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erma4kov [3.2K]
3 years ago
8

In times of rising prices, inventory profits (or phantom profits) are said to occur under the FIFO cost flow assumption. This oc

curs because under FIFO, the release of older, lower costs to the income statement results in higher profits than if current costs were to be recognized. This creates a problem for the reporting company because:?
Business
1 answer:
mart [117]3 years ago
4 0

Answer:

The answer is overstate profits

Explanation:

FIFO is First in First out. It assumrs that the oldest goods purchased or manufactured are sold first and the newest goods purchased or manufactured remain in ending inventory. With this, the cost of sales shows the cost of sales shows the cost of goods in the beginning inventory and the value of ending inventory reflects the cost of goods purchased more recently.

Therefore, in the period of rising inventory ending inventory are higher, cost of sales are lower and this makes profit to be higher or being overstated

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A copy machine acquired with a cost of $1,410 has an estimated useful life of 4 years. It is also expected to have a useful oper
mafiozo [28]

Answer:

a. Straight-line method

Depreciation Expense for the first year: $333.75

b. Double-declining-balance method

Depreciation Expense for the first year: $667.5

c. Units-of-output method

Depreciation Expense for the first year: $450

Explanation:

a. Straight-line method

Depreciation Expense each year is calculated by following formula

Annual Depreciation Expense = (Cost of machine − Residual Value)/Useful Life = ($1,410 - $75)/4 = $333.75

Depreciation Expense for the first year: $333.75

b. Double-declining-balance method

Under the straight-line method, useful life is 4 years, so the asset's annual depreciation will be 25% of the Depreciable cost.

Depreciable cost = Total cost of machine - Residual value =  $1,410-$75 = $1.335

Under the double-declining-balance method the 25% straight line rate is doubled to 50% - multiplied times

Depreciation Expense for the first year = $1.335 x 50% = $667.5

c. Units-of-output method

Depreciation Expense per copy = (Cost of machine − Residual Value)/Life in Number of Units  = ($1,410 - $75)/13,350 = $0.1

Depreciation Expense for the first year = Depreciation Expense per copy x number of copies were made the first year = $0.1 x 4,500 = $450

3 0
3 years ago
"carrie bought a house five years ago for $150,000. at that time she borrowed $140,000 from her bank. the house is now worth $16
vesna_86 [32]

Answer: PMI will automatically be dropped when the balance reaches $117,000.

Explanation: PMI stands for private mortgage insurance. This is an insurance policy that banks often require lenders to have when they do not have a 20% down payment on a new home.

PMI is automatically dropped with the amount of the mortgage due is reduced to 78% of the original appraised value of the home. In this case, the home was originally purchased for $150,000. 78% x 150,000 = $117,000. When the loan reaches $117,000 the pmi will automatically be dropped.

7 0
3 years ago
What were the goals of the truman doctrine and marshall plan?
Colt1911 [192]
The goal was to help rejuvenate Europes among with other countries economic, political, and social status and to build them back up after WWII, not only that but it was more of. Humanitarian deed, to help those in need and to help them rebuild their lives.
3 0
2 years ago
Question 1 of 10
Lisa [10]

C. price index

is the correct answer to the questions

Question 1 of 10

A. is a measure of change in the prices of goods from one period to

another

A. sanction

B. quota

оо O

C. price index

D. subsidy

SUBMIT

3 0
2 years ago
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5. John has two ATM transactions but only one of them has a fee (Interac). 1 point
Helga [31]

Answer:

You can withdraw by automatic electronic transfer, check, ATM card or debit card. There are many ways these days to withdraw money from your accounts. Let's go over each.

Explanation:

6 0
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