Question

1. Indicate with each event whether the event is likely to increase, decrease or have no change on current profits. (10 pts.)

Event	Change on Current Profits- Increase, Decrease or No Change
A company that normally takes long-term contract revenues into income over 10 years decides to take it over 5 years.
A company that has been paying A/P consistently in 30 days decides to push the A/P to 60 days.
A company normally writes off bad inventory annually decides to forego the practice for a given year.
A financial institutions finds that short-term mortgage securities have decreased in value by 20%
A company decides to extend the depreciation they take on trucks from 10 years to 20 years.
A company that has traditionally written off Accounts Receivable as uncollected when they are more than 120 days late decides to extend the policy to only writing off receivable that are one year past due.
A contractor bidding on annual one year contracts takes all of the bidding cost and treats them as a pre-paid asset that they convert to expenses over a five year period.
A retailer that is experiencing increasing cost from their supplier decides to shift from LIFO to FIFO inventory method.
A company decides to accelerate payment on a long term loan due to a build-up in working capital.

Answer 1

A company that normally takes long-term contract revenues into income over 10 years decides to take it over 5 years.	no change
A company that has been paying A/P consistently in 30 days decides to push the A/P to 60 days.	no change
A company normally writes off bad inventory annually decides to forego the practice for a given year.	decrease
A financial institutions finds that short-term mortgage securities have decreased in value by 20%	decrease
A company decides to extend the depreciation they take on trucks from 10 years to 20 years.	increase
A company that has traditionally written off Accounts Receivable as uncollected when they are more than 120 days late decides to extend the policy to only writing off receivable that are one year past due.	INCREASE
A contractor bidding on annual one year contracts takes all of the bidding cost and treats them as a pre-paid asset that they convert to expenses over a five year period.	NO CHANGE
A retailer that is experiencing increasing cost from their supplier decides to shift from LIFO to FIFO inventory method.	increases since fifo reports lower cost of goods sold which increases gross profit
A company decides to accelerate payment on a long term loan due to a build-up in working capital. INCREASE