Financial Reporting and Regulations (MBA) (0307513) Individual Assignment 2 (Chapter 4) (Optional) Spring 2019-2020 (15 marks) .. ID: Name: ....... Question 1: Financial information is presented below for two different companies. Elliott Cosmetics $90,000 Stever Grocery $ (e) 4,000 93.000 (a) ( Sales revenue Sales returns and allowances Net sales Cost of goods sold Gross profit Operating expenses Income from operations Other income and expense Net income 85.000 56.000 (b) 17,000 (c) (4,000) 32,000 (g) (h) (7,000) 9,000 Instructions 1. Determine the missing amounts. (c) Page 1 of 3 2. Why is the net income different between the two companies? Evaluate your answer and give your opinion on how to improve company performance based on the information ubove. Question 2: (Case study) (5 marks) Holmes Corporation manufactures electronic components for use in many consumer products. Their raw materials are purchased literally from all over the world. Depending on the country involved, purchase terms vary widely. Some suppliers, for example, require full prepayment, while others are content to receive payment within six months of receipt of the goods. Because of this situation, Holmes never closes its books until at least ten days after month end. In this way. it can sort out ownership of goods in transit, and document which goods were received by month end, and which were not Ann Cook, a new accountant, was asked to record about $50,000 in inventory as having been received before month end. She argued that the shipping documents clearly showed that the goods were actually received on the 8th of the current month. Her boss, busy with month-end reports, curtly tells Ann to check the shipping terms. She did so, and found the notation "FOB shipper's dock" on the document. She hadn't seen that particular notation before, but she reasoned that if the selling company considered it shipped when it reached their dock, Holmes should consider it received when it reached Holmes's dock. She did not record the purchase until after month end. Required: 1. Why are accountants concerned with the timing in the recording of purchases? (Analyze your answer, and give your opinion). Page 2 of 3 2. Was there a violation of ethical standards here? (Critically assess the situation, and give your opinion) End of Assignment Page 3 of 3