Answer:
Explanation:
Because land never depreciates, Western Bank & Trust wanted to distribute a higher percentage of the purchase price to the building, rather than the land. By allocating 90% of the purchase price to the building, rather than a more accurate 70%, Western Bank & Trust increases the depreciation amount of the building each year. For tax purposes, the IRS requires that the Modified Accelerated Cost Recovery System (MACRS) be used as the depreciation method used by companies. Under this method, the IRS specifies the useful life for a specific asset. MACRS also ignores residual value of an asset at the end of its useful life. By stating that the building was worth 90% of the total purchase price, Western Bank is attempting to increase its tax deduction from the IRS, because only the building depreciates, not the land. This improper allocation of the total purchase amount violates GAAP principles, which require that accounting information be “relevant and have faithful representation.” The information must be “complete, neutral, and free from error” (Nobles, Mattison, & Matsumura, 2014). For Western Bank to provide complete, neutral, and free from error information, it should record the transaction honestly: 70% to the building, 30% to the land. This dishonest representation is harmful to the federal government in that it is allowing Western Bank to take more money than what it is owed. If these kinds of situations happen on a large scale, it could have a huge impact on the economy in general. Source: Nobles, T., Mattison, B., & Matsumura, E. M. (2014). Horngren's Accounting, 10th Edition. Pearson Education, Inc. Student 2
Answer:
1.- selling 530 units will achieve 2,300 operating profit
2.- sales for $82,100 will achieve 8,900 operating profit
Explanation:
sale price 130
variable 65
contribution margin 65
(32150 + 2,300) /65 = 530 units
65/130 = 0.5
(32,150 + 8,900) / 0.5 = 82,100
Answer:
Option D is correct.
Explanation:
Both company will have same Equity multiplier as total assets and equity are same of both companies. So Option A and B is incorrect.
Option C is also incorrect because there is no difference between the sales and total assets of both companies.
Option D is correct because the return on equity of the company LD is higher as the Net profit which is profit after interest and tax is higher than the profit after interest and tax of the company HD.
ROE = PAIT / Equity
Option E is wrong because when we say ROA is same this means that the operating income is same.
ROA = Operating profit / Total assets
Remember that the operating profit is earnings before interest and tax.
Answer:
(a) INDICATOR OF FRAUD
Explanation:
The reason is that the supervisor has an outside business setup related to the department's setup which gives rise to a conflict of interest.
Answer:
a) 3 years
b) 5 years
Explanation:
The new system requires an investment of $1,200,000
The payback period is the number of year whereas the cash inflow is equal to the total investment regardless the present value of cash inflow. It means we don't apply any rate in the calculation/
a) if the even cash flows of $400,000 per year, then the payback period is 3 years ($1,200,000 = $400,000 * 3)
b) The following expected annual cash flows: $150,000, $150,000, $400,000, $400,000, and $100,000. And total cash flows in 5 years is $1,200,000 = total investment $1,200,000
The payback period in this case is 5 years.
