Answer Happy

Consider the following scenarios. (Click the icon to view the scenarios) Required For each of the scenarios, determine the effects (if any) of the accounting change (correction of error, change in accounting policy, or change in estimate) on the relevant asset or liability, equity, and comprehensive income in the year of change and the prior year. CUD a Change in estimate Prospective Retrospective b. Correction of an error s. Change in accounting policy Retrospective Next, determine the effects of any) of the accounting change on the relevant asset or sability, equity, and comprehensive income in the year of change and the prior year. (For any accounts unaffected, select "No eft" in the Change column and leave the amount column blank. For the Asset or Liability account, select "iner. A to indicate an increase in an asset. "Deor. L for decrease in liability, and so on.) Year prior to change Year of accounting change Asset or Asset or Change Liability Change Equity Change Income Change Amount Liability Change Equity Change Income Amount Amount Amount Amount Amount 3,500 No eff No off No et Decr 3.500 Dear A 3,500 Door
Morning Dows Company was started on January 1, 2021. During its first year of operations, the company had a choice of accounting policies. The chief financial officer identified the following as possible alternatives and underlying assumptions/estimates for each (Click the icon to view the possible alternatives and underlying assumptions/estimates.) The following are the actual transactions for the first three years of operations (Click the ioon to view the transactions) Required CED Requirement a. Derive net income for 2021, 2022, and 2023 Ignore income taxes Begin by computing net income for 2021, 2022, and 2023 using Accounting Policy Set A Accounting Policy Set A 2021 2023 2022 14.500.000 Sales 13,500,000 15.300,000 Cost of goods sold
Transactions Sales (all on accounts) Inventory purchases (paid immediately) Ending inventory value, FIFO Ending inventory value, average cost Collections Amounts actually written off Warranties actually paid Estimated warranties payable ending balance based on aging analysis of sales Depreciation expense All other operating expenses (paid immediately) 2021 2022 2023 $ 13,500,000 $14,500,000 $ 15,300,000 6,000,000 3,000,000 3,200,000 1,800,000 1,850,000 2,000,000 1,730,000 1,550,000 2,000,000 12,000,000 13,300,000 12,810,000 400,000 450,000 700,000 120,000 500,000 525,000 835,000 1,350,000 1,886,000 700,000 700,000 700,000 2,800,000 3,200,000 3,400,000 I
Possible alternatives and underlying assumptions/estimates Accounting policy set B Accounting policy set A FIFO Inventory valuation Average cost Bad debts 4% of sales Allowance: 5% of closing gross accounts receivable Allowance: An analysis of sales and repairs Warranties 7% of sales Done - X Print
Required Required a. Derive net income for 2021, 2022, and 2023. Ignore income taxes. b. What is the cumulative income for the three years for the two sets of accounting policies? What does this tell us about the closing balance sheet at the end of the third year? F c. What are the cumulative operating cash flows for the three years for both sets of accounting policies? Why are these cumulative cash flows the same for the two sets of policies? d. Carefully explain why the net incomes for each of the three years under review are not the same. What does this tell us about accruals and allocation methods? I x