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Accounting explanation – Fourth-quarter losses of automakersThe press report carried the following news item: General
Motors, Ford, and Chrysler are expected to post losses on fourth-quarter
operations despite sales gains. Automakers’ revenues are based on factory
output rather than retail sales by dealers, and last quarter’s sales increases
were from the bulging inventories at the end of the third quarter, rather than
from models produced in the fourth quarter.Required:
Discuss likely accounting-based reasons that contribute to
these expected fourth-quarter losses of automakers.