The two are used in a way that balances these costs and revenues. To obtain the contribution margin, L.L. Bean computes: item retail price if demanded – item cost To obtain the
a. Adjusted trial balance b. Comparative balance sheets c. Current income statement d. Additional information 4. The primary purpose of the statement of cash flows is to a. provide information about the investing and financing activities during a period. b. prove that revenues exceed expenses if there is a net income.
-When should the milestone payments received to date be recognized as revenues? -What are the deliverables for the arrangement under IFRS? -When would the milestone payments recognized under International Financial Reporting Standards (IFRS)? Alternatives: - Recognize revenue as cash is received. - Recognize revenue at the inception of the contract - Recognize revenue at the termination of the contract - Recognize revenue as the different versions are launched - allocate the contract consideration awards on a pro-rata basis to the revenue received
This method converts net income to net cash from operating activities. When using the indirect method a company must convert net income to net cash by gathering net income and adding or subtracting adjustments, this would give the company the Net cash, without having to go thru detail transactions. . Even though the indirect method may be easier for a company to manage their cash flow, I believe that this method may bring more work in case of an audit. (Weygandt, Kimmel, & Kieso, 2010. p 618).
The reason is the information support by independent documentary evidence. Historical cost accounting figures are based on actual acquisition prices, not merely possible of market values that can be revised to affect the ratio analysis which improve the performance of financial results. That is, historical costs accounting provides an objective view of an entity’s performance. Thus it consider verifiable and reduces the risk of manipulation of figures by management. In contrast, if there is not active market, market value accounting requires the use of estimation subject to uncertain assumptions, personal judgment, and subjective information about future values, such as discount rates and allowance for doubtful accounts.
Loyalty points program PDL operates a loyalty points program, which will impact on the measurement of sales revenue, important for analysts. Currently, a sale transaction with point value attached is recognized as a sale entirely in the current period. An expense and liability for the expected cost – not sales value – of goods to be redeemed in the future is recognized in the same time period as the sale. This policy maximizes the sales value recorded with the initial transaction. It does not reflect the substance of the transaction, though, which is that PDL has rendered multiple deliverables in sale: both the initial sale, and the subsequent sale based on points value are being sold.
IAS 11 instructs that revenue from a Construction Contract will be recognized if can be estimated reliably. Revenue and costs would be recognized concurrently with the completion of the activity mentioned in the contract, which is known as the “Percentage of Completion Method” of Accounting. In order to make an estimate of the total financial outcome from a contract, the firm would have to be able to calculate approximates of the Total Contract Revenue, Stage of Completion and the completion costs of the contract. In contrasts, if no approximates could be determined, the revenue would not be recognized. Instead, the firm would only be able recognize whether the incurred Contract costs are recoverable and if they should be expensed or incurred.
Profit maximization C. Agency theory D. Social responsibility 2. Jensen and Meckling showed that __________ can assure themselves that the __________ will make optimal decisions only if appropriate incentives are given and only if the __________ are monitored. A. principals; agents; agents B. agents; principals; principals C. principals; agents; principals D. agents; principals; agents 3. __________ is concerned with the maximization of a firm's earnings after taxes. A.
INCOME ELASTICITY OF DEMAND Income is a factor that can help to determine how much or how many units a product or service can sell in a determined period of time. Thus, changes in income are important to be monitored, as well as understanding the kind of good we have. To do this, we use Income elasticity of demand (Ey) which measures the effect of a change in income in quantity demanded. The basic formula for calculating the coefficient of income elasticity is: Percentage change in quantity demanded of a good divided by the percentage change in real consumers' income. Depending in the result of this equation the good can be thought as a normal good when the result is > 0 (positive income elasticity), or an inferior good when the result is < 0 (negative income elasticity).
Nike, Inc.: Cost of Capital - QUESTIONS 1. Why is it important to estimate a firm’s cost of capital? What does it represent? Is the WACC set by investors or by managers? The cost of capital is rate of return required by a capital provider in exchange foregoing an investment in another project, assets or business with similar risk.