For purposes of external financial reporting, LIFO may not be used with the lower of cost or market approach. c. If LIFO is used for external financial reporting, then it cannot be used for tax purposes. d. None of these. 83. If inventory levels are stable or increasing, an argument which is not an advantage of the LIFO method as compared to FIFO is a. income taxes tend to be reduced in periods of rising prices.
E&Y reasoned this as it creates an exception to the general rule of reserving for expected future product returns at the gross sales price and deferring the recognition of an equal amount of revenue. This justification is invalid. The company’s customers are not “ultimate customers,” but are wholesalers that sold their product to retailers. In addition, Medicis’s returns were not returns of products in exchange for products of “the same kind, quality, and price,” but of unsalable product for
ii) Compliance with U.S. GAAP for Tesco: Tesco was also incorrect in their dealing of the refund from a customer’s perspective. Article 605-50-25-10 on “Customer's Accounting for Certain Consideration Received from a Vendor” states that “a rebate or refund of a specified amount of cash consideration… shall be recognized as a reduction of the cost of sales based on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions” (FASB ASC). This means that Tesco should not have recorded the £750 million as sales
Predict counter argument that the IRS could use to validate its position. Prepare a response to the predicted IRS counter argument. Provide a rationale for the prediction. The counter argument that the IRS could use to validate its position is to consider a refund or abatement request with respect to a given year even if my client have not paid the amount due in full, but most likely an revenue officer (RO) in collection setting will not want to hear arguments as to whether the tax assessment is valid or proper. If my client was to consider a refund or abatement request, we would enclose the documents along with the amount that my client owes.
Question 1: Auditors should not insist that their clients accept all proposed audit adjustments even though those that have an immaterial effect on the financial report. The auditors should be suspicious of any rejection of the clients and have to investigate deeper into the suspicious accounts. Moreover, auditors should not be careless even though they have close relationships with the clients and fear that they would lose potential auditing fees. Question 2: Materiality is a concept or convention within auditing and accounting relating to the importance/significance of an amount, transaction, or discrepancy. The objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in conformity with an identified financial reporting framework of Generally Accepted Accounting Principles.
When the government prevents prices from adjusting naturally to supply and demand, efficiency is improved in the economy. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxviii]. A market economy cannot possibly produce a socially desirable outcome because individuals are motivated by their own selfish interests. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxix]. While the invisible hand cannot guarantee efficiency, it is better at guaranteeing equity.
Hugh McBride will address who the company’s stakeholders are, define the end-state vision, identify and evaluate alternatives, identify and access the risk of the alternatives, recommend optional solutions, create and implement solutions, and to access the outcomes. Beltway Investments are McBride Financial Services major investor. There are some that anticipate for the company to be run by implementing corporate governance. The company’s CEO has decided not to implement this option. The new CEO would rather operate the company without interference of the “money man.” Even though, this maybe a gamble due to corrupt the thinking that would affect Beltway’s public credit.
It would be my advice for Mr. Jones to not buy the stock because of the liability of current and future tax obligations which Mr. Jones would incur from the purchase of the stock. Since the tax identity of Smithon corporation would have not ceased, it is not a favorable purchase for Mr. Jones. Ina a case where the tax identity of a firm does not cease not to exist, the tax aspects will remain the same and so will the existing tax schedule. So in this case it would mean that Mr. Jones would not be allowed to change the financial year to end on December 31. The buyer in cases where he can’t change the legal entity is in a non -benefice situation, the buyer is limited to follow the current tax basis on the company’s assets even if the buyer paid more for the
In fact, like other professions, personal values come into play in the accounting decisions and judgments made by the decision makers, so full disclosure might mean different things to different people. Legal checklists have mandatory items, but the financial picture might still be vague or lack numbers to give an accurate financial representation of the company at any given time, as shown in the financial statements. For example, if it was totally “objective,” Enron’s accountant would not have been able to “cook” the books to make the company appear to be in a better financial position than it actually was. The accountant and other Enron professionals would not have ended up in court for fraud and the likes. Even though the accounting profession has guiding principles (GAAP), they are not absolute, but subject to human judgment and interpretation and, at times, the lack of compliance leads to fraud (e.g., Enron, WorldCom, and others).
However, if this practice were to be demonstrated in the American business system it would be considered questionable if not criminal. So the question remains “Surely "business ethics" assumes that for some reason the ordinary rules of ethics do not apply to business. “Business ethics," in other words, is not "ethics" at all, as the term has commonly been used by Western philosophers and Western theologians. What is it then?”