Answered: Beginning in 2018 the accounting for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 1

Beginning in 2018 the accounting for investments in stock changed. The former methods used were accounting for stock as trading securities, as available for sale securities, and the equity method. Describe trading and available for sale securities and the past accounting for each (the equity method will be covered later). Describe the new method of accounting for these securities beginning in 2018.

Question 2

Describe the two methods of accounting for bad debts under the allowance method (not the direct write off method used on tax returns). Include how we estimate the allowance needed under one of the methods and how we account for write offs and recoveries of write offs.

Question 3

Why do companies use the LIFO method of accounting for inventories? The international accounting standards do not allow the use of LIFO – support the use of LIFO on financial statements allowed by the U.S. standards.

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