GM506 diss 2

Can you explain how using LIFO for inventory valuation might affect financial reporting during inflation compared to FIFO, and why companies might prefer one method over the other?

Comment on the following statements with suitable example: i. The ratio return on assets has net income in the numerator and total assets in the denominator. Explain how each part of the ratio could cause return on assets to fall. ii. Explain how return on assets could decline, given an increase in net profit margin. iii. If quoted market prices are not available, a personal financial statement cannot be prepared. Comment.

During a period of inflation, an account balance remains constant. With respect to this account, a purchasing power loss will be recognized if the account is a: a. Monetary asset b. Monetary liability c. Nonmonetary asset d. Nonmonetary liability

Required: a. Explain why "better matching" occurs with LIFO. b. What is the impact on the carrying value of inventory in the balance sheet when LIFO rather than FIFO is used during periods of inflation?

During a period of inflation, an account balance remains constant. With respect to this account, a purchasing power gain will be recognized if the account is a: a. Monetary liability b. Monetary asset c. Nonmonetary liability d. Nonmonetary asset

Contrast the effects that LIFO vs. FIFO would have on ending inventory, net income and cash flow in a period in which prices are rising?

During times of inflation, which of these inventory accounting methods is best for cash flow? JUST EXPLAIN ONE ANSWER WHICH IS INCORRECT. FIFO, because the cheapest goods are recorded as being sold first, resulting in lower cost of goods sold and higher reported net income. LIFO, because the most expensive goods are recorded as being sold first, resulting in a higher cost of goods sold and a lower reported net income. It doesn’t matter which you use since cash flow is unaffected by the choice of inventory identification method.

"The projected income statement method consists of taking the estimated income statement for the next period and adding or subtracting to the income the items that affect cash and that are not included as sales or as expenses". do you believe the above statement to be true or false? true or false

When inventory is adjusted down, what is the impact on the balance sheet? a. The value of the asset, Merchandise Inventory, is restated at a more conservative number. b. The value of the asset, Merchandise inventory, is increased to reflect a more optimistic outlook. c. The value of the liability, Selling Expense, would be decreased to reflect a more conservative outlook. d. The value of the liability, Operating Expenses, would be increased to reflect the loss.   You are an accountant for ACME Corporation working on inventory valuation. What would prevent you from using LCNRV to adjust the value of your inventory? a. If ACME uses NIFO. b. If ACME uses LIFO to cost inventory. c. If ACME uses FIFO to cost inventory. d. If the Cost of Goods Sold exceeds last quarter’s COGS.

Which of the following is an example of a conservative accounting practice? a. Estimate the allowance for uncollectible accounts to be a larger amount.b. Do not write down inventory for declines in net realizable value (estimated selling price).c. Record a lower amount of depreciation expense in the earlier years of an asset’s life.d. Record sales revenue before it is actually earned.

What is a question that should be asked about accounts payable when forecasting? a.) What are the costs associated with storing goods? b.) How much bad debt should be anticipated? c.) How much cash is needed on hand to meet current liabilities? d.) How quickly can we replenish goods?

In a period of rising prices,a. cost of goods sold under LIFO will be less than under FIFO.b. gross profit under FIFO will be higher than under LIFO.c. LIFO inventory will be greater than FIFO inventory.d. net income under LIFO will be higher than under FIFO.

Question Which of the following changes in credit standards and conditions would cause an improvement in profit? A) An increase in the percentage of doubtful collections. B) An increase in collection expenses. C) Decrease in units sold D) Increase in the turnover of accounts receivable.

Contrast the modern construct for FISIM with a measure that sub- tracts deposits from the financial sector’s lending to measure value added in the financial sector, i.e. what we called gross profits. How will these two measures differ in terms of size and sensitivity to risk? Can you give differing views of a world without finance for each to be the proper measure of value added? [Note these are two different statistics which are designed to measure the same number so if they differ at least one of is incorrect.]

If accrued liabilities are overestimated in the current period, the reported income in a following period will be lower than it should be. Select one: True False

The Jimenez Corporation’s forecasted 2011 financial statements follow, along withsome industry average ratios.a. Calculate Jimenez’s 2011 forecasted ratios, compare them with the industry averagedata, and comment briefly on Jimenez’s projected strengths and weaknesses.b. What do you think would happen to Jimenez’s ratios if the company initiatedcost-cutting measures that allowed it to hold lower levels of inventory andsubstantially decreased the cost of goods sold? No calculations are necessary:Think about which ratios would be affected by changes in these twoaccounts. Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2011AssetsCash $ 72,000Accounts receivable 439,000Inventories 894,000Total current assets $1,405,000Fixed assets 431,000Total assets $1,836,000Liabilities and EquityAccounts and notes payable $ 432,000Accruals 170,000Total current liabilities $ 602,000Long-term debt 404,290Common stock 575,000Retained earnings 254,710Total liabilities and equity…

Income can be distorted by factors other than inflation. The most important causes of distortion for inter-industry comparisons are: A. timing of revenue receipts and nonrecurring losses. B. tax write-off policy and different inventory methods. C. A and B D. answer not given

When preparing a projected income statement, which of the following additional information, other than the financial statements would probably not be relevant?  a) Expected capital expenditure b) The competitive environment c) New versus old store mix d) Expected level of macroeconomic activity

Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy?  Monetary unit assumption. Periodicity assumption. Going-concern assumption.   Economic entity assumption.

Which one of the following statements is true? a. Income manipulation is difficult under LIFO.b. Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.c. Companies may use LIFO for tax purposes and FIFO in the financial statements.d. In periods of declining prices, LIFO will result in the payment of less income taxes.

Assume that Walmart anticipates inflation in future periods. In a period of rising prices, which inventory method will result in the largest amount of net income? A) FIFO B) Specific identification C) Average-Cost D) LIFO