What is the appropriate accounting treatment for each

Assignment Help Financial Accounting

Reference no: EM133433908

Questions: In each situation, answer the following questions:

- Identify the applicable accounting exchange rate or if an error correction applies.

- Explain what is the appropriate accounting treatment for each situation.

- What is the effect of the accounting treatment on the prior and current period financial statements?

Case Study:

Situation #1

Company X has been established in Puerto Rico for 15 years. The company is dedicated to offering transportation services to medical appointments throughout the island. X has a fleet of 75 transportation vehicles. Since the start of operations, X has depreciated all of its vehicles using the straight-line method. However, in early 2021 the accounting department was evaluating the depreciation rate of the fleet and determined that using the units-of-activity method of depreciation was more appropriate. So in that same year they adopted the change.

Situation #2

Aspen Inc. is preparing financial statements for the third year of operations and will present comparative statements for all three years. At the end of the third year, it discovered that the inventory was overvalued by $5,000 and $7,000 in the first and second year of operations, respectively.

Situation #3

IKOO is dedicated to selling sportswear, swimwear and water sports products. IKOO purchases products every month to replenish inventory and have enough merchandise to meet the high demand. From the beginning of its operations, it adopted the LIFO method to value its inventory. However, in the current year it was realized that the movement of merchandise is more in line with FIFO than with LIFO, so it adopted this method. IKOO is going to present the comparative financial statement for the last two years.

Situation #4

Kor Corp. is engaged in manufacturing and selling electronic products. Sales are made through its different establishments and online. 10 years ago it acquired 80% of 5 subsidiaries and has presented the consolidated financial statements for that period of time. At the end of the current year, it sold 2 of the subsidiaries. Kor will be filing two-year comparative statements.

Reference no: EM133433908

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