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Lowe's Companies Inc. and its subsidiaries are the world's second largest home improvement retailer. Lowe's had 1,857 stores in the United States, México, and Canada as of January 29, 2016. The fiscal year of the corporation concludes on the last Friday of January. It is in charge of preparing consolidated financial statements for the parent firm and all completely owned subsidiaries. Consolidated earnings statements, consolidated statements of comprehensive income, consolidated statements of shareholder equity, consolidated balance sheet, and consolidated statements of cash flows are among the financial statements. All intercompany transactions have been completely eliminated. Lowe’s uses First-In-First-Out method in valuing its inventory and recognizes it at the lower of cost or market value. The net vendors' cost and distribution center costs are included in the cost of inventory. The company maintains two inventory reserves one for the purpose of any projected loss related to the selling of merchandise below cost and for the estimated shrinkage between physical inventories. Lowe’s develops accrual rates for vendor funds based on the provisions of the agreements in place.
Lowe’s Companies Inc. uses multiple step income statement because it separates operating revenues and expenses from nonoperating revenues and expenses. Besides, the gross income has been shown as the difference between the net sales and the cost of goods sold.
Cost of Goods Sold
Gross Profit Percentage
Gross profit percentage is computed by dividing the gross profit by sales. There was insignificant increase in the gross profit margin.
Response to Week 5 Questions
Most of the company’s accounts receivables arise from selling commodities and services to commercial business customers on credit. Lowe’s has an agreement with the Synchrony Bank to buy at face value the commercial business accounts receivables. The agreement will expire in 2023 unless the contract is terminated sooner by either of the parties. The sales made from Lowe’s exclusive credit cards are not reflected in the accounts receivables.
The company provides for bad debts. The provision is charged on the accounts receivables. An increase in allowance for bad debts means does not affect the sales but the operating profit in which it decreases the operating profit since the difference is charged to the income statement as an expense. A decrease in allowance for bad debts is credited in the income statement thus increasing the operating profit.
Lowe’s records its property at cost, and any major additional costs are capitalized and depreciated. The capital assets are anticipated to accrue benefits in future and have original, useful life that exceeds one year. The total cost of capital asset comprises of all appropriate sales taxes delivery costs, installation costs as well as other costs incurred by the company concerning the asset. Upon disposal of a capital asset, its costs and accumulated depreciation is written off from the company's account and the loss on disposal is reflected in the consolidated income statement as an expense and a gain on disposal is recorded in the consolidated income statement as income. Lowe’s uses straight line method to depreciate its assets while Leasehold improvements and assets under capital lease are depreciated over the shorter of its estimated useful life and or the term of the related lease. Buildings and building improvements have aa estimated useful life of 5-50 years.
Response to week 7 Questions
An independent contractor receives a form 1099 while an employee receives w2. Unlike the case of w2 where the employer pays half of his income taxes, the independent contractor pays the entire tax by himself from his earnings. Besides, the employers pay such things as federal and state unemployment insurance premiums and workers' compensation premiums. But independent contractors do not have such items. Those are the reasons that an independent contractor is paid higher hourly rates than the employee.
Some challenges associated with submitting the w2 forms include:
When the employee loses the w2 form.
It can be sent back to the employer if it has incorrect address.
I would be comfortable with the responsibility because the knowledge of liability will encourage me in ensuring that the taxes are paid on time. The responsibility implies that I am a member of the executives and will always ensure that federal taxes are paid on time.
Any business that has employees is required to withhold payroll taxes from employees' paychecks and to pay applicable federal, state and local taxes. Such taxes include FICA as well as federal, state and local income taxes, if applicable. Therefore, it is a concern for small business if they fail to withhold the taxes since it is a requirement by the IRS.
W-4 form allows the employer to determine the amount of money that will be withheld from your paycheck in taxes and it is based on the number of exemptions one claims in his or her tax return.
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