Accounting Case - Lifo Vesus Fifo Essay

For an S corporation converted from a C corporation, it shall recognize the LIFO recapture amount, which is the excess of FMV on the first day of S year over the adjusted basis, by including it in the gross income of the last C corporation year.

6. Note 8 states Harnischfeger’s allowance for doubtful accounts. Compute the ratio of the allowance to gross receivables (receivables before the allowance) in 1983 and 1984. What would the allowance have been if the company maintained the ratio at the 1983 level? How much did the pre-tax income increase as a result of the changed ratio in 1984?

When using the LIFO method, if sales are higer than current purchases inventory not sold may be liquidated. This is called LIFO liquidation. The effect of the LIFO liquidation on the Harnischfeger’s income statement is an increase in net income by $2.4 million or $.20 in fiscal year 1984. There is no income tax effect. On the balance sheet there is a decrease of inventory, due to liquidation.

2. What is the effect of the depreciation accounting method change on the reported income in 1984? How will this change affect profits in future years?

2. Suppose a customer buys an iPhone from Apple for $500 on January 1, 2010. The cost of the iPhone to Apple is $350. Assume that the customer is entitled to upgrades over the next two years. Use the following financial statement effects template (FSET) to illustrate the financial statement impacts for Apple of the customer's iPhone purchase on the date of the initial purchase and at the end of each of the two years following the initial purchase under generally accepted accounting principles (GAAP).

a. Estimate the amount of revenue that Microsoft would have been reported in each year from 1996 through 1999 if Microsoft had not adopted its new revenue recognition policy in 1996.

a. What book-tax difference associated with its goodwill should RC report in year 1? Is it favorable or

For the year ended December 31, 2009, financial statement M should adjust its liability to $18.5 million FASB 450-20-50-3 through 450-20-50-8 required disclosure of additional exposure to loss if there is a reasonable possibility that there are additional amount to be paid. The amount of the adjustment would be considered 2009 an event period adjustment.

The effect of this transaction and next year’s income statement would be the ending inventory balance will increase and added in the cost of goods sold. The current period, the high value of the inventory balance will imply lower gross margins. The income tax expenses will decrease as the income tax expenses are usually proportionately depending on the company’s net earnings. In the next year, the transaction will increase in income and tax expense. Because a lot of inventories will be processed into finished goods which increase the gross sales, increasing the level of gross profit and earnings in the company. The income tax expenses and net earnings will increase.

-The was a liquidation of LIFO inventory quantities carried at lower cost compared with the current cost of their acquisitions. Because of this, COGS decreased.

According to the fact of this case, Parent Co. (Parent) wholly owns Poor Son Co. (Poor Son) as a legal subsidiary, and both of them all nonpublic companies. However, in January 2007 Poor Son filed a voluntary bankruptcy under Chapter 11 of the U.S. bankruptcy code because of its inability of meet obligations as they became due. Then, Parent claimed the loss of control of Poor Son and deconsolidated Poor Son from its financial statement. Through the bidding process in May 2009, Poor Son and OtherCo, the winning sponsor, filed a joint plan of reorganization to the bankruptcy court, but the plan was rescinded by OtherCo later due to significant market value shrink of Poor Son. After that, the

Accounts receivable are amounts owed by customers on account. They result from the sale of goods and services on credit. These receivables are generally expected to be collected within 30 to 60 days. They are typically the most significant type of claim held by a company. Accounts receivable and notes receivable resulting from sales are also known as trade receivables. Accounts receivable resulting from sales are referred to as trade receivables in Alcatel's financial statements.

6. Calculate Net Income (and its percentage difference) if Exxon used FIFO instead of LIFO in 2011.

Learning Objective: 04-02 Explain the purpose of adjustments and analyze the adjustments necessary at the end of the period to update balance sheet and income statement accounts.

* Net Operating Income (NOI), Cash Flow from Operations (CFO) and Cash Flow after Financing (CFAF)