This page is designed to pass on some tricks and tips I have learned over years of experience with this class and the topic in general. Most will be focused on helping you finish assignments. Some will be designed to help you prepare for exams.
A common confusion around accrual basis income statements, as we teach them, centers around the inventory adjustment. The question posed is: I am a bit confused with the inventories. How do you determine what is a positive and what is negative? Is the difference in head/AP/Accrued Interest what we need to put down (example the difference in cows is 20 head) or the entire heard multiplied by the dollar per unit? (sorry if this is confusing to explain in an email).
Inventory adjustments are a tough idea to wrap your mind around. My first suggestion is to make sure you read the chapter and watch the lecture. Pay particular attention to slide 28. Remember the logic is to align the revenue with when it was created, and to align the expenses it took to create the value. So yes mechanically (End # – Beginning #) x $value. As an aside,(End # – Beginning #) x $value = $value x End# – $value x Beginning#.
The PDF at the link below has some scenarios I hope you find helpful when you have questions about accrual adjustments.
Depreciation is a fun topic. And it can be confusing.
Common questions include:
To calculate the value of the asset for the Jan 2019 Balance sheet we can simply use the 2018 ending book value correct? Or am I missing something between how this new value is a Mkt Value and the assignment calls for Cost value? Or When an asset is sold within the year, do we account for the partial year depreciation of that year when calculating gain/loss?