Accounting Policies of Manufacturing Homes Company

This document provides an overview of the accounting policies implemented by Manufacturing Homes Company. It covers principles of consolidation, inventories, property plant and equipment, income taxes, income recognition, excess of costs over net assets, and earnings per share. The document also discusses the financial performance and future potential of the company.

Running head: MANUFACTURING HOMES 1
MANUFACTURING HOMES

MANUFACTURING HOMES 2
Table of Contents
Question 1...................................................................................................................................................3
Principles of Consolidation and Nature of Business................................................................................3
Inventories...............................................................................................................................................3
Property, plant and equipment.................................................................................................................3
Income Taxes..........................................................................................................................................3
Income Recognition.................................................................................................................................4
Excess of costs over Net Assets of acquired companies..........................................................................4
Earnings per share...................................................................................................................................4
Question 2...................................................................................................................................................4
Question 3...................................................................................................................................................5
References...................................................................................................................................................6

MANUFACTURING HOMES 3
Question 1
Accounting policies are the guidelines that are implemented while preparing the financial
statements of the Manufacturing Homes Company. There are several accounting policies which
are incorporated by the company and the same have been segregated and categorized.
Principles of Consolidation and Nature of Business
The nature of the business of the company is the retail sale of the single family homes
which are newly manufactured. The financial statements of the company reflect the consolidated
financial statements which include the details of subsidiary companies as well as wholly-owned
company (Palepu & Wright, 2017).
Inventories
The inventories are the stock which is used for manufacturing of homes. The inventories
are measured and mentioned on the basis of the true value of its cost or the market price (Palepu
& Wright, 2017).
Property, plant and equipment
The statement of accounts has used the straight line method of the depreciation of the
plant and machinery. The process of amortization has also been used in the straight line method
for the lease hold property (Palepu & Wright, 2017).
Income Taxes
The expenses in the financial statement are recorded for the different periods and are
treated accordingly. The deferred income taxes are treated as an in income in the current
financial statements (Hodgdon & Hughes, 2016).

MANUFACTURING HOMES 4
Income Recognition
The income is recognized on the accrual basis of accounting (Palepu & Wright, 2017).
Excess of costs over Net Assets of acquired companies
The financial statements of the company states that the straight line method is being used
for the amortization of properties (Thorbecke, 2017).
Earnings per share
The calculation of earnings per share is calculated in the financial statements as the
weighted average number of common and the common equivalent (Palepu & Wright, 2017).
Question 2
It is important to assess the financial performance of the company as the overall health of
the company can be known to the investors, customers, suppliers as well as the managers only on
the basis of the in-depth analysis of the company from all the aspects. The manufacturing Homes
Company deals with the retail sale of the new as well as the used houses (Golovkova, Eklof
Malova, & Podkorytova, 2019).
The current performance of the company states that in the year 1986 the revenues have
increased with a considerable amount in the year 1986 to $120264954. An increase of 44% is
observed in the operated sales center and the overall total assets have also increased from
$50944924 to $81377803. The New home sales were 80% single-wide in 1986, as compared
with 84% in 1985. This also indicates the real pressure of the company to grow with the
diversion and the shift resulting from the acquisition of the two subsidiaries. The Company’s
experience relative to prepayments of home mortgages, until 1986, had been minor. The property
plant and equipment are segregated on the basis of the estimated useful life. The weighted

MANUFACTURING HOMES 5
average interest rate paid on the outstanding floor plan liability was 10.9%, 11.0%, and 14.7%
for 1986, 1985, and 1984, respectively and this indicates the company is willing to acquire funds
by creating more financial pressure on itself. In the first nine months there was a huge difference
between the overall sales from $76396868 to $126599392. Overall the cost of the sales increased
more and the earnings were less. The gross earnings were ahead of $400000 whereas the net
earnings saw a slow increase due to the acceleration in the selling and the general expenses
(Jakub, Viera & Eva, 2015).
Question 3
The current condition and the future potential of the business can be assessed on the basis
of the strategies implemented in the business, the policies as well as the guidelines followed and
the overall analysis of the recent performance (Kumar, Boesso & Michelon, 2016). The
Company’s net sales for the three-month period ended September 30, 1987 were equivalent to
$44,590,244 whereas when compared to $29,464,161 for the comparable period of 1986, an
increase of 51% was observed. Net sales for the nine month period ended September 30, 1987
were $126,599,392 compared to $76,396,868 for the comparable period of 1986, an increase of
66% was occurred. Overall the company is terms of the sales. For period ended September 30,
1987, an analysis of the nine months cost of sales as a percentage of net sales was unchanged
from the comparable period of 1986. The current capital needs can be satisfied but from the point
of view of the future operations the company need to lower down the acquisition of the debt to
avoid the financial leverage (Palepu & Wright, 2017).

MANUFACTURING HOMES 6
References
Golovkova, A., Eklof, J., Malova, A., & Podkorytova, O. (2019). Customer satisfaction index
and financial performance: a European cross country study. International Journal of
Bank Marketing, 37(2), 479-491.
Hodgdon, C., & Hughes, S. B. (2016). The effect of corporate governance, auditor choice and
global activities on EU company disclosures of estimates and judgments. Journal of
International Accounting, Auditing and Taxation, 26, 28-46.
Jakub, S., Viera, B., & Eva, K. (2015). Economic Value Added as a measurement tool of
financial performance. Procedia Economics and Finance, 26, 484-489.
Kumar, K., Boesso, G., & Michelon, G. (2016). How do strengths and weaknesses in corporate
social performance across different stakeholder domains affect company
performance?. Business Strategy and the Environment, 25(4), 277-292.
Palepu., K. G., & Wright, S. (2017). Business analysis and valuation. Retrieved from
file:///C:/Users/System04087/Downloads/3349074_1289098697_BusinessAnalysisandVa
luationUs.pdf
Thorbecke, E. (2017). Social accounting matrices and social accounting analysis. In Methods of
interregional and regional analysis (pp. 281-332). Routledge.