EBK ADVANCED FINANCIAL ACCOUNTING
EBK ADVANCED FINANCIAL ACCOUNTING
11th Edition
ISBN: 8220102796096
Author: Christensen
Publisher: YUZU
Question
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Chapter 13, Problem 13.18P

a.

To determine

Introduction: FIFO stands for First in First Out where the goods or inventories that are brought first are sold first. This method is used where goods are of perishable nature.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 when switch from FIFO to LIFO

a.

Expert Solution
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Explanation of Solution

    Quarter EndedNet SalesGross ProfitOperating ExpensesEarnings from operations before taxNet Earnings
    20X7$$$$
    Mar -313881231061710.2
    June-304061231051810.8
    Sep − 304281371191810.8
    20X6
    Mar -31394127112159
    June -304161381191911.4
    Sep -3040312311763.6
    Dec − 313851251032213.2

b.

To determine

Introduction: Depreciation is an expense or loss involved in using fixed assets in the process of production which has to be provided for it is done by estimating the amount to be written off from the value of asset each year. Or it could be stated as a permanent decrease in the value of a fixed asset because of normal tear and wear while using them.

To explain: The effect of a company deciding to switch from straight-line method to accelerated method of depreciation

b.

Expert Solution
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Explanation of Solution

Accelerated depreciation refers to the use of one method from different methods of depreciation by a company, for financial accounting or tax purposes to depreciates a fixed asset in such a way that the amount of depreciation is higher than the earlier years of an asset’s life. As it is a change in accounting estimate because there will be a change in the expected future benefits derived. As per the requirement of FASB 154, this change should be accounted for during the period in which the change occurred or it should be accounted for during the period and the future periods if the change is of both current and future effects. The newly adopted method of depreciation will be used for the 3rd quarter on 30th September and for the future periods till the useful life of the assets. In the footnote disclosure to the financial statements, the effects of change on the income from operations should be justified.

c.

To determine

Introduction: LIFO stands for Last in First Out where the goods or inventories that are brought last are sold first. This method is only used in the Unites States of America.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 for the company deciding to change its method of accounting from completed contract method to percentage of completion method to recognize sales revenue on long term contract.

c.

Expert Solution
Check Mark

Explanation of Solution

    Quarter EndedCompleted Contract% of completionEffects of Change
    SalesGross ProfitSalesGross ProfitSalesGross Profit
    20X7$$$$
    Mar -3180206030(20)10
    June-300055305530
    Sep − 30100507040(30)(10)
    20X6
    Mar -310060406040
    June -301501004020(110)(80)
    Sep -300050305030
    Dec − 3160405030(10)(10)

The change of completed contract to the % of completion method involves the application of new method to the balance sheet of previous period and the adjustments to all the subsequent annual and interim financial statements by applying the new method.

Statement showing the net earnings after deducting the tax rate of 40 %.

    Quarter EndedNet SalesGross ProfitOperating ExpensesEarnings from operations before taxNet Earnings
    20X7$$$$
    Mar -313681431063722.2
    June-304611651056036
    Sep − 30 3981411192213.2
    20X6
    Mar -314541791126740.2
    June -303067111948(28.8)
    Sep -30453178117(61)36.6
    Dec − 313751241032112.6

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Chapter 13 Solutions

EBK ADVANCED FINANCIAL ACCOUNTING

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