Determine the percentage of Incorporation A’s sales end up as net income.

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Answer 1

Question

Chapter 3, Problem 3ATC

a.

To determine

Determine the percentage of Incorporation A’s sales end up as net income.

b.

To determine

Determine the percentage of Incorporation A’s sales go to pay for the costs of the goods being sold.

c.

To determine

Explain the specific criteria that are necessary before Incorporation A would recognize a sale as having been completed and record the related revenue.

d.

To determine

Explain the manner in which Incorporation A account for (report on its income statement) the shipping costs it incurs to ship goods to its customers.

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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 3, Problem 3ATC

a.

To determine

Determine the percentage of Incorporation A’s sales end up as net income.

b.

To determine

Determine the percentage of Incorporation A’s sales go to pay for the costs of the goods being sold.

c.

To determine

Explain the specific criteria that are necessary before Incorporation A would recognize a sale as having been completed and record the related revenue.

d.

To determine

Explain the manner in which Incorporation A account for (report on its income statement) the shipping costs it incurs to ship goods to its customers.

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Answer 3

Question

Chapter 3, Problem 3ATC

a.

To determine

Determine the percentage of Incorporation A’s sales end up as net income.

b.

To determine

Determine the percentage of Incorporation A’s sales go to pay for the costs of the goods being sold.

c.

To determine

Explain the specific criteria that are necessary before Incorporation A would recognize a sale as having been completed and record the related revenue.

d.

To determine

Explain the manner in which Incorporation A account for (report on its income statement) the shipping costs it incurs to ship goods to its customers.

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Answer 4

Question

Chapter 3, Problem 3ATC

a.

To determine

Determine the percentage of Incorporation A’s sales end up as net income.

b.

To determine

Determine the percentage of Incorporation A’s sales go to pay for the costs of the goods being sold.

c.

To determine

Explain the specific criteria that are necessary before Incorporation A would recognize a sale as having been completed and record the related revenue.

d.

To determine

Explain the manner in which Incorporation A account for (report on its income statement) the shipping costs it incurs to ship goods to its customers.

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Answer 5

Chapter 3, Problem 3ATC

a.

To determine

Determine the percentage of Incorporation A’s sales end up as net income.

b.

To determine

Determine the percentage of Incorporation A’s sales go to pay for the costs of the goods being sold.

c.

To determine

Explain the specific criteria that are necessary before Incorporation A would recognize a sale as having been completed and record the related revenue.

d.

To determine

Explain the manner in which Incorporation A account for (report on its income statement) the shipping costs it incurs to ship goods to its customers.

Answer 6

Chapter 3, Problem 3ATC

a.

To determine

Determine the percentage of Incorporation A’s sales end up as net income.

Answer 7

Chapter 3, Problem 3ATC

a.

To determine

Determine the percentage of Incorporation A’s sales end up as net income.

Answer 8

b.

To determine

Determine the percentage of Incorporation A’s sales go to pay for the costs of the goods being sold.

Answer 9

b.

To determine

Determine the percentage of Incorporation A’s sales go to pay for the costs of the goods being sold.

Answer 10

c.

To determine

Explain the specific criteria that are necessary before Incorporation A would recognize a sale as having been completed and record the related revenue.

Answer 11

c.

To determine

Explain the specific criteria that are necessary before Incorporation A would recognize a sale as having been completed and record the related revenue.

Answer 12

d.

To determine

Explain the manner in which Incorporation A account for (report on its income statement) the shipping costs it incurs to ship goods to its customers.

Answer 13

d.

To determine

Explain the manner in which Incorporation A account for (report on its income statement) the shipping costs it incurs to ship goods to its customers.

Answer 14

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Answer 15

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Answer 16

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Answer 17

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Determine the percentage of Incorporation A’s sales end up as net income.

Solution Summary: The author explains how Incorporation A recognizes revenue from product sales or services rendered when the following revenue recognition criteria are met.

Determine the percentage of Incorporation A’s sales end up as net income.

Determine the percentage of Incorporation A’s sales go to pay for the costs of the goods being sold.

Explain the specific criteria that are necessary before Incorporation A would recognize a sale as having been completed and record the related revenue.

Explain the manner in which Incorporation A account for (report on its income statement) the shipping costs it incurs to ship goods to its customers.

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Chapter 3 Solutions