Notes 2

Notes 2 - Lowest inventory valuation This reverses during...

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Balance Sheet: Assets A/R: o On B/S are Net Realizable Value A/R – Allowance for Doubtful Accounts Allowance for Doubtful Accounts: Look at what has historically happened Affects B/S and Bad Debt Expense on I/S Inventory accounting method: o FIFO: NI looks higher Worse off because of higher taxes o LIFO: NI looks lower Better cash flows from less taxes LIFO is recognized as better financially However, inventory will be weak because FIFO inventory will never leave/ get crappy Footnote needed for LIFO users o Average cost method o Replacement cost of inventory: FIFO value or, LIFO value minus “getting old inventory” decrease in value o LIFO during inflation: Highest CGS
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Unformatted text preview: Lowest inventory valuation This reverses during times of deflation o FIFO during inflation: Opposite of LIFO • Property, plant, and equipment (fixed assets): o Fixed, tangible, long-lived, capital assets o Depreciation: Straight line Accelerated Units of production o On B/S shown as book value: Original cost minus accumulated depreciation Books prefer straight line method Tax prefers accelerated method • Tax incentives for co. stimulating economy • Take tax savings and reinvest them o Fixed assets vs. current: For fixed, we can have different values for book and market values Tax benefits in US...
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This note was uploaded on 06/10/2011 for the course BUSI 407 taught by Professor Bowen during the Spring '11 term at UNC.

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Notes 2 - Lowest inventory valuation This reverses during...

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