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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Problem 1 2-93B Accounting Alternatives and Financial Analysis

Affordable Autos Inc. has asked your bank for a SlOO.000 loan to expand its sales facility. Affordable Autos provides you with the following data:

Chapter 12, Problem 93PSB, Problem 1 2-93B Accounting Alternatives and Financial Analysis Affordable Autos Inc. has asked your , example  1

Your inspection of the financial statements of other automobiles sales firms indicates that most of these firms adopted the LIFO method in the late 1970s. You further note that Afford able Autos has used 10% of depreciable asset cost when computing depreciation expense and that other automobile dealers use 20%. Assume that Affordable Autos's effective tax rate is 30% of income before tax. Also assume the following:

Chapter 12, Problem 93PSB, Problem 1 2-93B Accounting Alternatives and Financial Analysis Affordable Autos Inc. has asked your , example  2

Required:

1. Compute cost of goods sold for 2017-2019. using both the FIFO and the LIFO methods.

2. Compute depreciation expense for Affordable Autos for 2017-2019. using both 10% and 20% of the cost of depreciable assets.

3. Recompute Affordable Autos's net income for 2017-2019. using LIFO and 20% depreciation. (Do&t forget the tax impact of the increases in cost of goods sold and depreciation expense.)

4. CONCEPTUAL CONNECTiON Does Affordable Autos appear to have materially changed its financial statements by the selection of FIFO (rather than LIFO) and l0% (rather than 20%) depreciation?

Chapter 12, Problem 93PSB, Problem 1 2-93B Accounting Alternatives and Financial Analysis Affordable Autos Inc. has asked your , example  3

To determine

(a)

Cost of goods sold: Cost of goods sold alludes to the immediate costs owing to the creation of the goods sold in an organization. This sum incorporates the cost of the materials utilized in making the great alongside the immediate work costs used to create the great. .. Cost of goods sold is likewise alluded to as "cost of sale."

To discuss:

The cost of goods sold using LIFO and FIFO.

Explanation

Cost of goods sold = Opening stock + purchase + direct expense − closing stock

As per FIFO,

COGS (2017) = 420000 + 4990000 − 510000 = 4900000

COGS (2018) = 510000 + 5200000 − 620000 = 5090000

COGS (2019) = 620...

To determine

(b)

Depreciation is that amount which is normally tear and wear of any machine in during the process of production.

To discuss:

The depreciation amount for 2017-19 using both 5% and 10% of depreciable assets.

To determine

(c)

Net income means: The company sale goods from the factory after manufacturing the goods and added all types of expense then the company gets some income then reduce expenses from the income and the net profit is calculated.

To compute:

The net income after considering all expenses.

To determine

(d)

Net income means: The company sale goods from the factory after manufacturing the goods and added all types of expense then the company gets some income then reduce expenses from the income and the net profit is calculated.

To compute:

The net income after considering all expenses.

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Chapter 12 Solutions

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Ch-12 P-11DQCh-12 P-12DQCh-12 P-13DQCh-12 P-14DQCh-12 P-15DQCh-12 P-16DQCh-12 P-1MCQCh-12 P-2MCQCh-12 P-3MCQCh-12 P-4MCQCh-12 P-5MCQCh-12 P-6MCQCh-12 P-7MCQCh-12 P-8MCQCh-12 P-9MCQCh-12 P-10MCQCh-12 P-11MCQCh-12 P-12MCQCh-12 P-13MCQCh-12 P-14MCQCh-12 P-15MCQCh-12 P-16MCQCh-12 P-17MCQCh-12 P-18MCQCh-12 P-19MCQCh-12 P-20MCQCh-12 P-21MCQCh-12 P-22MCQCh-12 P-23MCQCh-12 P-24MCQCh-12 P-25MCQCh-12 P-26MCQCh-12 P-27MCQCh-12 P-28MCQCh-12 P-29MCQCh-12 P-30MCQCh-12 P-31MCQCh-12 P-32MCQCh-12 P-33MCQCh-12 P-34MCQCh-12 P-35MCQCh-12 P-36MCQCh-12 P-37MCQCh-12 P-38MCQCh-12 P-39MCQCh-12 P-40MCQCh-12 P-41MCQCh-12 P-42MCQCh-12 P-43MCQCh-12 P-44MCQCh-12 P-45MCQCh-12 P-46CECh-12 P-47CECh-12 P-48CECh-12 P-49CECh-12 P-50CECh-12 P-51CECh-12 P-52CECh-12 P-53CECh-12 P-54CECh-12 P-55CECh-12 P-56CECh-12 P-57BECh-12 P-58BECh-12 P-59BECh-12 P-60BECh-12 P-61BECh-12 P-62BECh-12 P-63BECh-12 P-64BECh-12 P-65BECh-12 P-66BECh-12 P-67BECh-12 P-68ECh-12 P-69ECh-12 P-70ECh-12 P-71ECh-12 P-72ECh-12 P-73ECh-12 P-74ECh-12 P-75ECh-12 P-76ECh-12 P-77ECh-12 P-78ECh-12 P-79ECh-12 P-80ECh-12 P-81ECh-12 P-82ECh-12 P-83ECh-12 P-84PSACh-12 P-85PSACh-12 P-86PSACh-12 P-87PSACh-12 P-88PSACh-12 P-89PSACh-12 P-90PSACh-12 P-91PSACh-12 P-92PSACh-12 P-93PSACh-12 P-84PSBCh-12 P-85PSBCh-12 P-86PSBCh-12 P-87PSBCh-12 P-88PSBCh-12 P-89PSBCh-12 P-90PSBCh-12 P-91PSBCh-12 P-92PSBCh-12 P-93PSBCh-12 P-94CCh-12 P-95.1CCh-12 P-95.2CCh-12 P-96.1CCh-12 P-96.2CCh-12 P-97.1CCh-12 P-97.2CCh-12 P-97.3CCh-12 P-97.4CCh-12 P-97.5CCh-12 P-97.6CCh-12 P-98.1CCh-12 P-98.2CCh-12 P-98.3CCh-12 P-99.1CCh-12 P-99.2CCh-12 P-99.3CCh-12 P-99.4CCh-12 P-99.5C

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