Horizons Inc. has agreed to sell an investment in a subsidiary that has been accounted for on the equity method of accounting to a minority stockholder in exchange for the stockholder’s share in Horizons. Since the fair value of the investment exceeds its book value, Horizons CEO is considering recognizing a gain on the exchange. However, the new CFO at Horizons is recommending to the board of directors that the excess from the exchange be accounted as a credit to equity. Horizons turns to you for advice! The problem under review in this case is whether a gain on a nonmonetary exchange can be recorded.
> How are keywords used to evaluate and collect evidence?
> Explain two ways to collect evidence.
> Define an attest engagement. Is an audit engagement an attest service?
> Identify five tax planning concepts.
> Springer & Jones, CPAs, LLP, is currently auditing Worldwide Electronics Inc. that manufactures electronic equipment utilized around the world. The audit client purchases in bulk large quantities of various inventories of stock material to produce variou
> Young & Co., CPAs is auditing Express Inc. for the current year. Express Inc. has thousands of purchase orders each month. The CFO in discussion with the auditors raised the concern whether certain employees are utilizing company purchase orders to obtai
> Tony Computer Services Corporation trades 50% of its common stock for the rights to certain computer programs of the Janet Corporation. Janet previously expensed such costs of developing these computer programs. Tony concurrently sold the other 50% int
> Where are financial ratios found in the LexisNexis databases: Lexis Advance® or Nexis Uni™?
> Besides going to review sites such as Yelp, how should one research whether a local construction company is reliable to remodel one’s house?
> Conduct an Internet search about the Audit Analytics database. Give an example of how one can use the potential analysis through this database.
> How should one research government accounting?
> JB Company recently acquired 100% of Sampson Company for $150,000 cash. Both companies are located outside of the United States and JB needs to prepare consolidated financial statements. JB provided the following information regarding the Sampsonâ&
> Northwood Industries, a U.S.-based public company, has two subsidiaries located in Europe. These two subsidiaries are required to prepare their individual financial statements in accordance with IFRS. Northwood, contemplating that the SEC will soon requi
> Zimmer Chemical Co. has chemical manufacturing facilities around the world. Recently, Zimmer erected a new facility in South Korea at a cost of $48 million and plans to operate the new facility for a period of fifteen years. The South Korean government r
> Taxpayer is a securities firm. Taxpayer uses the accrual method of accounting. Taxpayer executes stock trades and performs settlement functions. Settlement functions include recording the sale and confirming it with the customer. Trades made on Decembe
> Xco an accrual basis taxpayer has various lines of businesses. One business is a gas station. The land underneath the gas station was not contaminated when Xco purchased it. However, the land now has potential soil and groundwater problems (environmenta
> Hidetoshi was a world-renowned rock star from NewCountry. Sony-USA Records contracted with Hidetoshi to produce records. Sony-USA Records retained all intellectual property rights in the recordings. The contract granted Hidetoshi payments or “royalties”
> Mary Howard, CPA, has long audited the Wheat City Grain Company’s financial statements. Much of Wheat City’s assets consist of wheat stored in three of its grain elevators, and the Company maintains perpetual inventory records of the quantity of wheat s
> Sylvia is a professor in business at the University of Hawaii. She went on sabbatical for an academic year to take courses in Chinese at National Taiwan University in Taipei, Taiwan, to expand her knowledge of international business and ability to conduc
> For the past two years, Minsu, a Korean American, worked as a high school physical education teacher. He was also a body-builder and a part-time graduate student in educational technology at State University. As part of preparing a master’s thesis, Mins
> Stacey became an employee of DotGismo, Inc., a privately held firm. On December 15, 20X3, Stacey was allowed to buy 20,000 shares of DotGismo stock for $40,000 dollars. At that time when Stacey bought the stock, each share was worth $2. DotGismo retains
> Can firms capitalize research and development costs under IFRS? If so, in what circumstances? Provide specific citation to support your answer.
