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Write 3 page essay on the topic Composite Memo(The Final Installment).The purpose of this memorandum is to correct errors and help Composite Manufacturing Company see the benefits of having an account
Write 3 page essay on the topic Composite Memo(The Final Installment).
The purpose of this memorandum is to correct errors and help Composite Manufacturing Company see the benefits of having an accountant.
All figures discussed are in the thousands. Composite Manufacturing Company’s net sales were adjusted from $9,750 to $7,954. The reason for this discrepancy is mainly the mislabeling of revenue.
Mr. Little used volume discounts, settlements, grants, and reverse revenue recognition as sales. These items are not sales. The costs of goods sold went from $6,121 to $5,812. The reasons were to reverse the sale to Anjinu, reverse the entry of unsalvageable inventory as COGS, and to reverse the entry that recorded a sale to affiliate. Operating expenses were not changed. Other expenses were changed due to impairment loss regarding unsalvageable RM, losses on leasehold improvements that are no longer useful, switching net sales recognition to recognition of a gain, a loss in the proper period in which it was incurred. This made the amount balance negative. Liabilities and stockholders’ equity were adjusted as well.
The adjustments made for Composite Manufacturing Company’s financial statement made the company’s net income of $554 to a negative balance of $592. This was due to the improper classifying of revenue. While the $1,146 does not seem like a significant amount to mislabel, to stockholders the negative balance might cause worries. The corrections give the stockholders a better idea of the position the company is in, financially speaking. If the unadjusted financial report had been given to stockholders, the Composite Manufacturing Company could be sued later on for fraud.
Since the company has had a lawsuit over their product, more time might be given to the design. The idea is ingenious and green. However, all of the problems must be dealt with in order for this company to go
