Reference no: EM13872882
Assume you work as an accountant in the merchandising division of a large public company that makes and sells athletic clothing. To encourage the merchandising division to earn as much profit on each individual sale as possible, the division manager's pay is based, in part, on the division's gross profit percentage. To encourage control over the division's operating expenses, the man-ager's pay also is based on the division's net income.
You are currently preparing the division's financial statements. The division had a good year, with sales of $ 100,000, cost of goods sold of $ 50,000, sales returns and allowances of $ 6,000, sales discounts of $ 4,000, and salaries and wages expenses of $ 30,000. (Assume the division does not report income taxes.) The division manager stresses that it would be in your personal interest to classify sales returns and allowances and sales discounts as selling expenses rather than as contra-revenues on the division's income statement. He justifies this friendly advice, by saying that he's not asking you to fake the numbers," he just believes that those items are more accurately reported as expenses. Plus, he claims, being a division of a larger company, you don't have to follow GAAP.
Required:
1. Prepare an income statement for the division using the classifications shown in this chapter. Using this income statement, calculate the division's gross profit percentage.
2. Prepare an income statement for the division using the classifications advised by the manager. Using this income statement, calculate the division's gross profit percentage.
3. What reason (other than reporting more accurately) do you think is motivating the man-ager's advice to you?
4. Do you agree with the manager's statement that he's not asking you to fake the numbers?
5. Do you agree with the manager's statement about not having to follow GAAP?
6. How should you respond to the division manager's friendly advice?
|
If you made a string out of aluminum
: If you made a string out of aluminum: a. How would you find the linear mass density given the volume mass density and radius? (Give formula) b. Calculate the linear mass density for a .5 mm radius strand with a volume mass density of 2.70
|
|
Explain the data types used in c language
: What is data type? Explain the data types used in C language.Write a program and draw a flowchart to print 1 to 100 all natural numbers.
|
|
The time dimension of financial statements
: Describe the difference in the time dimensions of the balance sheet and the income statement. How might that affect interpretations of related ratios?
|
|
What are some strategies used to manage large sound files
: What are some strategies used to manage large sound files in web applications (streaming, buffering, compression, etc.)?
|
|
How to respond to the division managers friendly advice
: What reason (other than reporting more accurately) do you think is motivating the man-ager's advice to you? Do you agree with the manager's statement that he's not asking you to fake the numbers? Do you agree with the manager's statement about not ha..
|
|
Force and total time required
: A 1200-kg car moving at 20 km/h is accelerated at a constant rate of 4 m/s2 up to a speed of 75 km/h. What are the force and total time required?
|
|
Differences in the financial ratios
: Why might you expect to see differences in the financial ratios (E.g., debt ratios, current ratios, ROE, ROA) of firms in the banking versus the automotive industries?
|
|
The length of the beam
: Consider a force F = 80 N applied to a beam as shown in Fig. 8-37. The length of the beam is ? = 5.0 m,and ? = 37°, so that x = 3.0 m and y = 4.0 m. Of the following expressions, which ones give the correcttorque produced by the force F? around point..
|
|
Compare and contrast actual authority and apparent authority
: Compare and contrast actual authority and apparent authority. Does one carry more weight than the other? Why or why not? Must be 200 words and cited.
|