List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

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Answer 1

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Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 4.2E

1.

To determine

List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

2.

To determine

Identify the accounts which must be closed at the end of the year and to explain.

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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

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 4.2E

1.

To determine

List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

2.

To determine

Identify the accounts which must be closed at the end of the year and to explain.

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Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 4.2E

1.

To determine

List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

2.

To determine

Identify the accounts which must be closed at the end of the year and to explain.

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Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 4.2E

1.

To determine

List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

2.

To determine

Identify the accounts which must be closed at the end of the year and to explain.

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Answer 5

Chapter 4, Problem 4.2E

1.

To determine

List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

2.

To determine

Identify the accounts which must be closed at the end of the year and to explain.

Answer 6

Chapter 4, Problem 4.2E

1.

To determine

List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

Answer 7

Chapter 4, Problem 4.2E

1.

To determine

List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

Answer 8

2.

To determine

Identify the accounts which must be closed at the end of the year and to explain.

Answer 9

2.

To determine

Identify the accounts which must be closed at the end of the year and to explain.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 4 - What is the purpose of recording adjusting...Ch. 4 - List the four types of adjusting entries, and give...Ch. 4 - What is a contra-asset? Give an example of one.Ch. 4 - Explain how the financial statements relate to...Ch. 4 - What is the equation for each of the following...Ch. 4 - Explain the effect of adjusting entries on cash.Ch. 4 - How is earnings per share computed and...Ch. 4 - Prob. 8Q Ch. 4 - What are the purposes for closing the books?Ch. 4 - Differentiate among (a) permanent, (b) temporary,...

List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

Solution Summary: The author lists the types of adjustments on the balance sheet that should be adjusted at October 31 and related income statement account for each transaction.

List the types of adjustments on the balance sheet that should be adjusted at October 31 and the related income statement account for each transaction.

Identify the accounts which must be closed at the end of the year and to explain.

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