FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
19th Edition
ISBN: 9781119493624
Author: Kimmel
Publisher: WILEY
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Entity A is a listed company in Hong Kong. It did not keep completed accounting records for the period from 1 April 2019 to 31 March 2020 because the previous accounting manager suddenly resigned on 1 April 2019 and the position was kept vacant up to 31 March 2020.
However, Entity A needs to prepare the financial statements for the year ended 31 March 2020 in order to fulfil the financial reporting requirements. David Chan (David) is the managing director of Entity A. The new accountant, Tammy Li (Tammy) was employed by David on 1 April 2020. She worked very hard to find any useful information to facilitate the preparation for financial statements as at 31 March 2020.
The information which was found by Tammy are listed as below:
(1)
Entity A
Statements of Financial Position
as at 31 March 2019
$
$
Assets
Non-current assets
Office equipment
2,625,000
Current assets…
You have just finished presenting a summary of this year's financial results to the board of directors. Included in your presentation was an income statement including both basic and diluted EPS figures. One of the board members comments that they understand basic EPS but has no clue what diluted EPS is. The board member actually wondered aloud whether this diluted EPS computation was part of some "full-employment for accountants" project. How would you further explain the concept of dilution and what diluted EPS is trying to measure to the uncertain board member?
Robin Smith is considering buying shares in Mah Company. The company has reported an
increase in net income this year. On careful reading of the notes to the financial statements,
Robin learns that the company had a LIFO liquidation this year. Robin understands what
caused the liquidation but has asked you for advice about how to interpret it.
Required:
1. Prepare a short memo to Robin to answer the question.
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