Moose Heads Company was started on January 1, 2018. During its first year of operations, the company had a choice of accounting policies. The chief financial officer identified the following as possible alternatives and underlying assumptions/estimates for each: (Click the icon to view the possible alternatives and underlying assumptions/estimates.) The following are the actual transactions for the first three years of operations: (Click the icon to view the transactions.) Required Requirement a. Derive net income for 2018, 2019, and 2020. Ignore income taxes. Begin by computing net income for 2018, 2019, and 2020 using Accounting Policy Set A. 2018 Accounting Policy Set A Sales 2019 2020 Cost of goods sold Bad debts expense Warranty expense Depreciation expense More Info set A set B Inventory valuation FIFO Bad debts 3% of sales Average cost Allowance: 20% of closing accounts receivable Allowance: an analysis of sales and repairs Warranties 3% of sales Print Done Question Thie Quiz. 166. nte nossihle Resume Data Table 2018 2019 2020 Sales (all on account) $ Inventory purchases (paid immediately) Ending inventory value, FIFO Ending inventory value, average cost Collections Amounts actually written off Warranties actually paid Estimated warranties payable ending balance based on aging analysis of sales Depreciation expense All other operating expenses (paid immediately) 13,500,000 $ 15,500,000 $ 16,900,000 6,500,000 4,000,000 4,300,000 1,950,000 2,000,000 2,050,000 1,700,000 1,750,000 2,050,000 11 000,000 14,000,000 17.775,000 150,000 190,000 600,000 100,000 450,000 640,000 325,000 345,000 187,000 750,000 750,000 3,200,000 750,000 3,800,000 4,600,000 Required Required a. Derive net income for 2018, 2019, and 2020. Ignore income taxes. b. What is the cumulative income for the three years for the two sets of accounting policies? What does this tell us about the closing balance sheet at the end of the third year? c. What are the cumulative operating cash flows for the three years for either sets of accounting policies? Why are these cumulative cash flows the same for the two sets of policies? d. Carefully explain why the net incomes for each of the three years under review are not the same. What does this tell us about accruals and allocation methods? el Print Done id Requirement a. Derive net income for 2018, 2019, and 2020. Ignore income taxes Begin by computing net income for 2018, 2019, and 2020 using Accounting Policy Set A. Accounting Policy Set A 2018 2019 2020 Sales Cost of goods sold Bad debts expense Warranty expense Depreciation expense Other operating expenses Net income Now compute net income for 2018, 2019, and 2020 using Accounting Policy Set B. Accounting Policy Set B 2018 2019 2020 Salon Moose Heads Company was started on January 1, 2018. During its first year of operations, the company h Net Income Now compute net income for 2018, 2019, and 2020 using Accounting Policy Set B. 2018 Accounting Policy Set B Sales 2019 2020 Cost of goods sold Bad debts expense Warranty expense Depreciation expense Other operating expenses Net income Requirement b. What is the cumulative income for the three years for the two sets of accounting policies? W tell us about the closing balance sheet at the end of the third year? Accounting Policy Set A Accounting Policy Set B Cumulative net income for the three years Requirement b. What is the cumulative income for the three years for the two sets of accounting policies? What does this tell us about the closing balance sheet at the end of the third year? Accounting Policy Set A Accounting Policy Set B Cumulative net income for the three years What does the cumulative net income amounts tell us about the closing balance sheet at the end of the third year? Cumulative net income for the three years is This tells us that the balance sheet accounts at the end of the three year period will V Requirement c. What are the cumulative operating cash flows for the three years for either sets of accounting policies? Why are these cumulative cash flows the same for the two sets of policies? Accounting Policy Set A Accounting Policy Set B Cumulative operating cash flows for the three years Why are these cumulative cash flows the same for the two sets of policies? This amount is the same for both set of policies because Requirement c. What are the cumulative operating cash flows for the three years for either sets of accounting policies? Why are these cumulative cash flows the same for the two sets of policies? Accounting Policy Set A Accounting Policy Set B Cumulative operating cash flows for the three years Why are these cumulative cash flows the same for the two sets of policies? This amount is the same for both set of policies because Requirement d. Carefully explain why the net incomes for each of the three years under review are not the same. What does this tell us about accruals and allocation methods? Net incomes are different between methods for each of the three years due to the timing of when As the cumulative net incomes for the three years just a matter of when V As accruals try to estimate actual expenditures or events which occur later, the aggregate effe over multiple periods eventually it is