GAAP
Not what you're looking for?
1. Discuss why you feel that GAAP allows so many alternative methods for valuing inventories and computing depreciation.
2. Identify the factors that you, as a manager, would consider in chosing among the alternative inventory and depreciation methods allowed by GAAP.
3. Discuss what you feel might happen if all the firme were forced to use the same method. For eg. assume that instead of allowing for several alternative inventory and depreciation methods, GAAP simply required all the firms to use the straight line depreciation method and FIFO inventory method. Do you think that by requiring all the firms to use the same methods, the usefulness of financial statements would be increased or decreased? Explain.
Purchase this Solution
Solution Summary
GAAP provides different methods for valuing inventories and computing depreciation. These methods are used in accounting to get a correct value of the assets.
The different methods of valuing inventories are LIFO, FIFO and average cost method. In the FIFO method, the cost is calculated on the basis the purchases are made while in LIFO method, cost is calculated in the reverse order. The average cost method produces a cost flow based on a weighted average of unit costs. A company whose latest inventory is sold more than the older one should use the FIFO method and a company who first sells its older items rather than the new ones should use the LIFO method.
Detailed answer attached.
Solution Preview
GAAP provides different methods for valuing inventories and computing depreciation. These methods are used in accounting to get a correct value of the assets.
The ...
Education
- Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
- Bachelor of Commerce, West Bengal University
Recent Feedback
- "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect. It looks like you've mistaken the Debt ratio for the Equity Multiplier. You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already. You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount. Equity multiplier is not provided for us and we need to calculate it. I really hope this is helpful to you. "
- "Very attentive to detail. Answers are designed in easy to understand format."
- "Fast response and thorough answer"
- "thank you very much! "
- "thank you so much !!!!!!!"
Purchase this Solution
Free BrainMass Quizzes
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.