Question 2(b) -7 marks Hazel is concerned as a plant disease has affected the leaves on...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Question 2(b) -7 marks Hazel is concerned as a plant disease has affected the leaves on all the fruit trees, which form part of the inventory of the business. These fruit trees are currently recorded at their original cost price of $230,000. The fruit trees are still able to be sold, however due to the damage they will need to be sold at a reduced price. Hazel has established that the estimated selling price (i.e. Net Realisable Value) of the damaged fruit trees is now $180,000. Hazel understands that there is an accounting rule she must apply in accordance with the concept of conservatism when recording an inventory balance and would like your advice. i. What is the name of the rule that Hazel is referring to? (1 mark) Given the facts provided above, what will be the dollar impact of applying this rule to the following accounts of Darling buds Nursery? (State both the dollar impact wheth it will increase or decrease the balance) ii. Inventory account (1 mark) iii. Cost of Goods Sold? (1 mark) iv. Gross Profit? (1 mark) v. Explain in your own words why Hazel would be breaching the accrual accounting concept if she does not apply the rule identified in Q2(b)) above. In your answer, you need to refer to the three parts of the accounting definition of an expense. (3 marks) Question 2(b) -7 marks Hazel is concerned as a plant disease has affected the leaves on all the fruit trees, which form part of the inventory of the business. These fruit trees are currently recorded at their original cost price of $230,000. The fruit trees are still able to be sold, however due to the damage they will need to be sold at a reduced price. Hazel has established that the estimated selling price (i.e. Net Realisable Value) of the damaged fruit trees is now $180,000. Hazel understands that there is an accounting rule she must apply in accordance with the concept of conservatism when recording an inventory balance and would like your advice. i. What is the name of the rule that Hazel is referring to? (1 mark) Given the facts provided above, what will be the dollar impact of applying this rule to the following accounts of Darling buds Nursery? (State both the dollar impact wheth it will increase or decrease the balance) ii. Inventory account (1 mark) iii. Cost of Goods Sold? (1 mark) iv. Gross Profit? (1 mark) v. Explain in your own words why Hazel would be breaching the accrual accounting concept if she does not apply the rule identified in Q2(b)) above. In your answer, you need to refer to the three parts of the accounting definition of an expense. (3 marks)
Expert Answer:
Answer rating: 100% (QA)
1 Hzel is referring t is the lwer f st r net relizble vlue LNRV rule f rerding the inventry 2 The dl... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324664553
Concise 6th Edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
Students also viewed these accounting questions
-
Hazel is concerned as a plant disease has affected the leaves on all the fruit trees, which form part of the inventory of the business. These fruit trees are currently recorded at their original cost...
-
A nursery advertises that it has 10 elm trees for sale. Unknown to the nursery, 3 of the trees have already been infected with Dutch elm disease and will die within a year. a. If a buyer purchases...
-
Accounting Part B (6 marks) Note: Facts provided in Part B are to be treated separately from those in Part A. All Canohs projects are m
-
You would like to design a product to sell to shopping malls that tells them more about the behaviours of their customers. The system would use cameras to track customers as they walk from store to...
-
The existence of a downward- (or backward-) sloping supply curve of foreign exchange is a necessary condition for the generation of an unstable equilibrium position in the foreign exchange market....
-
Consider the sample space in Figure 1.22 with outcomes a, b, c, d and e. Calculate: (a) P(b) (b) P(A) (c) P(Aʹ) 0.13 0.48 0.02 0.22
-
In an electric breakdown in air (a spark), an electron (inertia \(9.11 \times 10^{-31} \mathrm{~kg}\) ) experiences an electric force of \(4.83 \times 10^{-13} \mathrm{~N}\). What is the magnitude of...
-
Suppose XYZ Software Company has a new application development project, with projected revenues of $1,200,000. Using the following table, calculate the ARO and ALE for each threat category that XYZ...
-
E xplain why various 8 0 5 1 C compilers produce ddifferent hex file sizes?
-
Ben Rawiller, a resident taxpayer operates an electrical goods store. During the 2021/22 tax year, Ben had the following transactions: Sales Purchases of Trading Stock Stock-1 July 2020 $ 2,927,800...
-
TARGET RETURN APPROACH Excite Ltd is a new Internet-based company that streams sports films to its customers. Excite has been in business for 20 months and already has to pay customers and revenue....
-
When Maggie applies the brakes of her car, the car slows uniformly from 15.0 m/s to a complete stop in 2.55. How many meters before the stop sign must she apply her brakes in order to stop at the...
-
A car with an initial speed of 4.3 m/s accelerates uniformly at the rate of 3.0 m/s? for 5 seconds. a. Find the final speed? b. Find the distance traveled.
-
The rate of bacterial reproduction is proportional to the number of bacteria at that time. The number of bacteria at 12.00 is 10000. After 2 hours the number becomes 40000 . How much is it at 17.00?
-
A bank holds $ 7 0 billion in checking accounts, $ 1 2 0 billion in savings accounts, and $ 4 5 billion in reserves. The bank has also issued loans for $ 1 3 0 billion and purchased 0 . 6 billion...
-
Suggest a short argumentative essay arguing whether or not the book, "Charlie and the chocolate factory" is acceptable for children in your opinion. Make your case using research from scholarly...
-
Identify the author and write five carefully chosen sentences on the meaning of the quotation. Suppose now that there were two such magic rings, and the just put on one of them and the unjust the...
-
Explain the term global capital markets. This chapter primarily discusses global equity markets. What other types of financial instruments are traded in these markets? How important are global...
-
Harrison Clothiers stock currently sells for $20.00 a share. It just paid a dividend of $1.00 a share (that is, D0 = $1.00). The dividend is expected to grow at a constant rate of 6% a year. What...
-
A firm has a profit margin of 2% and an equity multiplier of 2.0. Its sales are $100 million, and it has total assets of $50 million. What is its ROE?
-
Suppose rRF = 9%, rM = 14%, and bi = 1.3. a. What is ri, the required rate of return on Stock i? b. Now suppose that rRF (1) increases to 10% or (2) decreases to 8%. The slope of the SML remains...
-
Under an evolutionary classification system, species are grouped together based on (a) their shared similarities. (b) how closely related they are to one another. (c) their position in a hierarchy...
-
What criteria are used to classify species in the Linnaean system?
-
The scientific name of a species (a) consists of two parts, the family name and the species name. (b) is always underlined. (c) is always in Latin. (d) includes only the species name.
Study smarter with the SolutionInn App