1) Why is revenue recognition a significant issue? How do we determine when revenues are recorded for accounting purposes?
2) Explain the difference between a product and period expense.
3) Discuss the matching concept as it relates to accounting for revenues and inventory.
Refer to the latest annual financial statements for the two following companies:
Generally, this information is found in the Investor Relations area of the website.
Clearly identify the companies, the time period, and include the link to the financial statements you are analyzing in your report.
1) What accounting conventions do the two companies follow, US GAAP or IFRS?
2) Locate the income statement for the past two years for both companies. Prepare a table comparing five items or more from each statement.
3) Comment on the changes from one year to another. Is the company doing better or worse? Did revenues and expenses increase or decrease?
4) Is it easy to discern trends or compare the information from year to year and between the two companies? Please, comments on both aspects and show some examples.
This part should be 3 pages and need to include answers to all the questions listed above. Show computations, discuss the results and include references in APA format.
FOR THE PART TWO (2 PAGES)
We are using the same company as we did in the last paper. However, you need to consider some additional information.
1) One client had indicated that they were interested in purchasing $42,500 worth of products, so the bookkeeper recorded the transaction. However, the client has not actually committed to the purchase.
2) The bookkeeper already corrected the sales account. However, the bookkeeper may have made a mistake when computing cost of goods sold. She included total production costs for 2012 and did not adjust ending inventory for the $42,500 worth of units left at the end of the year. The amount of ending inventory was determined using a physical count.
Prepare an income statement for the company in good format. Always include the name of the company and the period covered in the title. Don’t forget dollar signs where appropriate. You do not need to include the balance sheet. Consequently, you will not need all the accounts listed above.
How does the income or loss compare to the original income statement? Explain the importance of the matching concept.
This part of the paper should be 2 pages and need to include answers to all the questions listed above. Show computations, discuss the results and include references in APA format.
FOR THE PART THREE (1 PAGE)
The financial statements are the representation of management.
How can investors and other third parties trust this information? Discuss the CPA’s role as an external auditor.
Do research on the Internet and show the reference for the information.
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