/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Question 3-10DQ Comparisons of income can be ver... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 2: Question 3-10DQ (page 75)

Comparisons of income can be very difficult for two companies even though they sell the same products in equal volume. Why?

Short Answer

Expert verified

Income of two companies cannot be compared easily because of the inconsistencies in the accounting and reporting policies adopted by the company while recording the revenue.

Step by step solution

01

Income statement

Income statement is prepared to show the revenue earned by the company and the expenses incurred to earn that profit. It is a component of the financial statements.

02

Comparison of income between the two companies

The comparison of income is difficult because each company use different accounting policies or methods to record the revenue transactions. For example, some companies may defer the recognition of revenue that comes via installment plan while the some companies may record it all right away. Some companies may use LIFO accounting method to record inventory and some may use FIFO accounting method.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Billy鈥檚 Crystal Stores Inc. has assets of $5,960,000 and turns over its assets 1.9 times per year. Return on assets is 8 percent. What is the firm鈥檚 profit margin (return on sales)?

The balance sheet for Stud Clothiers is shown below. Sales for the year were \(2,400,000, with 90 percent of sales sold on credit.

Stud Clothier

Balance sheet 20X1

Assets

Liabilities and Equity

Cash

\)60,000

Account payable

\(220,000

Account receivable

240,000

Accrued taxes

30,000

Inventory

350,000

Bonds payable (long term)

150,000

Plant and equipment

410,000

Common stock

80,000

Paid in capital

200,000

Retained earnings

380,000

Total assets

\)1,060,000

Total LIbilities and Equity

$1,060,000

Compute the following:

a. Current ratio

Stein Books Inc. sold 1,900 finance textbooks for \(250 each to High Tuition University in 20X1. These books cost \)210 to produce. Stein Books spent \(12,200 (selling expense) to convince the university to buy its books. Depreciation expense for the year was \)15,200. In addition, Stein Books borrowed $104,000 on January 1, 20X1, on which the company paid 12 percent interest. Both the interest and principal of the loan were paid on December 31, 20X1. The publishing firm鈥檚 tax rate is 30 percent. Did Stein Books make a profit in 20X1? Please verify with an income statement.

Jerry Rice and Grain Stores has \(4,780,000 in yearly sales. The firm earns 4.5 percent on each dollar of sales and turns over its assets 2.7 times per year. It has \)123,000 in current liabilities and $349,000 in long-term liabilities.

a. What is its return on stockholders鈥� equity?

Easter Egg and Poultry Company has \(2,000,000 in assets and \)1,400,000 of debt. It reports net income of $200,000.

a. What is the firm鈥檚 return on assets?
See all solutions

Recommended explanations on Business Studies Textbooks

Nature of Business

Read Explanation

Organizational Behavior

Read Explanation

International Business

Read Explanation

Public Relations Business Studies

Read Explanation

Operational Management

Read Explanation

Financial Performance

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.