Question: Can financial analysts use the required disclosure

> Carrie-Ann Fashions, Inc. entered into a 5-year lease with Reese Rentals to occupy an office building. The economic life of the building is 30 years. The building had a fair value of $8,500,000 and Carrie-Ann has an option to purchase the building at the

> Seal Container Corporation (SCC) signed a lease agreement on January 1, 2018, to lease new forklift equipment. The terms of the lease follow. • The lease has a term of 10 years. There are no purchase or renewal options. • SCC makes the annual lease pay

> Vanity Jewelers Incorporated signed a lease agreement on July 1, 2020, to lease diamond-polishing equipment from Whitehead Industries. The following information is relevant to the lease agreement. • The term of the lease is 7 years with no renewal optio

> Kloth Fabric Store operates in Philadelphia, Pennsylvania, where sales taxes are 7% of sales. Kloth collected $27,860 on sales made this month, including the sales price and sales taxes. The company uses a periodic inventory system. Prepare the journal e

> On January 1, 2018, Lima Leasing Company (LLC) acquired an airplane to be leased to LA Sky Company. LLC paid $950,000 to acquire the plane, which is also its fair value. The lease terms follow. • Annual rental payments of $190,000 are due January 1 of e

> On January 1, 2018, Temple Leasing Company (TLC) acquired a fleet of stock vehicles to be leased to Delaware River Company. TLC paid $275,000 to acquire the vehicles, which is also the fair value of the fleet. The lease terms follow. • Annual rental pay

> SouthSide Services leases several computer servers from Sharpe Computing Company. The lease agreement includes consulting and training updates. The standalone prices charged by Sharpe for each separate component are $850,000 for the servers and $150,000

> Using the same information provided in E17-8, assume that Meyer-Swift invested in tax-free municipal bonds. The bonds pay interest of $1,000 each year. In addition, a new tax law enacted at the beginning of Year 2 reduced the corporate tax rate to 30%.

> On June 1 of the current year, Tedesco Publishers collected $432,000 for 4-year online subscriptions to its Houston Style Magazine. Tedesco has a December 31 year-end. Prepare the journal entries required on the date Tedesco collects the subscriptions an

> Meyer-Swift Construction Equipment Manufacturers engaged in an installment sale with one of its major customers. The firm negotiated the terms of the installment sale for a specialized piece of equipment; full payment is required within 3 years. We prese

> J.W. Jones Markets, Inc. accepts prepaid grocery orders for home and commercial delivery. This year, the company collected $160,000 in advance orders and delivered $48,000 of the advance orders. The company paid $15,000 in insurance premiums for a policy

> Fortunes Hotel Associates reported the following income information for the current year: Required: a. Prepare the journal entry to record the tax provision for the current year. b. Are there any differences between the federal income tax rate and For

> Oliver Starshine Group provided the following income information from its first 3 years of operation. Oliver offers a 1-year warranty on its commercial floor polishing system. The company estimates its warranty cost at 10% of sales. Required: a. Comp

> Blue Collar Clothing, Inc. acquired a new fabric-cutting machine at the beginning of the current year. The machine cost $600,000 with no residual value expected. Blue Collar uses the straight-line method for financial reporting assuming a 6-year useful l

> Synthia Manufacturing Corporation reported pre-tax book income of $3,250,000 for the current year. • The change in the difference in the basis of plant assets is $430,000. The book basis is higher than the tax basis. • Of the Synthia’s pre-tax book inc

> Roth Tile and Carpets, Incorporated operates in Blue Bay, Wisconsin, where sales taxes are 6% of sales. Roth’s sales this month amounted to $2,560,500. The company uses a periodic inventory system. Prepare the journal entry to record sales for the curren

> Based on the information provided in E17-19, assume that Lewis Eagle Corporation reported the following income levels for both book and tax purposes for the following year. Assume that Lewis Eagle passed the more-likely-than-not test. Based on an analys

> Andre Company reported a $192,640 balance in its deferred tax liability account at the beginning of Year 5. The deferred tax liability was the result of using the straight-line method on its books and an accelerated depreciation method for tax purposes.

