Prepare two income statements for matka company

Assignment Help Accounting Basics

Reference no: EM13787181

Matka Company began operations in 2010. At the beginning of the year, the company purchased plant assets of $450,000, with an estimated useful life of ten years and no residual value. During the year, the company had net sales of &650,000, salaries expense of $100,000, and other expenses of $40,000, excluding depreciation. In addition, Matka Company purchased inventory as follows:

Jan 15200 units at $400 $80,000

Mar 20100 units at $40,840,800

June 15400 units at $416,166,400

Sep 18300 units at $412,123,600

Dec9150 units at $42,063,000

Total 1,150 units $473,800

At the end of the year, a physical inventory disclosed 250 units still on hand. The managers of Matka Company know they have a choice of accounting methods, but they are unsure how those methods will affect net income. They have heard of the FIFO and LIFO inventory methods and the straight line and double declining balance depreciation methods.

Required:

1. Prepare two income statements for Matka Company, one using the FIFO and straight line methods and the other using the LIFO and double declining balance methods. Ignore income taxes.

2. Prepare a schedule accounting for the difference in the two net income figures obtained in requirement 1

3. What effect does the choice of accounting method have on Matka's inventory turnover? What conclusions can you draw? Use the year- end balance to compute the ratio?

4. How does the choice of accounting methods affect Matka's return on assets? Assume the company's only assets are cash of $40,000, inventory, and plant assets. Use your- end balances to compute the ratios. Is your evaluation of Matka's profitability affected by the choice of accounting methods?

Reference no: EM13787181

Questions Cloud

Record the bad debts expense : Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense?

Primary source of stockholders : A primary source of stockholders' equity is

Examine performance management issues and processes : Examine performance management issues and processes

Produce an initial system specification document : Develop initial notes of the structure/functionality of the system. Produce an initial system specification document for the system. Develop a detailed scenario based model by writing use cases and develop an activity diagram.

Prepare two income statements for matka company : Prepare two income statements for Matka Company, one using the FIFO and straight line methods and the other using the LIFO and double declining balance methods. Ignore income taxes.

Explain the degrees of credibility : Explain the degrees of credibility

Average annual rate of return on the investment : If you bought the bond on the issue date at the issue price and expected to hold it until it matures on December 31, 2020, what would be your average annual rate of return on the investment?

Analyze the case and describe the impacts of breach on tjx : The case study focuses on a major IT security breach that occurred in the recent past. Consider yourself as the IT person in charge at TJX. You need to analyze the case and describe the impacts of the breach on TJX.

Create a context diagram for the new billing system : Create a Context Diagram and a Diagram 0 for the new billing and payment system.

User Account

All Pages