What effect will writing off the inventory have on the current year’s income?
The effect of writing off the inventory for the year’s income is one that has a drastic effect on the balance sheet according to Porter and Norton (2013) because, it determines the amount eventually recognized as an expense on the income statement. An error in assigning the proper amount to inventory on the balance sheet will affect the amount recognized as cost of goods sold on the income statement. (Using Financial Accounting Information: The Alternative to Debits and Credits, 9th Edition, section 5-6, para 2)
What effect does not writing off the inventory have on the year-end balance sheet?
The effect of writing off the inventory will have a greater effect at the end of the year according to Porter and Norton (2013) because, The amount assigned to ending inventory is deducted from cost of goods available for sale to determine cost of goods sold. If the ending inventory amount is incorrect, cost of goods sold will be wrong; thus, the net income of the period will be in error as well. (Using Financial Accounting Information: The Alternative to Debits and Credits, 9th Edition, section 5-6, para 3)
What factors should you consider in deciding whether to persist in your argument that the inventory should be written down? 2 Corinthians 9:8 says: "And God is able to make all grace abound toward you; that ye, always having all sufficiency in all things, may abound to every good work." Whenever we
The effect of this transaction and next year’s income statement would be the ending inventory balance will increase and added in the cost of goods sold. The current period, the high value of the inventory balance will imply lower gross margins. The income tax expenses will decrease as the income tax expenses are usually proportionately depending on the company’s net earnings. In the next year, the transaction will increase in income and tax expense. Because a lot of inventories will be processed into finished goods which increase the gross sales, increasing the level of gross profit and earnings in the company. The income tax expenses and net earnings will increase.
4. What inventory method is used to value inventories? Does this method reflect current cost at year-end?
The second way that Athina could have approached this issue is that Athina could have considered the write-off as an unusual or non-recurring item seeing as how the inventory-turned-obsolete was not something that happens regularly. In this case, by considering this event as unusual or non-recurring, there would have been no effect on the net income before unusual or non-recurring items.
22. Mitch Company’s ending inventory is understated by $4,000. The effects of this error on the current year’s cost of goods sold and net income, respectively, are
The paperwork is needed so that the inventory can be check and figured out the true value of the inventory. A better way at looking any logical justification for cost or market inventory valuation is that a stock of items is necessary to expedite production and sales. If inventory become obsolescence, goes through physical deterioration, and price declines occur, or even if the stock when finally utilized cannot be expected to realize its stated cost plus a normal profit margin. Reduction in inventory value is an additional cost of the goods produced and sold during the time that they decline value occurred
b. The inventory write down recorded, as an expense by the company is $4.4 million. It is measured at lower of cost and net realizable value. Cost is measured by weighted average using standard cost method or
Jones over forecasts his inventory and has a low inventory turnover ratio. This drastically increases his accounts payable, as he isn’t able to pay due to low cash inflow. His account’s payable increased by nearly 9 percent in 2006. Nearly half of his current assets are in inventory. Also Jones isn’t able to take advantage of the cash discounts offered by his suppliers due to his slow cash collection process. In order to perform well, the company must improve its inventory system and its cash collection policies.
My inventory control procedures provided both increased revenues and cost savings. Quite simply, I ordered adequate levels of products which were in high demand, I was able to better meet customers’ needs, and my revenues increased. The cost savings I experienced as a result of my inventory control procedures were a bit more complex. First, in establishing a routine schedule for ordering, I was able to reap the benefits of lower shipping costs. Because I had a routine schedule, I could
The error would’ve been correct on the current period first quarter results. To correct the overstatement of 8 million in inventory, a credit or decrease for $8 mill should’ve been done on the inventory account, and the retained earnings should’ve been debited for the same amount:
God’s grace is a word frequently used to refer to “gift from God”. In many circles, it is theological defined as God’s unmerited favor (Hughes, 1998, Ryrie, 1963). Within this
Although inventory is an asset it is recorded as a cost, anything recorded otherwise would be unethical and would be hard to report the cost of goods sold once inventory has been depleted.
Grace is defined as “divine help or strength … given through the mercy and love of God.” This grace can help us serve beyond our capacity to love, and in the scriptures grace is frequently used to connote a strengthening or
This gives the illusion of lower cost of goods sold (and thus higher profits) but it is, in fact, just a temporary capitalizing of the fixed manufacturing costs due to inventory build up.
The inventory throughout the second quater each an every item is variable and it totals at about £4,009,800 and turns over every 3 months/90 days. Cash sales should amount to about £7,500,000 if the inventory of £4,009,800 valued at cost turns over once in 90 days and if the average mark-up is about £2004, 9000. This figure can be roughly checked by referring to the expenses on the income statement. A rough measure of the cash expenses can usually be obtained by using the operating expenses less any non-cash expenses such as depreciation. Overall this shows that it is very important for Doomy corporations to have cash budget planned for its business, because it can help them assess if they are over spending their money and if the money is going and where it is coming in.
inventories of finished goods, or whether less was produced than sold, which would mean a