Exercise 2-8 (Essay) Presented below are a number of facts related to Weller, Inc. Assume that...

Exercise 2-8 (Essay)

Presented below are a number of facts related to Weller, Inc. Assume that no mention of these facts was made in the financial statements and the related notes.

Assume that you are the auditor of Weller, Inc. and that you have been asked to explain the appropriate accounting and related disclosure necessary for each of these items.

(a)		The company decided that, for the sake of conciseness, only net income should be reported on the income statement. Details as to revenues, cost of goods sold, and expenses were omitted.
(b)		Equipment purchases of $170,000 were partly financed during the year through the issuance of a $110,000 notes payable. The company offset the equipment against the notes payable and reported plant assets at $60,000.
(c)		Weller has reported its ending inventory at $2,100,000 in the financial statements. No other information related to inventories is presented in the financial statements and related notes.
(d)		The company changed its method of valuing inventories from weighted-average to FIFO. No mention of this change was made in the financial statements.

Please Make sure to explain so I can understand. Thanks!

Expert Solution

Answer:

a).

According to completely revelation guideline organization ought to unveil every last thing which is identified with business, thus organization needs to report all present year incomes and all present year costs in Income explanation.

At that point no one but examiner can confirm flawlessly.

b).

Here organization needs to report $170,000 as hardware in settled resources side and $110,000 as notes payable in liabilities side.

According to cost idea resources needs to report just in recorded cost. Remaining $60,000 needs to decrease in real money adjust from resources side.

c).

According to bookkeeping standard each organization needs to report all data identified with inventories, starting parity, buys, returns, rebate and completion adjust.

d).

According to consistency standard organization ought not change their bookkeeping arrangements like stock valuation, deterioration computation and so forth. These approaches ought to be steady finished a period.

On the off chance that organization needs to change their stock strategy, ought to be take endorsement for evolving.

ekkarill92 answered 1 year ago

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