give several examples, compare cost flow assumptions and inventory valuation under U.S. GAAP and IFRS, and indicate the possible influences to reported companies and financial information users. INTRODUCTION The U.S. Securities and Exchange Commission (SEC) continues to move forward in its proposed plans to replace U.S. GAAP for U.S. public companies with IFRS. Inventory valuation is important, because inventory is a crucial element not only in the computation of profit, but also in the valuation of
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TRUE-FALSE STATEMENTS 8. Closing entries are not needed if the business plans to continue operating in the future and issue financial statements each year. 9. The dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period. 10. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. 11. Closing revenue and expense accounts to the
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that a company can use to calculate the value of the goods in inventory. By reporting and analyzing such information, a company can help to predict financial performance and the best plan to achieve results. Such inventory valuation methods include: Average Cost Method; FIFO; and LIFO. The inventory valuation methods use two different inventory systems – perpetual and periodic. The perpetual inventory system is used when a company reports the cost of goods sold as those goods are sold throughout
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indicate that consumers are trimming spending faster than companies can slow production.1 These data also raised warning flags for investors in individual companies. As one analyst remarked, “When inventory grows faster than sales, profits drop.” That is, when companies face slowing sales and growing inventory, then markdowns in prices are usually not far behind. These markdowns, in turn, lead to lower sales revenue and income, as profit margins on sales are squeezed.2 Research supporting these
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Financial Detective, 2005 Ratio Analysis Researchers: Ligisan, Danmarie Lovely S. Cartalla, June Lue Health Products There are two companies in Health Products Industry, Companies A and B, who manufacture and market health-care products. Most of the companies’ assets were current assets. The company A has more total current assets of 51.2 % than company B, who has only 32.1 %. The current assets in here, includes Cash and Short Term Investments, Receivables, Inventories, and other current
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Determine the cost of goods sold under a | 5, 7, 8 |4, 5 | 3, 4 | 2 | 2 | |periodic inventory system. | | | | | | |4. Identify the unique features of the income |9 | 5, 6 | 5 | 2, 3 | 2, 3 | |statement for a merchandising company using
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|Questions |Exercises |Exercises | |Set B | |Describe the differences between |1, 2, 3, 4 |1 |1 |1 |1 | |service and merchandising companies. | | | | | | |Prepare entries for purchases under a |5, 6, 7, 8, 9, 10,|2, 3, 4, 5 |1, 2, 4, 5, 10 |2, 3, 4 |2, 3, 4 | |perpetual inventory
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increased 7% ($60,000 increase ÷ $910,000 = 7 % increase). Ex. 14.2 Sales ……………………. Cost of goods sold ……. 2009 163% 195% 2008 148% 160% 2007 123% 135% 2006 118% 123% 2005 100% 100% The trend of sales is favorable with an increase each year. However, the trend of cost of goods sold is unfavorable, because it is increasing faster than sales. This means that the gross profit margin is shrinking. Perhaps the increase in sales volume is being achieved through cutting
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What is the difference between gross margin and contribution margin? Gross Margin is the Gross Profit as a percentage of Net Sales. The calculation of the Gross Profit is: Sales minus Cost of Goods Sold. The Cost of Goods Sold consists of the fixed and variable product costs, but it excludes all of the selling and administrative expenses. Contribution Margin is Net Sales minus the variable product costs and the variable period expenses. The Contribution Margin Ratio is the Contribution Margin
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Q17-2 Revenue Recognition Distinguish between the accounting terms recognition and realization 1 ! Easy 5 Analytic Measurement Comprehension Q17-3 Revenue Recognition Revenue recognition for a motion picture company; licensing rights; differences between GAAP and IFRS 1 ! Easy 5 Analytic Measurement Comprehension Q17-4 Revenue Recognition Differing timing on when to recognize revenue 2 ! Easy 5 Analytic Measurement
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