EBK ADVANCED FINANCIAL ACCOUNTING
EBK ADVANCED FINANCIAL ACCOUNTING
11th Edition
ISBN: 8220102796096
Author: Christensen
Publisher: YUZU
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Chapter 6, Problem 6.9Q
To determine

Concept Introduction:

Intercompany transaction:

Consolidated financial statements are prepared by a parent company to consolidate the assets and liabilities of the parent and its subsidiaries. There may be some transactions between these companies which are called intercompany transactions. 

To Indicate: the reporting of the cost of goods sold by the consolidated entity when there have been inter-corporate sales during the period. 

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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 assets, Liabilities, and Equity?

Chapter 6 Solutions

EBK ADVANCED FINANCIAL ACCOUNTING

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