Accounting Questions and Answers | Study

Running head: REPORT 0
ACCOUNTING
JANUARY 8, 2020
STUDENT DETAILS:

REPORT 1
Part-A
Answer 1:
After receiving the copy of the financial statements of PepsiCo for periods ending December 31,
2013 as well as 2014, I will take following decisions in the different situations -
(a) The requirement of data from the financial statement of PepsiCo in case of the
banker –
The bankers will require the financial statement to assess loan as well as abilities of the
interests payable. It will require to evaluate the debt services coverage ratios, amount of
the loan, financial strength such as debt equity ratio as well as Bankers would need
financial statements to analyze the loan and interest payable capabilities. It is required to
evaluate debt service coverage ratio, amount of other loans, financial strength like
current ratio as well as debt equity ratio. The current ratio is also considered as the
liquidity ratio. It evaluates whether the organisation has sufficient sources to fulfil the
short-term obligation. The debt equity ratio indicates the relative part of the equity and
debt utilised to finance the asset of entity.
(b) A need of data from the financial statement of PepsiCo in case of potential investor
–
The Investor will require the data such as the net profit of an organisation, proportion of
dividend paid as well as the capital structure.

REPORT 2
(c) The requirement of data from the financial statement of company In case of Labour
negotiator –
The profit and loss statement is very helpful in this matter. The main reason is that they
require data such as the operating profits of corporation. It is evident that the labour
charge paid is compared with the proportion of labour charge to the profits with business.
Additionally, it can say that in case of enhancing profit, they want rise in the wages.
Answer 2:
Following accounting assumptions are violated in the provided situations-
(a) In the provided situation, Melissa bought computer for personal utilisation. However,
Melissa recoded this asset as the asset of Missy’ Teashop instead of personal asset. In
accounting, the economic entity is best assumptions made in generally accepted
accounting principle. It is required by the Economic entity assumption that the activities
of company are to be kept individually from the different functions of owners as well as
other financial organisations. In this situation, the economic entity assumption is
violated (Wisdom, et. al, 2017).

REPORT 3
(b) It is provided that Houston Electronics bought office building $ 500,000 before some
years. It can be traded presently at $ 850,000. The accountant would present the building
as the asset on the book at $ 850,000. It can see that it is required by the consistency that
the financial statements of organisation adopt the similar accounting principles,
approaches, methodologies, as well as processes from one accounting period to the
upcoming accounting period. This accounting principle permits the reader of the financial
statement of company to create useful comparison between different periods. It also
permits the organisation to initiate the changes to the chosen accounting methods.
However, the changes as well as effects should be presented for the benefits of a reader
of the financial statements. The accounting method or principle should be changed only
when the new method in can improve the reported financial outcomes. In the provided
situation, the consistency assumption is violated.
(a) It is decided by new accountant that he will make financial statement in every 2 years.
The financial statement’s users require current as well as proper data to assess financial
performance as well as condition of organisation to take significant decision as well as
proper action. The time-period assumption enables the organisation to divide the financial
functions in the short-term. In this case, the Time-period assumption is violated. The
time-period assumption is also known as the periodicity assumption.
(b) It is stated that the Candle store has no plan to quit. However, it is decided that it will
utilize market value to report the asset since it takes decision to move on to the smaller