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  • Bobek Inc Has Recently Reported Steadily Increasing Income The PDF

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    Anbu jaromia
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    Bobek Inc reported steadily increasing income from 2009 to 2011. Analysts expect continued growth and recommend buying stock. Bobek's 2012 year appears good, with income before warranty expense of $43,000. Some managers want to record a larger $7,000 warranty expense this year to report higher 2012 income and cover future costs, though $5,000 is typical. Recording a larger expense this year would shift income between years. The appropriate accounting is to record typical $5,000 warranty expense and not shift income between years.

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    Bobek Inc reported steadily increasing income from 2009 to 2011. Analysts expect continued growth and recommend buying stock. Bobek's 2012 year appears good, with income before warranty expense of $43,000. Some managers want to record a larger $7,000 warranty expense this year to report higher 2012 income and cover future costs, though $5,000 is typical. Recording a larger expense this year would shift income between years. The appropriate accounting is to record typical $5,000 warranty expense and not shift income between years.

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    56 views1 page

    Bobek Inc Has Recently Reported Steadily Increasing Income The PDF

    Uploaded by

    Anbu jaromia
    Bobek Inc reported steadily increasing income from 2009 to 2011. Analysts expect continued growth and recommend buying stock. Bobek's 2012 year appears good, with income before warranty expense of $43,000. Some managers want to record a larger $7,000 warranty expense this year to report higher 2012 income and cover future costs, though $5,000 is typical. Recording a larger expense this year would shift income between years. The appropriate accounting is to record typical $5,000 warranty expense and not shift income between years.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Bobek Inc has recently reported steadily increasing income

    The
    Bobek Inc. has recently reported steadily increasing income. The company reported income of
    $20,000 in 2009, $25,000 in 2010, and $30,000 in 2011. A number of market analysts have
    recommended that investors buy the stock because they expect the steady growth in income to
    continue. Bobek is approaching the end of its fiscal year in 2012, and it again appears to be a
    good year. However, it has not yet recorded warranty expense. Based on prior experience, this
    year’s warranty expense should be around $5,000, but some managers have approached the
    controller to suggest a larger, more conservative warranty expense should be recorded this
    year. Income before warranty expense is $43,000. Specifically, by recording a $7,000 warranty
    accrual this year, Bobek could report an increase in income for this year and still be in a position
    to cover its warranty costs in future years.Instructions(a) What is earnings management?(b)
    Assume income before warranty expense is $43,000 for both 2012 and 2013 and that total
    warranty expense over the 2-year period is $10,000. What is the effect of the proposed
    accounting in 2012? In 2013?(c) What is the appropriate accounting in this situation?View
    Solution:
    Bobek Inc has recently reported steadily increasing income The
    SOLUTION-- http://accountinginn.online/downloads/bobek-inc-has-recently-reported-steadily-
    increasing-income-the/

    For Solutions Visit accountinginn.online


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