We have discussed the fact that managers have some discretion in making accounting-related decisions. Due to...

We have discussed the fact that managers have some discretion in making accounting-related decisions. Due to the COVID-19 situation, companies likely will have lower earnings in 2020 than in 2019. Assume that for 2020, a company wants to do what it can so that its financial statements look as “good” to investors as they did in 2019. Discuss AND give explanations on EACH of the judgmental decisions the company might make with respect to:

Accounting for accounts receivable/allowance for doubtful accounts

Accounting for acquisitions of property, plant and equipment

Accounting for depreciation

Repurchasing shares of stock (aka purchasing treasury stock)

NEED EXPLANATIONS ON EACH

Expert Solution

- Accounting for Receivables/allowance for doubt ful account :

Companies should reconsider the credit period for all receivables outstanding. We should give more credit period for the Debtors due COVID-19. This leads to less provisioning on Doubt ful debts. Until the situation is normalised, we should not provide more provision on Doubt ful debts. In consequence, the expenditure on Income statement decreases so that Earnings appeared to good in financial statemets

- Accouting for acquisions of property plant and equipment and Accouting for Depreciation

We capitatlised the Property plant and equipment acquired. and we n eed to charge lower depreciation possible as per IFRS and as per company policy due to no production is going on during COVID period. Lower depreciation leads to Better Earings reflection in financial statements.

- Repurchasing shares of stock :

Repurchasing of shares leads to build a confidence in Investors and their trust on company remains increases.

ekkarill92 answered 2 years ago

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