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Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
Edition 7ISBN: 978-0078136726Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
Edition 7ISBN: 978-0078136726 Exercise 13
Transpacific Bank
You are working as a loan officer at Transpacific Bank and are analyzing a loan request for a client when you come across the following footnote in the client's annual report:
Inventories are priced at the lower of cost or market of materials plus other direct (variable) costs. Fixed overheads of $4.2 million this year and $3.0 million last year are excluded from inventories. Omitting such overhead resulted in a reduction in net income (after taxes) of $720,000 for this year. Our tax rate is 40 percent.
?In preparing to present the loan application to the bank's loan committee, write a brief paragraph in nontechnical terms describing what this footnote means and how it affects the bank's evaluation of the financial condition of the borrower.
You are working as a loan officer at Transpacific Bank and are analyzing a loan request for a client when you come across the following footnote in the client's annual report:
Inventories are priced at the lower of cost or market of materials plus other direct (variable) costs. Fixed overheads of $4.2 million this year and $3.0 million last year are excluded from inventories. Omitting such overhead resulted in a reduction in net income (after taxes) of $720,000 for this year. Our tax rate is 40 percent.
?In preparing to present the loan application to the bank's loan committee, write a brief paragraph in nontechnical terms describing what this footnote means and how it affects the bank's evaluation of the financial condition of the borrower.
Explanation
Verified
Verified
Variable Costing
To take into account l...
Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
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