> Use the glossary to locate the definition of a contingent liability. a. What is the definition? b. What standard is the definition found in?
> Use e-IFRS to determine how the accountant would conduct an impairment test for long-lived assets. a. Which authority describes the impairment test? b. What process did you use to find the authority? c. Briefly explain the impairment test.
> Use e-IFR Sto identify the accounting authority (citation) governing each of the following: a. Customer loyalty programs b. Operating lease incentives c. Operating segments d. Treasury share transactions e. Agriculture
> Open up an IAS or IFRS. a. What are the major organizational parts of the authority (placed in bold)? b. Compare your answer in (a) to the major organizational parts of an IFRIC or SIC. c. Are (a) and (b), for the most part, the same? If yes, how so? I
> How many IFRICs have been issued?
> Open IFRS1: First Time Adoption of International Financial Reporting Standards. a. Which authority does this replace? b. Briefly summarize the introduction to paragraph 4.
> The Treasury Department of Drof Motors invests “excess” funds daily (e.g., in foreign currencies). It, thus, earns profits and losses, which are included in the company’s consolidated financial statements. Should Drof consider its Treasury operations a
> Access the IESBA website (www.ethicsboard.org). Click on Projects and list three active projects and three 2009 completed projects.
> a. In 2017, Congress debated repealing Dodd-Frank. What were four major provisions in Dodd-Frank that impacted corporate governance? b. Has Congress repealed Dodd-Frank? How else could a roll-back on the law occur?
> a. Identify the three largest companies in the worldwide automobile industry. What is the source for your listing and what is size based on (market cap or number of automobiles sold or some other dimension? b. Examine the SEC filings for Tesla in 2016.
> a. Identify the five largest “Fortune 500” companies for 2017. b. Identify the primary basic industry for the fifth largest company. c. What does the company identify as its core business segments? d. Where is this company headquartered? e. Provide t
> In 2015, the proxy vote for Apple’s annual meeting had six proposals: 1. The election of the directors, 2. The ratification of the auditor, 3. An advisory vote on executive compensation (“say on pay”), 4. An amendment to the employee stock purchase
> The Heather Company’s fiscal year ends on June 30. Its employees (with at least three months of experience) are entitled to 12 paid sick days annually for each calendar year beginning on January 1. An employee not taking his/her earned sick days would
> What is included in CCH® Accounting Research Manager?
> Access the Association of Certified Fraud Examiners website (www.acfe.com), and: a. List three qualifications for becoming a CFE. b. List three items located in the ACFE’s resource library.
> Identify the topic of the following Treasury Regulations, Revenue Rulings, or Revenue Procedures: a. Treas. Reg. 1.385-4T e. Rev. Proc. 2017-29, 2017-14 I.R.B. 1065 c. Rev. Rul. 68-609, 1968-2 C.B. 327
> List the following topics for IRS Publications or Form: a. IRS Publication 17 b. IRS Publication 334 c. Form 941
> List the major Code section for the following topics: a. Charitable deductions b. Accrual accounting for deductions c. Foreign income exclusion
> Identify the general contents of each of the following subchapters and parts of the Code: a. Subtitle A, Chapter 1, Subchapter O b. Subtitle C – employment taxes c. Subtitle F, Chapter 67, Subchapter B
> Identify the general content of each of the following Internal Revenue Code sections: a. §274(d)(1) b. §751(b)(3)(A) c. §1221(a)(7)
> You are auditing the financial statements of Air Service Inc., an airplane wholesaler that purchases various types of corporate jets for sale to different companies or individuals. Prior to the sale of an airplane, Air Service utilizes the jet for chart
> In auditing Crispy Inc., the auditor has determined that certain information that is not required by an applicable financial reporting framework, has been included in the company’s basic financial statements which is clearly differentiated and identified
> Alex Curtis, during the audit of Landon Company, has determined that the company will be preparing its financial statements on a liquidation basis of accounting due to the fact that management has decided to liquidate Landon Company at the end of the fir
