/2023 RE: Accounts Receivable Adjustments Dear Mr. Cornell, We've learned that our biggest client has recently filed for bankruptcy. Due to her outstanding debt of $175,000, she must be marked as "uncollectible" in the books. Accounts receivable (AR) can be valued correctly through the use of the allowance method by balancing revenue against expenditures. To reduce AR in the current asset portion of the balance sheet, we shall employ the provision for doubtful accounts. Bad debt will be determined using an AR or sales percentage and the allowance method. I think it's best to go ahead and write off the whole thing as a bad debt provision. It is unlikely that they will be able to settle this debt, but we can try writing to them nevertheless. We don't expect this to have much of an effect on our bottom line over time. Kailyn Berkheiser Target Brands, Inc.

6 References Kuligowski, K. (2023, February 21). What is depreciation, and how does it work? . Business News Daily. https://www.businessnewsdaily.com/what-is-depreciation.html Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate accounting: Reporting and analysis. Mason, OH: South-Western Cengage Learning.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version