A finished ACC-486 Topic 1 comparability adjustment schedule example, restating two retailers to one inventory method and one receivables basis, then showing which ratio rankings reverse. Searches like "acc 486 topic 1 assignment example", "acc486 topic 1 sample" and "acc-486 topic 1 example" land here.
What a finished ACC-486 Topic 1 comparability adjustment schedule looks like
Both companies' reported figures open the schedule, labeled illustrative, and two adjustments are then made in plain view. Retailer A reports on LIFO with a reserve of $9 million at year end and $7 million a year earlier, so its inventory rises from $42 million to $51 million and its cost of sales falls by the $2 million change. Retailer B sold $12 million of year-end receivables to a factor, and the schedule returns them to the balance. Ratios are then computed twice, reported and adjusted, in adjacent columns. Gross margin moves A from 28.0 to 28.8 percent, past B's 28.5. Inventory turnover drops A from 4.3 to 3.5 times, behind B's 3.9. B's collection period stretches from 27 to 46 days, roughly level with A's 45. A closing paragraph says what each reversal means.
How an ACC-486 Topic 1 example is structured
The schedule is arranged so each adjustment can be checked before any ratio uses it. It opens with a short statement of purpose naming the question the comparison serves, here which retailer runs its merchandise more profitably. The reported figures follow in two columns, drawn from each company's statements, with the note that supplied every number cited beside it. The LIFO restatement comes third, adding the ending reserve to inventory and subtracting the year's change in the reserve from cost of sales, with the tax effect on equity mentioned and kept outside the margin comparison. The factored receivables adjustment is fourth, sourced to the transfer disclosure. A ratio table then sets reported and adjusted results next to each other for both companies, using ending balances as a stated simplification. The last part explains each reversal in a sentence about the business rather than the arithmetic.
The comparison question stated first
The schedule names what it is trying to learn, which retailer earns more on its merchandise, so every adjustment can be judged by whether it serves that question.
LIFO restated from the disclosed reserve
Adding the reserve to inventory and removing its annual change from cost of sales puts Retailer A on the FIFO basis that Retailer B already reports.
Factored receivables returned to the balance
Receivables sold just before year end shorten the reported collection period, so the schedule restores them before comparing how quickly either company is paid.
Reported and adjusted columns side by side
Each ratio appears twice for each retailer, which lets a reader see exactly how much of an apparent difference came from the accounting basis alone.
Reversals explained in business terms
The example explains that A's lower reported margin came from LIFO charging recent, higher purchase costs to its sales rather than from weaker pricing.
Where marks go in ACC-486 Topic 1
Grading on this topic tends to start with whether any adjustment was made at all. A paper ranking the two retailers on reported gross margin has set one inventory method against another and credited the result to management. Restating LIFO inventory without also correcting cost of sales fixes the balance sheet and leaves the margin untouched, a half adjustment that markers look for. Adjustments with no note cited for their figures cannot be verified, and many sections treat an unsourced reserve as invented. The factored receivables are the item most often missed, since nothing on the face of B's balance sheet points to them. Ratio tables presenting both columns with no sentence on what changed and why still lose credit, because the adjusted numbers were only the means and the explanation was what the rubric set out to reward.
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ACC-486 Topic 1 questions, answered
What is a LIFO reserve?
The difference between what inventory would cost under FIFO and the amount the company carries it at under LIFO. US companies using LIFO commonly disclose it in the inventory note. Adding it to reported inventory gives a FIFO-basis balance, and the year's change in the reserve shows how much lower or higher cost of sales would have been on FIFO. When purchase prices are rising, the reserve usually grows.
Why add sold receivables back?
Because the comparison is about how each business collects from its customers, and selling receivables to a factor changes the balance without changing how fast those customers pay. Once the sold amount is restored, the two collection periods measure the same thing. The example sources the figure to the transfer disclosure and notes that the company did receive cash, so its liquidity genuinely improved even though its collection speed did not.
Does every difference in accounting policy need an adjustment?
Only the ones large enough to change a conclusion, and only where the notes supply enough to make one. Some differences, such as how a company estimates warranty costs, cannot be restated from outside with any confidence. The example adjusts two items with disclosed amounts, names one smaller difference it left alone, and explains why leaving it in place did not affect the ranking.