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A2 World of Accounting Cases - Block 1
Complete the following problems. Be sure to fully answer the essay questions.
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- WB Problems 2.2 – Using Financial Information
Imagine that you are the manager of Valley Skateboard Shop. The accountant for the business has delivered the news that sales are down by 15 percent compared to last month. She also reports that the rent on the building will be increasing next month by $100. You believe that shop needs a more experienced salesperson and that the building needs new paint and awnings. How might the information delivered by the accountant affect your decisions and course of action?
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- WB Problem 2.3 – Identifying Accounting Assumptions
Suppose you work for a company called Greenwood Sky Divers as a sky-diving instructor. Since you have your pilot’s license, you also give flying lessons on the side. You and the owner of Greenwood Sky Divers both belong to a local club, the Greenwood Eagles, whose members get together for sky dives on weekends. Greenwood Sky Divers is a sole proprietorship that has been in business for six years. The owner of the company regularly reviews financial reports, and the company’s accountant prepares end of the year reports to compare results from one year to the next.
Decide what information in this paragraph is relevant to accounting for Greenwood Sky Divers. Identify the three accounting assumptions for Greenwood, and give an example of each assumption from the information given.
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- TB – International Accounting Standards
When two companies from different countries prepare financial statements, do you think they use the same accounting rules? If both companies use International Accounting Standards (IAS), the statements would be comparable and understandable. The International Accounting Standards Board (IASB) develops accounting rules so that investors can compare financial statements of publicity traded companies from any country. Since International Accounting Standards are not always the same as U.S. generally accepted accounting principles (GAAP), it is important to know which rules were used to prepare financial statements.
Explain why a U.S. company might choose to prepare its financial statements using both GAAP and IAS.
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