> Lewis Eagle Corporation concluded that it was able to exclude $2,500,000 in income from its current tax return. Income before the exclusion is $6,000,000. There are no book-tax differences. This income is subject to a 30% tax rate. Based on its technical

> In 2018, Meg Inc. discovered an error in its 2015 financial statements. The firm recorded $11,000,000 of depreciation expense on its equipment instead of recording $10,000,000. Meg has a constant tax rate of 40% and reports 3 years of comparative income

> On January 1, Jefferson Company acquired 25% of the outstanding voting shares of Tremont Corporation at a cost of $1,340,000 by acquiring 20,000 of the total 80,000 outstanding shares at a cost of $67 per share. During the year, Tremont reported $875,000

> IFRS. Prepare the journal entry needed to record the partial sale of the investment acquired in BE16-9. Assume that Turner sold 12,800 of the Fenwick shares for $47 per share in 2017 and the fair value of the remaining shares is $41 per share on December

> Using the information provided in E17-17, assume that in Year 8, DiVito determined that it is more likely than not that it will earn only $50,000 in the future to be used to offset the net operating loss carryforward. Required: a. Prepare the journal

> Sills Products acquired $2,960,000 face value, 5% bonds as a heldto-maturity investment on January 1 of the current year when the market rate of interest was 10%. Interest is paid annually each December 31. Sills purchased the bonds, which mature in 6 ye

> Ginger Spice Distributors acquired 14,500 shares of its own common shares at a cost of $64 per share. After 6 months, Ginger sold half of the shares in the open market at $70 per share. Prepare the journal entries to record the acquisition and sale of th

> Assume that Cornish Corporation has 2,500,000 shares of $3 par value common stock issued and outstanding. The company is authorized to issue 10 million shares. Due to increased share prices, the corporation decided to implement a 2-for-1 stock split. Pre

> Wonder Spring Water Company recently employed a consultant to revise its production and distribution procedures. In order to compensate the consultant, Wonder issued 1,000 shares of its $1 par value common stock. Those shares are not publicly traded, but

> Carlos Company decided to raise additional capital in the equity market. It engaged an underwriter to float a new common share issue. The issue consisted of 5,000 shares of $3 par value common stock. Carlos paid the underwriter 2% of the total issue pric

> At the beginning of the current year, Niles Corporation issued 1,600 shares of its own $2 par value common stock for $19 per share. Prepare the journal entry required to record the issuance of the shares.

> Perdido Products, Inc. issued 2,500 shares of its common stock. The common stock has a stated value of $10 per share and was issued at $24 per share. Prepare the journal entry required to record the issuance of the shares.

> On September 1, Year 1, Royal Corp., a newly formed company, had the following stock issued and outstanding: • Common stock, no par, $1 stated value, 5,000 shares originally issued for $15 per share. • Preferred stoc

> IFRS. Almonzo’s Flower Box, Inc., an IFRS reporter, operates a floral delivery service. The company has three delivery trucks. It recently signed a contract to make deliveries for two local florists. The delivery route for one of the florists has been un

> U.S. GAAP, IFRS. Match the U.S. GAAP term with the IFRS term. There may be more than one match, and responses may be repeated.

> DiVito Imported Provisions, Inc. reported pre-tax accounting income equal to its taxable income as follows: All tax changes are enacted into law as of the beginning of the year. No tax rate changes are known until the year of change. DiVito elects the c

> Using the information provided in BE15-13 and the following stockholders’ equity section of Oz Lollypop Company, adjust the balance sheet for the correction of the error. Data from BE15-13: In its audit of Oz Lollypop Company, Able and

> Is an annual impairment test required for all long-term operating assets? Explain

> Does recognizing an impairment loss on a long-term operating asset have the same effect on the financial statements as recording depreciation expense and amortization expense? Explain

> Can firms group all property, plant, and equipment for purposes of performing an impairment test? Explain

> Is the impairment test for tangible, long-term operating assets identical to the impairment test for intangible assets? Explain.

> How does a firm classify the acquisition of a plant asset by issuing common stock?

> In its audit of Oz Lollypop Company, Able and Ready, CPAs, discovered in 2018 that the firm had not recorded a $975,000 expense in 2014 (for both book and tax purposes). Oz never paid this amount due on the invoice it received. Assuming a constant tax ra

> Does the direct reporting format provide complete flexibility in terms of the line items to report in operating activities?

> How do firms classify interest paid and interest received on the statement of cash flows under IFRS?

> How do firms reclassify gains and losses on the disposal of property, plant, and equipment? Why is this reclassification appropriate?

> Hamilton Container Company reported the following income (loss) information for the first 4 years of its operations: There are no uncertainties about the realization of the net operating loss benefits. All tax rate changes were enacted as of the beginni

> What are the two different reporting formats for preparing the operating activities section of the statement of cash flows?

> Does a firm classify the acquisition of a plant asset by common stock issuance as both an investing and a financing activity on the cash flow statement in the year of acquisition?

> To what does the total cash flow computed on the statement of cash flows reconcile?

> What is the primary purpose of the cash flow statement?

> Are cash flow disclosure requirements the same for both the direct and indirect reporting formats?

> Do firms subtract pension expense from net income to determine operating cash flows?

