Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are the Controller of ABC Manufacturing Corp, a publicly traded furniture manufacturing company, based on Long Island. Business has been going well for ABC.

You are the Controller of ABC Manufacturing Corp, a publicly traded furniture manufacturing company, based on Long Island. Business has been going well for ABC. Over the last four quarters the EPS have been 50, 54, 59, and 60 cents per share. It is nearing the end of the quarter and most of the analysts that are following your stock are projecting an EPS for the current quarter of 69 cents per share, which looks right in line with what you are projecting for the quarter.

However, just as you are going over the quarter to date figures, four new items are brought to your attention:

The study you requested on the shifting to LIFO inventory costing has just been completed and will result in a life to date increase in net income (after tax) of 7 cents.

Last week there was significant water damage to some finished desks at a company owned warehouse.Unfortunately, due to the level of insurance deductibles, the company's insurance policy will only pick up a portion of the 6 cent after tax loss.Losses similar to this one have happened on

In each case, what additional information might you seek? Depending on what you find out, what would US GAAP require you to report or disclose in your quarterly 10Q? How would the above events be reflected in your quarterly income statement? What EPS concerns would you expect to hear from the CFO and President? What alternatives would be available to you to appropriately and ethically adjust earnings?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Accounting Information for Decision-Making and Strategy Execution

Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young

6th Edition

137024975, 978-0137024971

More Books

Students also viewed these Accounting questions

Question

Trace Greek medical thought from Aesculapius to Hippocrates.

Answered: 1 week ago