David H. Brooks, a university graduate with an accounting degree and the former CEO of DHB Industries,
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1. Show the impact of the inventory write-down on the accounting equation, and also show the journal entry that should have been recorded on December 31, 2004.
2. Calculate (a) the Inventory balance that should have been reported on December 31, 2004, and (b) the amount of Net Income that should have been reported for the year ended December 31, 2004. (Assume the inventory write-down does not affect income tax.)
3. DHB’s share price reached an all-time high ($ 20–$ 22 per share) in November and December 2004, but then the company’s CEO, CFO, and other executives began selling their shares in the company. Within a few weeks, they had cashed in over $ 200 million of stock. In August 2005, after DHB announced its inventory would have to be written down, the stock price fell to less than $ 5 per share. If you were an attorney representing DHB’s investors, what evidence would you present to assert that a fraud had occurred? If you were an attorney defending DHB, what counterarguments would you make? Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For
Fundamentals Of Financial Accounting
ISBN: 9780073527109
3rd Edition
Authors: Fred Phillips, Robert Libby, Patricia A Libby
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