Problem Six: Adjusting Financial Statements

question 41

Essay

Problem Six: Adjusting Financial Statements
You are examining the financial statements of ABC Corporation for Year 2. ABC Corporation manufactures widgets and has a unionized workforce. You are trying to assess the earnings persistence of the company. To aid you in this endeavor you are adjusting earnings for non-recurring, non-sustainable items.
Below is a list of items you believe might affect earnings persistence. Indicate why the item may affect earnings persistence and how each item might affect net income.
Company has:
1. LIFO Liquidation of $3M
2. Decreased the discount rate used to determine post-retirement health benefits
3. Accumulated Depreciation as a percentage of gross depreciable assets is ninety percent
4. Labor unions went on strike for one month during the year

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Definitions:

Colonial Era

A period in history marked by the establishment, exploitation, and expansion of colonies by European powers in other parts of the world, from the late 15th century to the mid-20th century.

Globalization Forces

The various drivers of globalization, including economic, cultural, and technological forces, that lead to increased interconnectedness and interdependence among the world's populations.

Italian

Relating to Italy, its people, culture, or language.

Religious Beliefs

The faith-based principles and convictions held by individuals or groups regarding the existence, nature, and worship of a deity or deities, and the spiritual life.