EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 19, Problem 10PS
Summary Introduction
To choose an action by management of Hartfield Industries which will most likely result in low- Quality earnings.
Introduction:
Quality of earnings can be defined as the amount of earnings due to higher sales or less costs rather than artificial profits created by anomalies in the accounting statements or move used like inflation of stocks or change in
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A company believes that it is subject to scrutiny by particular interest groups such as employee unions because it is earning expensive profits.
Do you think that this might influence whether the company prefers to recognise revenue over time for its construction contracts, or whether it would prefer to defer profit recognition until the completion of the project?
Using this case, discuss whether it be appropriate to recognise revenue at completion of production rather than at the point of sale?
1. Of the following, choose the one that describes a situation where liabilities and expenses are manipulated to make a company appear less profitable?
A. Liabilities are capitalized to increase revenues.
B. Failure to record insurance expense for the period.
C. Failure to record employee payroll earned but not paid as of period end.
D. Failure to record warranty costs when the facts suggest that disclosure is more appropriate accounting treatment.
E. None of the above.
Recently, Nai Su Ltd. experienced a strike that affected a number of its operating plants. The controller of this company indicated that it was not appropriate to report depreciation expense during this period because the equipment did not depreciate and an improper matching of costs and revenues would result. She based her position on the following points.
1. It is inappropriate to charge the period with costs for which there are no related revenues arising from production.
2. The basic factor of depreciation in this instance is wear and tear, and because equipment was idle, no wear and tear occurred.
Comment on the appropriateness of the controller’s comments.
Chapter 19 Solutions
EBK INVESTMENTS
Ch. 19 - Prob. 1PSCh. 19 - Prob. 2PSCh. 19 - Prob. 3PSCh. 19 - Prob. 4PSCh. 19 - Prob. 5PSCh. 19 - Prob. 6PSCh. 19 - Prob. 7PSCh. 19 - Prob. 8PSCh. 19 - Prob. 9PSCh. 19 - Prob. 10PS
Ch. 19 - Prob. 11PSCh. 19 - Prob. 12PSCh. 19 - Prob. 13PSCh. 19 - Prob. 14PSCh. 19 - Prob. 15PSCh. 19 - Prob. 16PSCh. 19 - Prob. 1CPCh. 19 - Prob. 2CPCh. 19 - Prob. 3CPCh. 19 - Prob. 4CPCh. 19 - Prob. 5CPCh. 19 - Prob. 6CPCh. 19 - Prob. 7CPCh. 19 - Prob. 8CPCh. 19 - Prob. 9CPCh. 19 - Prob. 10CPCh. 19 - Prob. 11CPCh. 19 - Prob. 12CPCh. 19 - Prob. 13CP
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