> After the Julie Company issued its previous years’ financial statements, it noticed that it incorrectly calculated depreciation expense and, thus, disclosed this fact as a prior period adjustment in its current years’ financial statements. (This differe
> Johnson & Young, LLP have been requested to be the auditors of Payroll Inc., an outside service company that processes payroll for over 200 clients. In considering the request, Johnson & Young are concerned that they might be required to be independent o
> Gates Inc. has its reviewed interim financial information included with the audited financial statement. However, after the review the auditor believes that the interim financial information is not prepared in accordance with an applicable financial repo
> In year 1, Joe Josephs, CPA, reviewed Lander Company’s financial statements. However, in year 2, the Lander Company hired Tom Holstrum, CPA, to audit its financial statements. Should Tom meet with Joe, and would Joe be considered as a predecessor audito
> Albright Inc. has recently issued a 10% stock dividend to its existing stockholders. As a result of the issuance of the stock dividend the market price of the stock declined 25%. Albright has requested your assistance as to treating this stock dividend a
> Alex Corporation is planning this year to present comparative income statements but only the current year’s balance sheet. James Johnston, president of Alex Corporation requests your advice as to whether comparative cash flow statements for both the curr
> The Bootsie Holding Company has sales exceeding $10 billion and each of its three, wholly-owned subsidiaries has sales exceeding $2 billion. Three years ago, the subsidiaries had “complex” capital structures—until Bootsie acquired them. Bootsie’s annua
> In order to help induce Jill Gregory to remain as president of the Reed Company, in 2000 it promises to pay her (or her estate) $200,000 per year for the next 15 years—even if she leaves the company or dies. Reed wants to properly record this transactio
> James Olds buys a four-year, $1,000,000 certificate of deposit from the Second National Bank. James will receive 5% interest in year 1; 5.5% in year 2; 6% in year three; and 6.5% interest in year 4. If James “redeems” this certificate before the maturi
> As of January 1, the Lohse Company owes the First Arbor Bank $350,000 which is due on December 31. Since Lohse seems unable to repay the note, the bank agreed that Lohse can “settle” this balance by agreeing to make four, annual installments on each of t
> Leila Company began an operating lease arrangement with Debco Industries, which was slated to begin on January 1, at monthly lease payments of $10,000. However, Debco’s negligence prevented Leila from moving in on time—since it failed to clean up the pl
> Narda Corporation agreed to sell all of its capital stock to Effie Corporation for three monthly payments of $200,000. After Effie made the first required payment, it ceased making other payments. The stock subscription agreement states that Effie, thu
> Mead Motors purchases an automobile for its new car inventory from Generous Motors, which finances this transaction through its financial subsidiary, Generous Motors Credit Company (GMCC). Mead pays no funds to Generous Motors or GMCC until it sells the
> On January 1, the Old Town Heart Association received a $1,000,000 endowment from the Chamber family. Under terms of the gift, the Association must permanently restrict the endowment—but may spend up to half of the interest earned on the gift or half of
> Find an example of data analytics in tax, one that is not discussed in the text.
> Use a tax service to find the definition of a material adviser in the Code. What type of list must the material adviser maintain? Give the authorities for your answers, using proper citation format.
> Assume that the taxpayer has a tax issue in which the only authorities on point are as follows: (a) a private letter ruling that favors the taxpayer’s position and (b) a Tax Court regular decision that opposes taxpayer’s position. What does the researc
> Find the Treasury Regulation that determines whether educational expenses can qualify as deductible business expenses. Give the citation for the general rule within that regulation.
> Compare the international treatment of segment reporting to the U.S. GAAP treatment.
> Does a tax treaty exist between the United States and Japan? If so, when was the most recent version signed?
> Locate the Valuation Services Standards, and explain the 2 types of valuation engagements to estimate a value.
