Pepsi Co. vs. Coca Cola

Topics: Generally Accepted Accounting Principles, Balance sheet, Revenue Pages: 40 (7075 words) Published: September 10, 2011
C Analyzing and interpreting information
I Classifying economic events
C Explaining uses, meaning, and limitations of data
R Keeping a systematic chronological diary of events
R Measuring events in dollars and cents
R Preparing accounting reports
R Reporting information in a standard format
I Selecting economic activities relevant to the company
R Summarizing economic events
External user Customer External user Securities and
Exchange Commission
External user Internal Revenue service Internal user Store manager External user Labor unions External user Suppliers
Internal user Marketing manager Internal user Vice-president of Finance
Internal user Production supervisor
Internal User Can we afford to give our employees a pay raise? External User Did the company earn a satisfactory income?
Internal User Do we need to borrow in the near future?
External User How does the company's profitability compare to other companies? Internal User What does it cost us to manufacture each unit produced? Internal User Which product should we emphasize?

External User Will the company be able to pay its short-term debts? E1-3
Ron Rivera is in an ethical dilemma which revolves around executing his Superior's instructions or following the GAAP, the generally accepted accounting principles. The stakeholders include Larry Smith, Ron Rivera, and new investors. All economic events, such as the reporting the company's land, must be in tune to the standards set by GAAP. The cost principle is one such standard that states that companies record assets at their cost. However Mr. Smith is requesting Mr. Rivera go against the cost principle by reporting the company's land at market value of $170,000. vs the cost vale of $100,000. As the President states to Ron, this will attract investors by making the company look more successful. The ethical dilemma is this: should Mr. Rivera violate FASB's (Financial Accounting Standards Board) rules or should he conform to Mr. Smith's instructions? Mr. Smith should not de-standardize or corrupt general accounting principles a head accountant, or any accountant for the matter, must follow. Similar to the FASB, Mr. Smith can relay the reliability of cost figures versus the relevance of market value in an insubjective and concise manner without jeopardizing a head accountants skill set of utilizing the most fair accounting practices a head accountant must uphold at all times. Another alternative is to inform Mr. Smith that that is not possible but to ensure him that he will record the market value of allowed investment securities if it improves investment opportunities.

1. According to the cost principle, also known as the historical cost principle, assets must be recorded at costs, at the price one originally paid for the asset. Therefore this report is incorrect as it violates FASB procedures. In order for the report to be correct, Grossman Company must record their assets at their cost.

2. Including records hat only includes data that can be expressed in terms of money follows the monetary unit assumption. This allows quantifiable events to be recorded VS also including items that are more qualitative in respect to the company. The above assumption is required in accounting and it is therefore a correct practice.

3. Personal living costs must be recorded separately and therefore this practice is incorrect. The above practice is labeled the economic entity assumption in an organization. In this example, Caleb Borke, must keep his personal expenses as a distinct entity. E1-5

Accounts payable Liability
Cash Asset
Cleaning equipment Asset
Cleaning supplies Asset
Accounts receivable Asset
Notes payable Liability
Salaries payable Liability
Karin Meredith, Capital Equity
1. Made cash investment to start business- Increase in assets and increase in owner’s equity
2. Paid monthly rent- Decrease in Assets and decrease in owner’s equity 3. Purchased equipment on...
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