Here is the synopsis of our sample research paper on Merrimack Tractors Case Study. Have the paper e-mailed to you 24/7/365.
Essay / Research Paper Abstract
This 13 page paper looks at a case study of a firm that is considering make a change in accounting policy; to move from last in first out (LIFO) to first in first out (FIFO) inventory valuation methods. The impact that change may have ion the income statement are discussed and calculated, and issues such as ethical considerations are discussed. The bibliography cites 4 sources.
Page Count:
13 pages (~225 words per page)
File: TS14_TEmerrimack2.rtf
Buy This Term Paper »
Unformatted sample text from the term paper:
there is the potential to change accounting policies where there is a good and acceptable reason. In this case there is a firm that is considering making the change
from last in fist out (LIFO) to first in first out. To consider this the different potential impacts on the firm need to be considered. The figures for the
year 2007 have been given; the case also tells us that sales for 2008 will be 10,000 units for each quarter with a sales price of $2,000 per unit. This
gives total sales revenue of $80,000,000. The cost of sales can be calculated from the inventory data given. The figure for the cost of good here is simple to calculate,
as there is no period which the inventory level drops below the 15,000 units that was carried forward the units that remain in inventory will be calculated at the oldest
price. Therefore the opening inventory value less the closing inventory values was used to give the cost of the goods sold. Figure 1 Cost of goods calculation Opening Inventory value
13,500 Closing inventory value 75,500 Cost of goods sold 62,000 To undertake the rest of the calculation the remaining costs are assumed to be the same in 2008 as
they were in 2007, and the tax rate is assumed at remaining at 35%. The pro forma income statement is shown in figure 2. Figure 2 Incomes statement
2008 Figures in US $000s1 Sales 80,000 Cost of goods sold 62,000 Gross profit 18,000 Selling and admin costs 10,000 Income before taxes 8,000 Income taxes 2,800 Net income
5,200 Question 2 The income statement above makes some assumption regarding the way that the inventory is being accounted for. If the pattern of sales changes there is the
...