Ending Inventory & Cost of Goods Sold: Detailed Analysis - Essay Sample

Introduction

Ending inventory is the valuable commodities that are still reliable for sale and are kept by an organization at the end of its financial year. It is used in the calculation of the items that have been sold while the cost of goods sold is the number of things that have traded to the customers during the time of revenue reports. It is of great use in the flowing of costs out of the inventory on the organization's value of the products that have been retailed.

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Discuss in detail when looking at determining inventory quantities, the advantages/ disadvantages of using one method over the other( perpetual vs. Periodic)

Advantages of Inventory Quantities

Easy to apply one of the most significant advantages is the existence of the periodic inventory and how it is easy in application. Hence it is not tiresome like other options

Cheap to apply since there is no requirement for one to spend in purchasing expensive software solutions with the affordable implementation system

It is the best option for small businesses, especially for one or two people.

Disadvantages

The main problem when operating with periodic inventory is the issue of one getting himself with inaccuracies, which might be very dangerous to a business.

It is sometimes labor intensive especially if the business grows one might find difficulties in taking the inventories

Exercising control over someone's stock is a big problem since one may encounter issues in evaluating the rate of theft within a business.

Compare and Contrast Between Fifo and Lifo and Why You Would Use One Accounting Method Over the Other.

FIFO is an evaluation approach that an organization accounts for first before any transactions have been made. However, most of the organizations like using FIFO since it is more natural and direct since one accounts for the first inventory ones the first item has been retailed. However, there is a significant disadvantage if the prices of the inventory have been overestimated, thus will cause one's taxable income to rise since the original cost of the list received is low. However, when comparing with LIFO is accounting for the most previously received transactions on the products that have been first sold. It provides a more accurate assessment of the market prices of the inventory one retails since it sells in a short period after being acknowledged. Organizations go for LIFO in times of inflation since it assists in keeping the existing gross income low as the previous and most recent purchases contain more excellent prices. However, the primary constraint to this is that one cannot change from LIFO to FIFO for many years without the permission of the IRS.

Discuss in details how LIFO provides tax benefits

LLIFO is usually used in times of inflation since the existing purchases are at higher costs and are harmonized against incomes that remove the boom of profit and thus minimizing revenue tax policies.

Discus detail how long-lived asset can be measured on balance sheets

Long-lived assets are only listed as an organization's balance sheet if they are attained commodities or possessions with a recognizable value, which can be rewarded in the balance sheet.

Discuss in detail the tax incentives long-lived assets

long-lived assets give the organization economic advantages over the current operating year as most of them start from a particular point of purchase by the organization.

Discuss in detail how improvements to long-lived assets are handled on financial reports

Long-lived assets provide future advantages for an organization for more than one year and help in outlining an organization's revenue generation in the future.

Discuss in detail what is depreciation how it is calculated and methods used to allocate depreciation

Depreciation in accounting is the reduction of the documented cost of long-lived assets in an organized manner until the value of that item becomes negligible or zero. There is three primary way on how to calculate depreciation; these include the unit of production method, straight-line method, and double-declining balance method.

Discuss in detail how liabilities should be shown on a balance sheet

Liabilities are the values an organization owes to the creditors from the previous transactions. They are often classified in the balance sheet in a particular order on how they display themselves based on current liabilities and long term liabilities.

Compare and contrast bonds sold at par, discount and premium

Par value is when the price one pays for an item tends to maintain while when a bond that is trading above its importance in the secondary market, it is known as the premium bond. This is due to the fact most investors need a higher return, which they will pay for; hence, they pay in advance to receive the ticket payment. However, when it comes to a discount bond, it is a bond that trades less than the par value in the subsidiary market. Therefore this is often observed when a bond offers tickets that are slightly lower than the current interest rates.

Discuss in detail what imputed interest on notes payable is.

Imputed interest is an approximation of the rate of interest for a debit rather than the price that is left in the debit agreement. It is put in practice when there is a difference in the debt rate from the market rate.

Your company is being sued or injuries resulting from product liability. Discuss in detail what you should and have to report and how on your financial statements.

The organization needs first to find out from the person who is a victim of the injuries before seeing a dime in the reimbursement for the damages. Therefore the only way liability could be established is through identifying if the person was careless or what led to the incident. After which the insurance company will accept the offer of settling the injuries.

Discuss in detail what are and why residual value guarantees are placed in lease contracts by lessors

Residual values are anticipated values of the consumed physical assets in the completion of the lease. They are generally put on contracts due to the uncertainty which is experienced sometimes in the back end if the future market can change with the underlying asset at the stoppage variation of the anticipated residual value. Therefore a residual value is more like a loan that may tend to depreciate with time.

Discuss in detail why a lease would make payments in advance of their due dates- what are they trying to do?

Lease or rental agreement describes the details on when rent is due and where or how to pay it, most of the contracts and rental consensus give advice for the tenants to pay their rent monthly or in advance. However, to the landlords, they seem to be somehow flexible as to establish when rent needs to be paid with the tenant.

Compare and contrast requirements for a lease (for both capital and operating) for a contract and the requirements of a capital lease for leasor. Be complete with your response.

A capital lease is taken as an asset on an organization's balance sheet while an operating lease is the cost that is contained off the balance sheet.both of them include the following requirements:

• change of ownership at the end of the period
• a choice to buy the asset at a discount price after the period
• the period of the lease is equivalent to or higher to 75% of the life of the asset
• the current lease payment is equal to 90% or higher of the assets market rate.

Discuss in detail the lessor and lessee's positions for the selection of either a capital or operating lease for tax purposes.

Operating lease is far much better than the capital lease since they are counted as a debit on an organization's balance sheet. Since the organization may not be permanent in a particular place.