Does a firm need to correct an error that misclassifies equipment as inventory if total assets are correct?
> 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?
> Can financial analysts use the required disclosure of interest and taxes paid under the indirect reporting format to offset the inconsistent classification of interest expense and tax paid within the operating activities section of the cash flow statemen
> 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?
> 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?
> Jorge Corporation issued $100,000 par value, 6%, 4-year bonds (i.e., there were 100 of $1,000 par value bonds in the issue). Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1
> How does a lease offer business and financial flexibility for the lessee?
> What are typical terms and provisions in a lease contract?
> What types of payments are included in variable lease payments? How are variable lease payments treated in accounting for leases?
> In a direct financing lease, does a lessor always report selling profit or loss on the sale of the leased asset at the lease commencement date? Explain
> In a sales-type lease, does a lessor always report a selling profit or loss on the sale of the leased asset at the lease commencement date? Explain.
> How does the lessor measure the net investment in the lease for a lease classified as a sales-type lease?
> Who bears the risk of obsolescence in a lease transaction?
> What are the lessee’s accounting and reporting requirements for the subsequent measurement of the lease transaction if a lease is classified as a finance lease?
> Tank Top Menswear, Ltd. reported net plant and equipment of $1,600,000. These assets cost $2,500,000 with accumulated depreciation taken to date of $900,000. Based on recently assessed negative evidence, Tank Top’s management concluded that its plant ass
> What are the lessee’s accounting and reporting requirements for the initial measurement of the lease transaction if a lease is classified as a finance lease?
> What is the accounting treatment for initial direct costs the lessor pays?
> Fill in the missing items for each of the cases below:
> What are the lessee’s accounting and reporting requirements for the subsequent measurement of the lease transaction if a lease is classified as an operating lease?
> What are the lessee’s accounting and reporting requirements for the initial measurement of the lease transaction if a lease is classified as an operating lease?
> What is the lessee’s short-term lease policy election?
> How does a lessee measure the lease liability?
> What types of expenditures are included in initial direct costs paid by the lessee?
> What is reported by a lessee under a lease when the lessee makes the short-term lease policy election?
> What does the lessor report on the income statement under an operating lease?
