You have recently been hired as the Controller for a large publicly-traded company that has experienced significant operating losses for the past few years, which has caused a sharp decline in the company’s stock price. The CFO has asked you to prepare a (1-2 page) memo to discuss the following topic: 

1. The company is anticipating purchases of significant property and equipment during the next 12 months. What are your considerations and recommendations on whether to use either straight-line depreciation method or the double-declining-balance depreciation method?

2. What are your considerations and recommendations on whether to use either the LIFO or FIFO method for costing its inventory?

3. Currently, management focuses solely on gross profit in dollars rather than the gross profit margin percentage. Which is the more useful metric and what factors most influence gross profit margin? Name two specific ways to improve the gross profit margin.

4. Currently, the company records all contingent liabilities regardless of the facts and circumstances of each situation. Explain whether this is appropriate, how should contingent liabilities be recorded, and how could a company manipulate contingent liabilities to its advantage?

Answer rating: 100% (QA)

Ans1 Under straight line method of depreciation total depreciable value of fixed assetie cost less residual value is depreciated over the estimated useful life of the asset So equal annual depreciatio... View the full answer