Speedy delivery service recently hired a new accountant who discovered that the prior accountant had erroneously capitalized routine repair and maintenance costs on delivery trucks. The costs were added to the overall trucks’ book values and
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- The owner of a local business complains that the adjustments process consumes a lot of time and delays reportingmonth-end financial results. How would you convince herof the importance of this process?arrow_forwardYou have been hired as a consultant by a parts manufacturing firm to provide advice as to the proper accountingmethods the company should use in some key areas. In the area of receivables, the company president does notunderstand your recommendation to use the allowance method for uncollectible accounts. She stated, “Financial statements should be based on objective data rather than the guesswork required for the allowance method.Besides, since my uncollectibles are fairly constant from period to period, with significant variations occurringinfrequently, the direct write-off method is just as good as the allowance method.”Required:Draft a one-page response in the form of a memo to the president in support of your recommendation for the company to use the allowance method.arrow_forwardWhich of the following is not a characteristic of non-counterbalancing error? Group of answer choices a.If the net income of one year is understated due to non-counterbalancing error, the net income of subsequent year is also affected. b.The statement of financial position of the year of non-counterbalancing error and succeeding statement of financial position are incorrect until the error is corrected. c.If not detected, this is not automatically corrected in the next accounting period. d.The income statement of the period in which the non-counterbalancing error is committed is misstated.arrow_forward
- Which of the following is an example of a conservative accounting practice? a. Estimate the allowance for uncollectible accounts to be a larger amount.b. Do not write down inventory for declines in net realizable value (estimated selling price).c. Record a lower amount of depreciation expense in the earlier years of an asset’s life.d. Record sales revenue before it is actually earned.arrow_forwardWhile you know that the balance sheet aging of receivables method is more accurate, it does require more company resources (e.g., time and money) that are currently applied elsewhere in the business. Using the income statement method is acceptable under generally accepted accounting principles(GAAP), but should you switch to the more accurate method even if your resources are constrained? Do you have a responsibility to the public to change methods if you know one is a better estimation?arrow_forwardSee the image below. Please provide some solutions so that I can verify that I solved the problem correctly. Question: The effect on 2018 net income of Lukas Company of its failure to record the CM involving transaction with Falcon amountedarrow_forward
- Why is it expected that the initial debit and credit totals of the income statement accounts do not balance on a 10-column worksheet? Select one: a. None of the choices available. b. This is expected because the company should report an asset. c. This is not expected and it shows that there is definitely an error made. d. This is expected because the company should report an income or a loss.arrow_forwardDetermine the effect of the following errors on a company's total revenue, total expenses, and net income. Indicate the effect by selecting Overstated (too much), Understated (too little),or Not Affected.-----See the image for the questionarrow_forwardImagine that the auditor of QRS has expressed concerns that the bad debts expense recorded for the year is not high enough. What would be the impact on the reported value of the following items if the auditor requires an adjustment to be made? Select higher, lower or no effect from the drop down menu. Indicate higher/lower/no effect for: Cash Accounts Receivable Allowance for Doubtful Debts Bad debts expense Current Assets Net Profitarrow_forward
- Please answer with reason for all why the option is correct and why the other options are incorrectPlease answer correct otherwise skip it Which of the following factors could contribute to mistreatments in the revenue cycle? (select all that apply): A. Difficulties in estimating the likelihood of collection within the next year. B. Strict definition of the timing and amount of revenue to be recognized. C. Low volume of sales, cash receipts, and sales adjustment transactions D. Misappropriation of liquid assets generated through cash receipt transactions.arrow_forward2. What is the revenue-recognition abuse identified in the article related to the percentage-of-completionmethod?3. Did revenue-recognition abuses tend to increase or decrease net income in the year they occurred?4. Did auditors tend to require their clients to make adjustments that reduced the revenue-recognition abusesthey detected?arrow_forwardWhich of the following is an example of fraudulent financial reporting? a. The treasurer diverts customer payments to his personal due, concealing his actions by debiting an expense account, thus overstating expenses. O b. An employee steals inventory and the "shrinkage" is recorded in cost of goods sold. O c. Company management changes inventory count tags and overstates ending inventory, while understating cost of goods sold. O d. An employee steals small tools from the company and neglects to return them; the cost is reported as a miscellaneous operating expense.arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeBusiness/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage