Advanced Financial Accounting

If the depreciation method changes from straight-line method to accelerated method then, depreciation expense would be increase and net income would decrease. The EPS ratio would represent a loss of $0.19 per share.

2) Although there is more shares, the Earnings after taxes are now higher due to the lower variable costs, which compensates for the increase in earnings based on the same 1,000,000 units at $30. Also the bigger part of the 14M invested, 10M was financied with issuing of

Finally, our net book value in 2010 will be $122,050.10, which is the difference between the new 2010 leasehold improvement and the accumulated depreciation of leasehold improvements:

Debit Retained Earnings $96,000; credit Common Stock Dividend Distributable $80,000; credit Paid-In Capital in Excess of Par Value, Common Stock $16,000.

Net income is reduced through depreciation and is an expense of the company. It does not reduce cash of the company. This adjustment does not involve the calculations of current cash flow. Calculations should be put back on net income in order to produce the outcomes of cash that has been provided by the operations of

| Income Summary 280,000 Retained Earnings 280,000 Ending balance $300,000 Beginning balance 100,000 Difference 200,000 Cash dividends $40,000 Stock dividends 40,000 80,000 $280,000

(a) Compute depreciation expense for 2011 and 2012 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining balance method.

On the 2009 unaudited statement, there was $59,787,000 and on the audited there was $58,787,000 which accounts for the $1,000,000 difference. Additionally on the Statement of Revenue and Expense for years 2008 and 2009 there was a discrepancy of $1,000,000 in 2009. This discrepancy appeared on the provision for doubtful accounts. The unaudited report showed $13,797,000 and the audited shows $14,797,000 which accounts for the $1,000,000 difference. This makes the “net income” for the year (2009) $627,000 in the unaudited, and 373,000 in the audited statement.

This income statement summarizes the company’s performance during 2007. It reflects how much money the company brought in as revenues, how much spent on expenses, and the difference between the two is the net income profit. All figures above are in terms of millions. Excel rounded the depreciation value which was 1.5 to 2 and net income of 1.5 to 2 as well which gave total expense of 11 which is actually 10.5 million. I will attempt to explain the major components of this Income

1. For a company, this is the total amount of money received by the company for goods sold or services provided during a certain time period. It also includes all net sales, exchange of assets; interest and any other increase in owner 's equity and is calculated before any expenses are subtracted. Net income can be calculated by subtracting expenses from revenue. In terms of reporting revenue in a company 's financial statements, different companies consider revenue to be received, or "recognized", different ways. For example, revenue could be recognized when a deal is signed, when the money is received, when the services are provided, or at other times. There are rules specifying when revenue should be recognized in different

5. Inclusion of certain costs in property, plant and equipment that the firm should have expense in the period incurred: This overstates fixed assets, income tax payable, retained earnings, operating expenses. This understates income tax expense.

19. The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

Companies purchase ownership in other firms as a course of business. These events create concerns among investors and employees. Employees wonder what impact the purchase will have on their jobs. Investors wonder what impact the purchase will have on the value of their securities. After the purchase, the company must determine how revenue needs to be reported for the investing company. Many companies find that they must use the equity method to report revenue earned by the main company.

d) Total stockholder’s equity will decline by $11,000 as a result of ABC, INC’s purchase of buy back its

ii. Using double- declining method, the first year ending balance of $6,404 is subtracted form the proceeds of the sale netting in a gain of $1,096 on the disposal. Once this is subtracted form the previous years depreciation $4,269, you get a total income statement impact of $3,173.