The Head Office Of Empire Company

Financial Instruments A financial asset is something which is defined as an entitlement of future cash flows. However, a financial instrument is a broader term used to describe financial assets and other assets in which there are no organised secondary markets to trade them. However, a financial security is something that can be traded in a secondary market. Attributes of Financial Assets Financial assets are those that: • • • • Have a return of yield expressed in terms of percentage. Have risk in which there is probability the actual return will differ from the expected return. Are liquid in that they can be sold at current market prices with reasonable transaction costs. Are expected to have a set time-pattern of cash flows in or out.

Inventory at beginning of year . . . . . . . . . . . . . . . . Purchases less cost of items withdrawn for personal use . . . . . . . Cost of labor . . . . . . . . . . . . . . . . . . . . . Additional section 263A costs (attach statement) . . . . . . . . . . Other costs (attach statement) . . . . . . . . . . . . . . . Total. Add lines 1 through 5 . . . . . . . . . . . . . . . . Inventory at end of year . . . . . . . . . . . . . . . . . Cost of goods sold. Subtract line 7 from line 6. Enter here and on page 1, line 2 Check all methods used for valuing closing inventory: (i) Cost as described in Regulations section 1.471-3 (ii) Lower of cost or market as described in Regulations section 1.471-4 Other (specify method used and attach explanation) (iii)

In the past it was noted that companies reported the asset retirement obligation through taking into account a variety of liabilities. The asset retirement obligation was set up so as to come up a harmonious procedure would be implemented so as to overcome the problem of retiring the long-term asset. Companies should recognize liabilities for the asset retirement obligation during the time when an obligation is incurred and when there is reasonable estimate that a fair value will be made for an asset as per the Statement of Financial Accounting Standards (SFAS) N.O 143.

Companies that record the cost of inventory at lower cost of market must record inventory cost at whichever is lower, original cost or current market price. It is usually used when inventory is obsolete or market price for the asset has declined. The rule is often useful when inventory has been held for a long period of time. When the market value is lower than cost the company will need to recognize the loss. If the write-down of the lower cost or market is minor, the expense charge can be applied to cost of goods sold. However if material or recurring it may be wise to track in a separate account, such as “Loss on LCM adjustment (AccountingTools.com, 2015).” Another common adjusting entry item is a contra asset inventory account “allowance to reduce inventory LCM.” It is used to report the amount inventory market is below inventory cost. The account

a. Prepare a journal entry to record $3,500 million of estimated line costs for quarter 1. DR - Accrued Line cost $3,500

The considerable debate on the advantages and disadvantages of moving towards a full mark to market accounting system for financial institutions has been triggered by the move of the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) to make changes in this direction as part of an attempt to globalize accounting standards. Both fair value accounting and historical cost accounting have their advantages and drawbacks and therefore it is hard to conclude which system is superior to the other. Within the accounting systems, the valuation of intangible assets has been a constant source of attention by the board as well. This essay summarizes the superiority of fair value accounting in measuring value of certain assets and liabilities including intangible assets in light of the IASB discussion paper released recently.

Question 1: Separate the following list of assets into real assets and financial assets. What are the distinguishing characteristics of each type of asset ?

In the accounting perspective about these assets held for sale, GAAP suggests that “companies should measure them as the “is the lower of the carrying amount or the fair value, minus the cost to sell. In addition, impairment losses may be recovered and recognized in profit and loss. Newly acquired held-for-sale assets are measured at fair value, minus the cost to sell at the acquisition date” (Sardone and Tyson, 25); IFRS also recommends a very similar treatment in valuing the non-financing assets: property, plant, and equipment. It rules that the relevant value for non-financing asset is equal to the purchase price of the asset, minus any accumulated depreciation and any accumulated impairment losses if occurs. Also, the two standards suggest compatible requirements that to be considered under impairment, assets have to be in these situations: “a significant decrease in the fair value of an asset; a significant change in the extent or manner in which an asset is used; a significant adverse change in legal factors or in the business climate that affects the value of an asset; an accumulation of costs significantly in excess of the amount originally expected to acquire or construct an asset; a projection or forecast that demonstrates continuing losses associated with an asset” (Kieso, Weygandt and Warfield, 618). In addition of using the cost model which measures the value of non-financing assets as the difference between

The companies which report their inventory under the market rule of lower cost, commonly use contra asset inventory account. The companies use balance sheet in order to report that the market amount of the inventory is less than the cost amount of inventory. It can be said in the other sense that the accumulation of the inventory account balance and allowance account balance will equate the lower of cost method (Lower of Cost or Market, 2008).

To define the meaning of an asset, it is required to meet the key items of criteria such as: the items need to have future economic benefits, control, past events, probable and reliable measurement. All of these are showing at financial statement. If one of the key criteria of the above is not there, the item cannot be classified as an asset and should not be shown in balance sheet.

For November, there was an ending inventory of 500 units which led to an operating income of $72,357.03 under absorption costing and a $65,679.68 under variable costing . Due to ending inventory absorbing the fixed overhead cost under absorption costing as opposed to being directly expensed under variable costing, there was a smaller per unit fixed overhead expense under abortion which leads to a higher operating income under absorption costing. However, when the ending inventory decreases as seen in December, operating income was greater under variable costing than absorption costing . This is due to the additional expense of fixed overhead under absorption costing because the beginning inventory in December had prior month’s overhead costs. Under variable costing, the ending inventory did not absorb fixed cost, so this allowed the fixed overhead expense to be lower causing operating income to be higher.

Note Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Put option written on non-controlling interest Total equity Non-current liabilities Bank borrowings Warranty provision Deferred revenue Retirement benefit obligations Deferred income tax liabilities Other non-current liabilities 15 13(c) 14

For November, there was an ending inventory of 500 units which lead to an operating income of $72,357.03 under absorption costing and a $65,679.68 under variable costing . Due to ending inventory absorbing the fixed overhead cost under absorption costing as opposed to being directly expensed under variable costing, there was a smaller per unit fixed overhead expense under abortion which leads to a higher operating income. However, when the ending inventory decrease as seen in December, operating income was greater under variable costing than absorption costing . This is due to the additional expense of fixed overhead because the beginning inventory in December had prior month’s overhead costs under absorbtion costing. Under variable costing, the ending inventory did not absorb cost, so this allowed the fixed overhead expense to be lower causing operating income to be higher.

* The income statements prepared under absorption costing and variable costing usually produce different net operating income figures. Under absorption costing if inventories increase then some of the fixed manufacturing costs of the current period will not appear on the income statement as part of cost of goods sold. Instead, these costs are deferred to a future period and are carried on the balance sheet as part of the inventory account. Such a deferral of cost is known as fixed manufacturing overhead deferred in inventory, as the accountant said that the July production was well below standard volume because of employee vacations this caused overhead to be under

Receivables can be defined as a company's right to payment of an amount of money from the debtors, which clearly belong among the assets. The assets can be divided into current and long term by the expected maturity at the time of their creation.