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Earnings management- Examples of where accounting can produce different numbers legally (honestly?).- Interesting ones - perhaps; • LIFO, FIFO Average Cost (Physical / Perpetual) • Depreciation- Why does management do it (not tax)?- Why not produce any numbers you like?- Why not require only one method or estimate?- Why would managers manage earnings?- NOT TAX - we are talking about ‘managing' reported accounting profits not taxable income.- Don't you want to look good - if you can choose which photo, which assessment marks to include etc- Managers want to show results that make their job easier: • High profits - great manager - she should be paid more • Low profits - not ripping the public off - should get government protection - shouldn't be taxed more.- Why not produce any numbers you like?- There are rules; revenue recognition, conservatism etc but there still is ‘wiggle' room (weighted ave v's FIFO).- Corporate law - fraud when you just make up the numbers.- Auditors who independently check that the numbers are ‘true and fair' or ‘presented fairly' within the ‘accounting reporting framework' (e.g. HC)- Post settling up - you can only lie so often.- Why not require only one method or estimate?- That adds a new kind of distortion.- Let's consider a pair of shoes!- How do we depreciate them; method, life, residual value?- Accelerated? Ten years? Always have some value?- OR Straight line? Two years? Zero residual- Imposing structure still gives distortions!- What are we attempting to achieve when producing financial statements? • Useful information (SAC 2 Objective of Financial Reporting) Barth showed useful for predicting.- How do we make the information useful? • Make it relevant, reliable, understandable etc (IASB Framework, Qualitative Characteristics of Financial Reporting) - But problems still remain. • Relevant or Reliable? • Relevant to whom? • Investors or creditors, casual observer?- Conceptual Framework and its application.
Explain the difference between the cash basis and accrual basis of accounting. Explain the difference between the cash basis and accrual basis of accounting?
evaluate the probable causes of the ERP implementation failure and then create your own hypothesis as to why it failed. Assess the effects the failure had on consumers, stockholders, employees, and the company's image.
On November 4, 2009, Blue Company acquired an asset (27.5 year residential real property) for $200,000 for use in its business. In 2009 and 2010, respectively, Blue took $642 and $5,128 of cost recovery.
An increase in the activity level within the relevant range results in:
Start the journal entries in class and you will need to post the transactions to T accounts and develop an income statement, statement of stockholder's equity, and balance sheet to be handed in. This exercise can be hand written or completed ..
hope amp crosby co. reports net income of 34000. the partnership agreement provides for annual salaries of 24000 for
Suppose a consumer has a daily income of $100 and purchases just two goods A and B. The price of good A is $5 and the price of good B is $4.
Prepare the elimination entries for the preparation of a consolidated statements workpaper on December 31, 2010 assuming the cost method.
ab and c are partners with capital balances of 50000 30000 and 20000 and who share in the profit and loss of the abc
The loan is to be repaid in four equal year-end installments. What amount of interest revenue should be recognized by the bank for the second year of the loan?
Sales on credit 280,000, cash sales 100,000, sales discount 13,000, sales return and allowances 11,000. Prepare the sales revenues section of the income statement based on this information.
Alpha paid five days past the discount period.
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