Management Decision MakingCase Study 2You have recently been hired as the Controller for a large...

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Management Decision MakingCase Study 2You have recently been hired as the Controller for a large publicly traded company that has experienced significant operating losses for the past few years, which has caused a sharp decline in the company’s stock price.  The CFO has asked you to prepare a 2-3 page memo (single spaced) discussing the following topics:1) The company is anticipating purchases of significant property and equipment during the next 12 months.  What are your considerations and recommendations on whether to use either straight-line depreciation method or the double-declining-balance depreciation method?2) What are your considerations and recommendation on whether to use either the LIFO or FIFO method for costing its inventory?  3) Cuently, management focuses solely on gross profit in dollars rather than the gross profit margin percentage.  Which is the more useful metric and what factors most influence gross profit margin?  Name two specific ways to improve the gross profit margin.  4) Cuently, the company records all contingent liabilities regardless of the facts and circumstances of each situation.  Explain whether this is appropriate, how should contingent liabilities be recorded, and how could a company manipulate contingent liabilities to its advantage?

Khushboo · Accepted Answer

Memo
From: Controller
To: Chief Financial Officer
Date: 16th November 2020
Sub: Discussion on treatment of various accounting issues
Dear Sir,
With reference to above subject, there are various accounting issues which need different accounting treatment. In the past the company has incurred various losses and there are various items which need to be accounted for as per accounting standards and can be resulted increase in profitability. The accounting treatment for different items are as below:
· In first case, the company is planning to purchase large amount of plant, property and equipment (PPE) in next 12 months. There are various depreciation methods for PPE which can be applied over the useful life of assets such as SLM method, WDV method, double declining method and MACRS method etc.

Management Decision Making Case Study 2 You have recently been hired as the Controller for a large publicly traded company that has experienced significant operating losses for the past few years,...

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