The accounting policy change by LIC.

Question

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Answer 1

Question

Chapter 21, Problem 1FSC

a.

To determine

The accounting policy change by LIC.

b.

To determine

The reason for change in accounting policy.

c.

To determine

The method used by LIC after change in accounting policy.

d.

To determine

The difference in net income of LIC before and after implementation of new accounting policy.

e.

To determine

The difference in pension expenses under two policies and using new policy pension expenses is higher or lower.

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's expenses, Gross margin, and Net income?

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

Answer 2

Question

Chapter 21, Problem 1FSC

a.

To determine

The accounting policy change by LIC.

b.

To determine

The reason for change in accounting policy.

c.

To determine

The method used by LIC after change in accounting policy.

d.

To determine

The difference in net income of LIC before and after implementation of new accounting policy.

e.

To determine

The difference in pension expenses under two policies and using new policy pension expenses is higher or lower.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Chapter 21, Problem 1FSC

a.

To determine

The accounting policy change by LIC.

b.

To determine

The reason for change in accounting policy.

c.

To determine

The method used by LIC after change in accounting policy.

d.

To determine

The difference in net income of LIC before and after implementation of new accounting policy.

e.

To determine

The difference in pension expenses under two policies and using new policy pension expenses is higher or lower.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 4

Question

Chapter 21, Problem 1FSC

a.

To determine

The accounting policy change by LIC.

b.

To determine

The reason for change in accounting policy.

c.

To determine

The method used by LIC after change in accounting policy.

d.

To determine

The difference in net income of LIC before and after implementation of new accounting policy.

e.

To determine

The difference in pension expenses under two policies and using new policy pension expenses is higher or lower.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 21, Problem 1FSC

a.

To determine

The accounting policy change by LIC.

b.

To determine

The reason for change in accounting policy.

c.

To determine

The method used by LIC after change in accounting policy.

d.

To determine

The difference in net income of LIC before and after implementation of new accounting policy.

e.

To determine

The difference in pension expenses under two policies and using new policy pension expenses is higher or lower.

Answer 6

Chapter 21, Problem 1FSC

a.

To determine

The accounting policy change by LIC.

Answer 7

Chapter 21, Problem 1FSC

a.

To determine

The accounting policy change by LIC.

Answer 8

b.

To determine

The reason for change in accounting policy.

Answer 9

b.

To determine

The reason for change in accounting policy.

Answer 10

c.

To determine

The method used by LIC after change in accounting policy.

Answer 11

c.

To determine

The method used by LIC after change in accounting policy.

Answer 12

d.

To determine

The difference in net income of LIC before and after implementation of new accounting policy.

Answer 13

d.

To determine

The difference in net income of LIC before and after implementation of new accounting policy.

Answer 14

e.

To determine

The difference in pension expenses under two policies and using new policy pension expenses is higher or lower.

Answer 15

e.

To determine

The difference in pension expenses under two policies and using new policy pension expenses is higher or lower.

Answer 16

Expert Solution & Answer

Answer 17

Expert Solution & Answer

Answer 18

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Answer 19

Ch. 21 - Are accounting changes permitted in financial...Ch. 21 - How do firms report accounting changes under the...Ch. 21 - Prob. 21.3Q Ch. 21 - How do firms account for changes in accounting...Ch. 21 - Prob. 21.5Q Ch. 21 - Prob. 21.6Q Ch. 21 - Prob. 21.7Q Ch. 21 - Prob. 21.8Q Ch. 21 - Do accounting errors that self-correct within two...Ch. 21 - Does a firm need to correct an error that...

The accounting policy change by LIC.

Solution Summary: The author explains how LIC changed its accounting policy for pension and postretirement benefit plans in the fourth quarter of 2013.

The accounting policy change by LIC.

The reason for change in accounting policy.

The method used by LIC after change in accounting policy.

The difference in net income of LIC before and after implementation of new accounting policy.

The difference in pension expenses under two policies and using new policy pension expenses is higher or lower.

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Chapter 21 Solutions