a) The committee on accounting procedure, CAP, that has been in operation from 1939m to1959, was a natural development of the AICPA(then known as AIA)Committee, that was in existed during 1933 to 1938. The committee was formed as a result of the financial crisis that were experienced during 1929 and the years after that. The power to issue pronouncements on matter of accounting principles and procedure was based on the grounds that AIPCA had the power to establish practices that would be accepted by the accounting governing bodies and governments. The CAP focused on resolving certain accounting problems rather than going for the solution to specific issues in the accounting field or the development of generally accepted accounting principles.
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Case 2-4
a) In the presence of evidence that the business operation has a limited life, it should not be seen as being in the operation forever.
b) NO.
Since a business is seen to be in continues operation, the value that makes sense to a purchaser should be the market value. The value measures the present value of the future cash inflows to the business. This is important as it assumes the business will be in operation and create future cash flows.
c) NO.
Bankruptcy provides proof that the business is not to remaining operation forever, this mean that the assets reported in the company sheet should be measured at the net value to be realized from the operation.
Case 2-5
a) SFACNO.6 defines assists as probable future economic benefits got or managed by a particular body as a result of prior transaction or event. When your company makes use of a building to produce automobiles, the probable future economic benefit is the inflow of resources that is expected from the automobile sales.
The company who may use them gets this benefit, if it has a desire to make more automobiles; the prior transaction that resulted in the existence of the asset is the building …show more content…
The use of LIFO by General motors and Ford in preparation of the balance sheet which shows the historical costs do not show the recent costs and could be for many years. Thus it can be argued that the figures in the balance sheet does not show any amount as per the balance sheet date and thus cannot be relied on in the decision making.
Contrary, Honda and Daimler uses FIFO and thus their balance sheet shows the most recent buying price thus current value of inventory in the balance sheet dates.
• Since all this values are based on cost, under FIFO the costs are close to replacement cost when reporting and thus decision about financial status would be regarded as more relevant.
• The equally likely future estimated amount to be received or paid and they are less confident estimate which causes the accountants to result to more losses than profits.
b. In the assumption if price rise rather than fall, General motors, Ford and Chrysler provides non changing accounting information as it has relation to inventory. Every company uses LIFO as it matches high cost thus low reporting profits and low value of assets. In the recent years, the incident of low inflation has tempered to the above
Case 2-4
a) In the presence of evidence that the business operation has a limited life, it should not be seen as being in the operation forever.
b) NO.
Since a business is seen to be in continues operation, the value that makes sense to a purchaser should be the market value. The value measures the present value of the future cash inflows to the business. This is important as it assumes the business will be in operation and create future cash flows.
c) NO.
Bankruptcy provides proof that the business is not to remaining operation forever, this mean that the assets reported in the company sheet should be measured at the net value to be realized from the operation.
Case 2-5
a) SFACNO.6 defines assists as probable future economic benefits got or managed by a particular body as a result of prior transaction or event. When your company makes use of a building to produce automobiles, the probable future economic benefit is the inflow of resources that is expected from the automobile sales.
The company who may use them gets this benefit, if it has a desire to make more automobiles; the prior transaction that resulted in the existence of the asset is the building …show more content…
The use of LIFO by General motors and Ford in preparation of the balance sheet which shows the historical costs do not show the recent costs and could be for many years. Thus it can be argued that the figures in the balance sheet does not show any amount as per the balance sheet date and thus cannot be relied on in the decision making.
Contrary, Honda and Daimler uses FIFO and thus their balance sheet shows the most recent buying price thus current value of inventory in the balance sheet dates.
• Since all this values are based on cost, under FIFO the costs are close to replacement cost when reporting and thus decision about financial status would be regarded as more relevant.
• The equally likely future estimated amount to be received or paid and they are less confident estimate which causes the accountants to result to more losses than profits.
b. In the assumption if price rise rather than fall, General motors, Ford and Chrysler provides non changing accounting information as it has relation to inventory. Every company uses LIFO as it matches high cost thus low reporting profits and low value of assets. In the recent years, the incident of low inflation has tempered to the above