> Sterzel Company declared its quarterly cash dividend on March 31 of the current year. The dividend of $.75 per share was to be paid on May 1 to the shareholders of record as of April 18. The company reported 120,000 shares issued with 15,500 shares held

> Under the indirect method, do firms subtract bond discount amortization from net income to determine operating cash flows?

> What approach is used in preparing the operating activities, investing activities, and financing activities sections of the statement of cash flows?

> Use the same information provided in E17-14. Now assume that in Year 4, taxable income is $280,000. This amount is higher than anticipated by management, and they now believe that they will be able to utilize the entire NOL carryforward. Required: a.

> Under the indirect method, do companies using IFRS begin the operating section with net income?

> Does the accounting equation explain the change in cash during the period?

> What is the cash flow statement?

> Do accounting errors that self-correct within two accounting periods require correcting entries?

> When does a change in reporting entity occur?

> What type of change would a change from LIFO to FIFO be considered?

> How do firms account for a change in depreciation method?

> What are the direct and indirect effects of changes in accounting principle on the financial statements?

> Using the information provided in BE15-10, assume that Chief Company retired all of the shares on July 5 (rather than holding shares in the treasury and reissuing them). Prepare the journal entries to record the acquisition and retirement of the treasury

> How do firms account for changes in accounting estimates and changes in accounting principles?

> Aurora Incorporated provided the following information Aurora reported no book-tax differences and elected the carryback/carryforward option for its Year 3 loss. Future tax rates are not expected to change. Required: a. Prepare any necessary journal

> Explain the two approaches that firms use to report accounting changes.

> How do firms report accounting changes under the retrospective method?

> Does a firm need to correct an error that misclassifies equipment as inventory if total assets are correct?

> Are accounting changes permitted in financial statements?

> When is a potentially dilutive security antidilutive?

> When can firms use the treasury stock method?

> Does the after-tax interest add-back for convertible debt require the amount of the coupon interest paid for the period of the earnings per share computation?

> Does a company with dilutive convertible debt and dilutive convertible preferred shares have to add the after-tax interest and after-tax preferred dividends back to net income in the numerator computation of diluted EPS?

> Can diluted earnings per share on bottom-line net income or net loss exceed basic earnings per share?

> On March 15, Chief Company acquired 20,000 shares of its own $2 par value common shares at a cost of $17 per share. Chief had originally issued the shares at $12 per share. On July 5, Chief sold 7,000 of the shares in the open market at $20 per share. On

> Loggins Lumber Company experienced net losses during the first 2 years of its operations. Year 3 was the company’s first profitable year. Loggins uses the same accounting methods for financial reporting and its tax returns. The company

> If all potentially dilutive securities are dilutive (as opposed to antidilutive), will diluted earnings per share be the same whether there are actual or hypothetical conversions of potentially dilutive securities?

> Does the if-converted assumption apply only to diluted earnings per share?

> Do firms adjust the numerator of the EPS ratio for preferred dividends if the dividends are declared?

> Do earnings per share disclosures include a reconciliation of the numbers used in the computation of EPS to the information provided in the financial statements?

> Is an entity required to present earnings per share on income from continuing operations and earning per share on discontinued operations on the face of its financial statements?

> How do financial statement analysts use earnings per share information?

> Do corporations report the projected benefit obligation and the plan assets as individual accounts on the sponsor corporation’s balance sheet?

> Does a company report the funded status of the defined-benefit plan as calculated by an actuary on the financial statement?

> The corridor method requires computing the amortization of net actuarial gains and losses under the straightline method. Will the amortization be the same each year?

> Does the going-concern concept justify the use of the projected benefit obligation in all pension calculations?

> Phlash Photo Labs, Ltd. provided you the following information for the 3 years ended December 31. Required: a. Assuming no book-tax differences and no uncertainty regarding the realization of the tax benefits of the net operating loss carryforward, prep

> ABC Toy Company earned $357 million of net income in 2019 and paid $45 million in dividends. It issued no new stock. Complete the stockholders’ equity section for ABC Toy Company:

> Does the employee always absorb the total risk of loss on pension plan assets?

> When accounting for employee stock options, will a reduction of compensation expense or compensation “income” occur in future periods?

> Do companies with equity-based compensation plans make adjustments for changes in the market price of the stock?

> How do companies account for stock-based compensation?

> Does aggregating the five components of pension cost always results in a reduction in income?

> What is the allocation period used to expense stock-based compensation?

> How does a lessee separate lease and nonlease components?

> What components are included in a lease contract?

> How is the right-of-use asset measured?

> Evergreen Waste Company provides weekly trash collection services to small companies. Evergreen collected a $1,000 deposit from each of 12 new customers for large trash dumpsters. The cost of each dumpster is $700. The company uses a perpetual inventory

> Over what time period does the lessee amortize the leased asset transferred by the lessor?