Moose Heads Company was started on January 1, 2018. During its first year of operations, the company had a choice of accounting policies. The chief financial officer identified the following as possible alternatives and underlying assumptions/estimates for each: (Click the icon to view the possible alternatives and underlying assumptions/estimates.) The following are the actual transactions for the first three years of operations: (Click the icon to view the transactions.) Required Requirement a. Derive net income for 2018, 2019, and 2020. Ignore income taxes. Begin by computing net income for 2018, 2019, and 2020 using Accounting Policy Set A. 2018 Accounting Policy Set A Sales 2019 2020 Cost of goods sold Bad debts expense Warranty expense Depreciation expense More Info set A set B Inventory valuation FIFO Bad debts 3% of sales Average cost Allowance: 20% of closing accounts receivable Allowance: an analysis of sales and repairs Warranties 3% of sales Print Done Question Thie Quiz. 166. nte nossihle Resume Data Table 2018 2019 2020 Sales (all on account) $ Inventory purchases (paid immediately) Ending inventory value, FIFO Ending inventory value, average cost Collections Amounts actually written off Warranties actually paid Estimated warranties payable ending balance based on aging analysis of sales Depreciation expense All other operating expenses (paid immediately) 13,500,000 $ 15,500,000 $ 16,900,000 6,500,000 4,000,000 4,300,000 1,950,000 2,000,000 2,050,000 1,700,000 1,750,000 2,050,000 11 000,000 14,000,000 17.775,000 150,000 190,000 600,000 100,000 450,000 640,000 325,000 345,000 187,000 750,000 750,000 3,200,000 750,000 3,800,000 4,600,000 Required Required a. Derive net income for 2018, 2019, and 2020. Ignore income taxes. b. What is the cumulative income for the three years for the two sets of accounting policies? What does this tell us about the closing balance sheet at the end of the third year? c. What are the cumulative operating cash flows for the three years for either sets of accounting policies? Why are these cumulative cash flows the same for the two sets of policies? d. Carefully explain why the net incomes for each of the three years under review are not the same. What does this tell us about accruals and allocation methods? el Print Done id Requirement a. Derive net income for 2018, 2019, and 2020. Ignore income taxes Begin by computing net income for 2018, 2019, and 2020 using Accounting Policy Set A. Accounting Policy Set A 2018 2019 2020 Sales Cost of goods sold Bad debts expense Warranty expense Depreciation expense Other operating expenses Net income Now compute net income for 2018, 2019, and 2020 using Accounting Policy Set B. Accounting Policy Set B 2018 2019 2020 Salon Moose Heads Company was started on January 1, 2018. During its first year of operations, the company h Net Income Now compute net income for 2018, 2019, and 2020 using Accounting Policy Set B. 2018 Accounting Policy Set B Sales 2019 2020 Cost of goods sold Bad debts expense Warranty expense Depreciation expense Other operating expenses Net income Requirement b. What is the cumulative income for the three years for the two sets of accounting policies? W tell us about the closing balance sheet at the end of the third year? Accounting Policy Set A Accounting Policy Set B Cumulative net income for the three years Requirement b. What is the cumulative income for the three years for the two sets of accounting policies? What does this tell us about the closing balance sheet at the end of the third year? Accounting Policy Set A Accounting Policy Set B Cumulative net income for the three years What does the cumulative net income amounts tell us about the closing balance sheet at the end of the third year? Cumulative net income for the three years is This tells us that the balance sheet accounts at the end of the three year period will V Requirement c. What are the cumulative operating cash flows for the three years for either sets of accounting policies? Why are these cumulative cash flows the same for the two sets of policies? Accounting Policy Set A Accounting Policy Set B Cumulative operating cash flows for the three years Why are these cumulative cash flows the same for the two sets of policies? This amount is the same for both set of policies because Requirement c. What are the cumulative operating cash flows for the three years for either sets of accounting policies? Why are these cumulative cash flows the same for the two sets of policies? Accounting Policy Set A Accounting Policy Set B Cumulative operating cash flows for the three years Why are these cumulative cash flows the same for the two sets of policies? This amount is the same for both set of policies because Requirement d. Carefully explain why the net incomes for each of the three years under review are not the same. What does this tell us about accruals and allocation methods? Net incomes are different between methods for each of the three years due to the timing of when As the cumulative net incomes for the three years just a matter of when V As accruals try to estimate actual expenditures or events which occur later, the aggregate effe over multiple periods eventually it is