Define generally accepted accounting principles

Reference no: EM132083220

Question: Fife Company prepares quarterly reports following generally accepted accounting principles. For each of the items below, state whether the method is in conformity with generally accepted accounting principles with an explanation of your answer and appropriate justification:

1. Fife takes a physical inventory at year-end for annual financial statements. Inventory and cost of sales reported in quarterly reports are based on estimated gross profit rates. Fife does have reliable perpetual inventory records.

2. The company records income tax expense for each quarter based on the expected tax rate for the year rather the tax rate based on the quarter's income.

3. The company had a loss on a discontinued operation in the third quarter. The company plans to recognize one-half of the loss in each of the third and fourth quarters.

4. The company reports inventory at lower of cost or market. At the end of the second quarter, the market value was below cost. Fife did not report a loss for the quarter since they expected the year-end market value to exceed the year-end cost.

Reference no: EM132083220

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