Emerson Electric is engaged in design, manufacture, andsale of a broad range of electrical, electromechanical,and electronic products and systems. The following showsEmerson's net income and net income before extraordinaryitems for the past 20 years (in millions):NetYear IncomeY1 $201.0Y2237.7Y3273.3Y4 300.1Y5302.9Y6 349.2Y7401.1Net IncomebeforeExtraordinaryItems$201.0237.7273.3300.1302.9349.2401.1NetYear IncomeY8 $408.9Y9467.2Y10 528.8Y11 588.0Y12 613.2Y13631.9Y14 662.9Net IncomebeforeExtraordinaryItems$408.9467.2528.8588.0613.2631.9662.9Emerson ElectricNetYear IncomeNet IncomebeforeExtraordinaryItemsY15 $708.1Y16Y17Y18 1,018.5Y191,121.9Y20 1,228.6 1,228.6788.5907.7$ 708.1904.4929.01,018.51,121.9Emerson has achieved consistent earnings growth for more than 160 straight quarters (more than40 years).PROBLEM 2-14EarningsManagementStrategies Required:a. What earnings strategy do you think Emerson has applied over the years to maintain its record of eamings growth?b. Describe the extent you believe Emerson's earnings record reflects business activities, excellent management,and/or earnings management.c. Describe how Emerson's earnings strategy is applied in good years and bad.d. Identify years where Emerson likely built hidden reserves and the years it probably drew upon hidden reserves.

Answer:- Earnings management meaning:- The practice of managing earnings is using accounting…

Required: a. What earnings strategy do you think Emerson has applied over the years to maintain its record of eamings growth? b. Describe the extent you believe Emerson's earnings record reflects business activities, excellent management, and/or earnings management. c. Describe how Emerson's earnings strategy is applied in good years and bad. d. Identify years where Emerson likely built hidden reserves and the years it probably drew upon hidden reserves.

Required: a. What earnings strategy do you think Emerson has applied over the years to maintain its record of eamings growth? b. Describe the extent you believe Emerson's earnings record reflects business activities, excellent management, and/or earnings management. c. Describe how Emerson's earnings strategy is applied in good years and bad. d. Identify years where Emerson likely built hidden reserves and the years it probably drew upon hidden reserves.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity

Section: Chapter Questions

Problem 7RE

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