> Herb Construction Company is building a hotel for speculative purposes. That is, the Company has not yet found a buyer for the hotel, but expects to do so within a few months. Herb, who expects to spend about another two years to complete construction
> What is the penalty provided under Code Section 6662 (b)(2)? Where in that Code section is that penalty defined? Explain the definition in your own words.
> Access the AICPA Professional Standards via Checkpoint, and click on By-laws. Under Section730, determine when can a member receive disciplinary action without a hearing?
> Locate the AICPA Professional Standards via Checkpoint, and click on Personal Financial Planning Services’ link. Locate Section 100 and provide four examples of PFP services
> Access the PCAOB website (www.pcaobus.org), and list two new or proposed auditing standards issued by the PCAOB
> Access the AICPA.org website and locate the ASB under auditing and attestation standards. Examine the approved highlights of the ASB. What were the last three auditing standards issued by the ASB?
> Under Treas. Reg. §1.6011-4, how is a reportable transaction described?
> Locate the Preparation, Compilation & Review Standards, and locate SSARS No. 21 to explain briefly the scope of this standard. Locate the Preparation, Compilation & Review Standards, and locate SSARS No. 21 to explain briefly the scope of this standard.
> After getting selected in Disney’s training program, Minsu became a rock star. His family paid $22,000 to get Minsu trained. How much of these expenses paid by his family are deductible? Reference the specific authority in the Code and regulations.
> Locate the Audit & Attest link and click on Clarified Statements on Auditing Standards, and determine the AU section number that discusses the forms of confirmations
> Access the International Federation of Accountants website (www.ifac.org/IAASB/), and briefly describe the following two International Auditing Standards: ISA 500 and ISA 505.
> On January 1, year 1, Melvin Corporation promises to “unconditionally” transfer a building that cost $100,000 (appraised recently at $300,000) to the Vivian Company on January 1, year 2 for a boat she bought for $250,000. As of December 31, year 2, Melv
> Joe Brock owns 10,000 of the 60,000 outstanding shares of Big Corporation; Leslie Ross own 20,000 shares; Mark Jones and his twin brother Sam each own 5,000 shares; and about 300 other shareholders own the remaining 20,000 shares—with no one other shareh
> Which of the following tax sources are considered primary authorities? a. Tax services b. Tax Court memorandum decisions c. Revenue Procedures d. IRS publications e. Temporary Treasury Regulations
> When is it appropriate to issue an adverse audit opinion? Cite the specific Professional Standard section used for your answer
> If you have access to the AICPA Professional Library database, attempt to complete the following practice exercises. (Note: You can also complete these exercises with a hard copy of the AICPA Professional Standards.) You have been requested by a potentia
> On January 1, year 1, the Allen Company issues 100,000 shares of its stock (which is valued at $10 per share) to acquire the Natie Company. The purchase agreement also states that Allen will pay $200,000 in year two if Natie has net income of at least $
> The Builtwell Construction Company is building a hospital for a third party. As such it borrows substantial funds from a foreign bank and repays the required interest costs as scheduled. Builtwell also incurs some foreign currency truncation gains and l
> Provide two examples of a business/due diligence investigation.
> Identify the basic steps of a fraud examination
> What are some risk factors associated with management fraud and employee fraud?
> Differentiate between management fraud and employee fraud.
> What is a risk factor or red flag?
> Bo Broker Company charges a fee for bringing together the Acme Construction Company and the First Bank Company. The parties agree that Bo earns her fee when Acme and First “agree” to the terms of the construction mortgage. However, Bo can receive four
> What are the three components of the fraud triangle? Of what concern are they to the fraud examiner?
> Define forensic accounting.
> Describe three computerized tools used by the fraud examiner/investigator.
> Describe four examples of fraud engagements.
> What are some of the complexities in international practice?
> How will you remain current on authoritative accounting standards?
> What is the purpose of a research memorandum?
> How might one determine accounting alternatives?
> What is the three-part approach used to identify the problem or precise issue?
> What skills are needed for professional practice and the CPA exam?
