Suppose an accountant discovers that the company holds substantial amounts of inventory that are now obsolete and worthless. Should the accountant report the truth, write off the inventory as an asset, and take a loss on obsolete inventory in earnings? Suppose the accountant also knows that the company is already in distress. Should the accountant seek ways to avoid or delay recognizing inventory losses that will cause the company to report lower earnings and thereby experience a drop in stock price and potential bankruptcy? What if the accountant knows the company is growing quickly and generating healthy profits?

A LIFO liquidation means which of the following:     The firm uses the LIFO cost flow assumption, and it is insolvent. It must liquidate all of its inventory.     The firm did not purchase enough inventory units in the current period to cover its sales for the current period. It must sell its older inventory units that were valued at a lower price. Thus, its gross profit will be higher than expected.     The firm did not purchase enough inventory units in the current period to cover its sales for the current period. It must sell its older inventory units that were valued at a lower price. Thus, its gross profit will be lower than expected.     The firm did not purchase enough inventory units in the current period to cover its sales for the current period. It must sell its older inventory units that were valued at a higher price. Thus, its gross profit will be higher than expected.     None of these answers is correct.

ts) An auditor recently asked an accounting manager to perform a LCM test on a batch of inventory. Since the manager would prefer to avoid the cost of a LCM test, what GAAP argument could she use to avoid performing the test? O The cost of the test would not outweigh the benefit of the result. O Why don't you perform the test? That's what we are paying you for. O I have no reason to believe future value has dropped below the historical cost. h O The recorded cost accurately represents the costs when the inventory was produced.

When you are purchasing a company stock, you are purchasing part of the company.  True  False

Based on a change in economic conditions, Company X has determined that its allowance for doubtful accounts needs to increase. What type of accounting change is this? accounting policy accounting error accounting estimate

Managers often complain that the stock market is short-sighted and focused on accounting earnings. In your post, make a case to convince your manager that this view is either true or not true.

What is a good response to? Unrealized intercompany inventory profits from a prior period are eventually resold in the current period to continue to lower inventory numbers. This eventually increases the net income, however the profits are pushed until the resale period to accurately report the income. The sales of inventory between the parent company and the subsidiary should be eliminated and therefore would no affect the parent's financial statements. However, when the inventory is finally sold to an unaffiliated customer, not a subsidiary, the income would then be reported and affect the net income and financial statements. It is important to note for record keeping if a transaction has occurred upstream or downstream, however, any intercompany transactions, whether upstream or downstream, should be eliminated (Taylor, 2022).

Identify all false statements about changes in accounting principles and estimates. 1. Investors likely prefer the retrospective approach as it is best for comparability across reporting periods. 2. Companies likely prefer the prospective approach as it is the least costly to apply. 3. Voluntary changes in accounting principle such as inventory-method change and depreciation- method change require the retrospective approach. 4. Change in estimated useful life of equipment should be accounted for prospectively. 5. Good justifications from investors' viewpoint for a voluntary change in accounting principle is th the change increases earnings and is less costly to implement. 6. "Taking earnings bath" is more likely during a good year or the year of management change. O 3, 5, 6 O 1, 2, 4 2, 3, 4 O 5 & 6

Ross’s Lipstick Company’s long-term debt agreements make certain demands on the business. For example, Ross may not purchase treasury stock in excess of the balance of retained earnings. Also, long-term debt may not exceed stockholders’ equity, and the current ratio may not fall below 1.50. If Ross fails to meet any of these requirements, the company’s lenders have the authority to take over management of the company. Changes in consumer demand have made it hard for Ross to attract customers Current liabilities have mounted faster than current assets, causing the current ratio to fall to 1.47. Before releasing financial statements, Ross’s management is scrambling to improve the current ratio. The controller points out that an investment can be classified as either long-term or short-term, depending on management’s intention. By deciding to convert an investment to cash within one year, Ross can classify the investment as short-term-a current asset. On the controller’s recommendation,…

Because of increasing profits and inventory prices, the company changed from FIFO to LIFO inventory, which had a material effect on inventory and cost of sales. The change is adequately disclosed in the financial statements, and the auditor concurs with the change. The auditor will most likely issue a(an): Standard unmodified opinion O Unmodified opinion with explanatory paragraph O Unmodified opinion with changes to standard report wording Qualified oplon Disclaimer of opinion O Adverse opinion