Assume that you are the auditor of Weller, Inc. and that you have been asked to explain the appropriate accounting and related disclosure necessary for each of these items.

a. The company decided that, for the sake of conciseness, only net income should be reported on the income statement. Details as to revenues, cost of goods sold, and expenses were omitted. b. Equipment purchases of $170,000 were partly financed during the year through the issuance of a $110,000 notes payable. The company offset the equipment against the notes payable and reported plant assets at $60,000. c. Weller has reported its ending inventory at $2,100,000 in the financial statements. No other information related to inventories is presented in the financial statements and related notes. d. The company changed its method of valuing inventories from weighted-average to FIFO. No mention of this change was made in the financial statements.

(a) It is true that details of revenues, cost of goods sold and expenses ought to be in the balance statement, but was not always so,. In the past only net income was recorded but. Accounting Principles has evolved over the years.

(b) Notes payable should be recorded as liability (because it is a form of cash Outflow) and equipments are assets. Offsetting is can be used when some assets are used to pay off liabilities.

(c) According to General Accepted Accounting Principles, the inventory amounts are stated and the method used in determining cost (LIFO, FIFO, average cost, etc.) should also be stated. Methods used in determining cost should be emphasized and alternatives should be made known as well.

(d) In accounting principles, changes in financial statements should be made known. Contrariwise, this will lead to a false financial statement. Financial statements ought to be compared with that of previous years to substantiate its usefulness.

Explanation:

The company decided that, for the sake of conciseness, only net income should be reported on the income statement. Details as to revenues, cost of goods sold, and expenses were omitted

(a) It is true that details of revenues, cost of goods sold and expenses ought to be in the balance statement, but was not always so,. In the past only net income was recorded but. Accounting Principles has evolved over the years.

b. Equipment purchases of $170,000 were partly financed during the year through the issuance of a $110,000 notes payable. The company offset the equipment against the notes payable and reported plant assets at $60,000.

(b) Notes payable should be recorded as liability (because it is a form of cash Outflow) and equipments are assets. Offsetting is can be used when some assets are used to pay off liabilities.

c. Weller has reported its ending inventory at $2,100,000 in the financial statements. No other information related to inventories is presented in the financial statements and related notes.

(c) According to General Accepted Accounting Principles, the inventory amounts are stated and the method used in determining cost (LIFO, FIFO, average cost, etc.) should also be stated. Methods used in determining cost should be emphasized and alternatives should be made known as well.

d. The company changed its method of valuing inventories from weighted-average to FIFO. No mention of this change was made in the financial statements.

(d) In accounting principles, changes in financial statements should be made known. Contrariwise, this will lead to a false financial statement. Financial statements ought to be compared with that of previous years to substantiate its usefulness.