/*! 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} Q34Q State some of the more serious p... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 4: Q34Q (page 181)

State some of the more serious problems encountered in seeking to achieve the ideal measurement of periodic net income. Explain what accountants do as a practical alternative.

Short Answer

Expert verified

The problems encountered by the accountants are associated with the determination of revenues and expenses and other facts linked with the same.

Step by step solution

01

Step-by-Step-SolutionStep 1: Meaning of Accountant

The term accountant refers to an individual appointed by an organization鈥檚 managementto maintain and record its accounting activities. An accountant keeps track of all financial transactions associated with the business concern.

02

Problems in achieving ideal measurement of periodic net income

  • The problem occurs from both sides, i.e.,revenues and expenses. It is often noticed that revenues are not recognized according to the standard rules of therevenue recognition principle.
  • In addition, the most critical issue is the determination of costs expired in the process of generatingrevenues.
  • Further, it is difficult to determine the expiry of the costs, the benefit of which may last for future years.
03

Practical alternative

In resolve and minimize such problems the accounts must bifurcate the expenses and costs in such a manner that same can be expensed in the appropriate fiscal year.

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

Question: Presented below is a combined single-step income and retained earnings statement for Nerwin Company for 2017.

(000 omitted)

Net sales revenue \(640,000

Costs and expenses

Cost of goods sold \)500,000

Selling, general, and administrative expenses 66,000

Other, net 17,000

583,000

Income before income tax 57,000

Income tax 19,400

Net income 37,600

Retained earnings at beginning of period, as previously reported 141,000

Adjustment required for correction of error (7,000)

Retained earnings at beginning of period, as restated 134,000

Dividends on common stock (12,200)

Retained earnings at end of period \(159,400

Additional facts are as follows.

1. 鈥淪elling, general, and administrative expenses鈥� for 2017 included a charge of \)8,500,000 that was usual but infrequently occurring.

2. 鈥淥ther, net鈥� for 2017 included a loss on sale of equipment of $6,000,000.

3. 鈥淎djustment required for correction of an error鈥� was a result of a change in estimate (useful life of certain assets reduced to 8 years and a catch-up adjustment made).

4. Nerwin Company disclosed earnings per common share for net income in the notes to the financial statements.

Instructions

Determine from these additional facts whether the presentation of the facts in the Nerwin Company income and retained earnings statement is appropriate. If the presentation is not appropriate, describe the appropriate presentation and discuss its theoretical rationale. (Do not prepare a revised statement.)

Identify at least two situations in which important changes in value are not reported in the income statement.

Linus Paper Company decided to close two small pulp mills in Conway, New Hampshire, and Corvallis, Oregon. These two closings do not represent a major shift in strategy for the company. Would these closings be reported in a separate section entitled 鈥淒iscontinued operations after income from continuing operations鈥�? Discuss.

Charlie Brown, the controller for Kelly Corporation, is preparing the company鈥檚 income statement at year-end. He notes that the company lost a considerable sum on the sale of some equipment it had decided to replace. Since the company has sold equipment routinely in the past, Brown knows the losses cannot be reported as an unusual item. He also does not want to highlight it as a material loss since he feels that will reflect poorly on him and the company. He reasons that if the company had recorded more depreciation during the assets鈥� lives, the losses would not be so great. Since depreciation is included among the company鈥檚 operating expenses, he wants to report the losses along with the company鈥檚 expenses, where he hopes it will not be noticed.

Instructions

  1. What are the ethical issues involved?
  2. What should Brown do?

Tim Mattke Company began operations in 2015 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2017, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below.

Year Weighted Average FIFO

2015 \(370,000 \)395,000

2016 390,000 \(430,000

2017 410,000 \)450,000

Instructions

  1. What is Mattke鈥檚 net income in 2017? Assume a 35% tax rate in all years.
  2. Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing.

Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2017 income statement.
See all solutions

Recommended explanations on Business Studies Textbooks

Managerial Economics

Read Explanation

Project Planning & Management

Read Explanation

Business Operations

Read Explanation

Public Relations Business Studies

Read Explanation

Corporate Finance

Read Explanation

Human 91影视

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.