Identify whether the following items are characteristics of information that are relevant (REL) or a faithful representation (FR): Information that is neutral. Information that has decision-making implications because of its predictive value. Information that is complete. Information that is free from error. Information that has decision-making implications because of its confirmatory value.
> On May 15, Year 1, Moran Inc. approved a plan to dispose of a component of its business. It is expected that the sale will occur on February 1, Year 2, at a selling price of $500,000, which was the current fair value of the component. During Year 1, disp
> Allison Corporation’s current year income from continuing operations before taxes was $1,000,000 before taking the following items into consideration: • Depreciation was understated by $100,000. • A strike by the employees of a supplier resulted in a los
> Mission Flowers Company had the following transactions for the year ended December 31: • Sales revenues of $775,000. • Operating expenses of $550,000. • Losses due to employee strike of $200,000. This was the first employee strike in the history of the c
> Jojo, Inc. held a discontinued operation as of December 31, 2018. The operating loss from the discontinued operation was $500,000 for the period. As of December 31, 2018, the net assets of the discontinued operations had decreased in fair value by $272,0
> Using the information provided in E5-3, prepare a single-step and a multiple-step statement of net income for Bradley Corporation. Data from E5-3:
> Bradley Corporation provided the following account balances as of the end of the current year. The company is subject to a 40% income tax rate. Required: a. Prepare a condensed, multiple-step statement of net income for the current year ended December 3
> Using the trial balance provided in E5-1, prepare a condensed, multiple-step income statement with all supporting schedules. Data From E5-1:
> The Tamer Tire Company provided the following partial trial balance for the current year ended December 31. The company is subject to a 40% income tax rate. Required: a. Prepare a single-step income statement. b. Prepare a multiple-step income statement
> Two independent situations follow. Solve for the appropriate variable. a. Nardo Co. wants to purchase a piece of heavy equipment in seven years for $751,815. The corporation currently has $500,000 to invest for this purpose. Determine the rate of return
> Calculate the future value of each of the following cash flows using a 5% interest rate: a. Proven Co. agreed to finance a project by making eight annual deposits of $20,000 at the end of each year. The deposits will commence three years from today. Inte
> Calculate the present value of each of the following cash flows at 8% using interest tables, a financial calculator, or a spreadsheet: a. $15,000 is to be received at the end of each of the next six semiannual interest periods plus $20,000 to be received
> Using the appropriate PV table, compute the present value of the following amounts: a. $25,000 payable at the end of each year for 10 years with 6% interest compounded annually. b. $15,000 receivable at the beginning of each semiannual period for five ye
> Using the appropriate future value table, compute the future value of the following amounts received: a. $10,000 received at the end of each year for five years compounded annually at 10%. b. $3,000 received at the beginning of each year for eight years
> Using the present value and future value tables, a financial calculator, or a spreadsheet, answer the following questions. a. $8,000 is to be deposited at the end of each year for the next five years. What is the FV of this investment if 8% interest is c
> The Banks Corporation sold its credit subsidiary on December 31 of the current year at a gain of $237. See the following for the corporation’s income statement before removing the discontinued subsidiary and before the inclusion of the
> Using the present value and future value tables, a financial calculator, or a spreadsheet, answer the following questions. a. $200,000 is to be received five years from today. What is the PV of this cash flow if 6% interest is compounded annually? b. $20
> Determine the bond issue proceeds for each of the following bonds payable. All bonds are issued on January 1, 2019. a. Belmark Corporation issued bonds in the amount of $1,250,000 that will be paid in 10 years. Interest of $18,750 is payable semiannually
> Determine the bond issue proceeds for each of the following bonds payable. All bonds are issued on January 1, 2019. a. Solmark Corporation issued bonds in the amount of $150,000 that will be paid in five years. Interest of $15,000 is payable annually eac
> Build-It-Big Company estimates two scenarios of possible future notes receivable uncollectible and the probability of each not being collected in the next year. The risk-free rate is 5%. For each of the scenarios, compute the expected cash flow value bas
> A recent college graduate decides to invest the $8,000 he received for his college graduation in a fund earning 12% annual interest for four years. At the end of the four-year period, he expects to withdraw the money to purchase a reasonably priced used
> Jannie Company estimates two scenarios of possible future accounts receivable uncollectible and the probability of each not being collected in the next year. The risk-free rate is 4%. For each of the scenarios, compute the expected cash flow value based
> Assume the same facts as E7-17, except that JayZ is required to make the annual payments at the end of the year. Would his decision be the same? Data From E7-17: JayZ reports outstanding debt on his balance sheet of $250,603. He has two options to settl
> JayZ reports outstanding debt on his balance sheet of $250,603. He has two options to settle the debt: He can either pay $650,000 at maturity in 10 years, or he can make annual payments of $38,500 for 10 years. Payments are due at the beginning of each y
> Ne-Yo borrowed $500,000 to build a recording studio in his home. The total amount of the debt along with 8% annual interest must be repaid in 15 years. He decides to invest in a debt sinking fund that will be used to retire the debt. The fund earns 10% i
> Dave the Lying King Inc., a mattress manufacturer, decides to participate in a pension plan commencing on January 1, 2018. The plan requires a pension payment each year following retirement. An actuary provides the following information: On average, empl
> IFRS. Woorley Corporation needs to determine whether the disposal of its Tools Division qualifies as a discontinued operation. The Tools Division is one of Woorley’s three major business segments. Its recent financial performance has been strong, yet Woo
> Bella D’oro wants to open a new factory in New Jersey. The company can either purchase or lease the factory. There are three options available for Bella D’oro: 1. Purchase a factory with a useful life of 20 years today for $500,000 in cash. This factory
> Onix Corporation is required to pay the pension cost of one of its unionized employees. According to the terms of the union contract, the employee will retire in eight years and receive $20,000 at the end of the three consecutive years following retireme
> Lenny Shafer Bakery and Co. budgeted $350,000 to build a factory 10 years from today. Shafer will finance the project by making six equal annual deposits of $50,000 at the end of each year commencing four years from today. The company can invest in a fin
> Wiz Khalifa would like to invest in an $80,000 face value note payable. The note has a 12-year term and pays 10% annual interest, at the end of each year. Interest is compounded annually. a. What would he pay for the note if he wanted the note to yield 1
> Two independent situations follow. Interest is compounded annually. Solve for the appropriate interest rate using a financial calculator or a spreadsheet. a. A college student wishes to purchase a new car. In order to pay for the vehicle, he borrows $15,
> Indicate which rate and time period you would use in order to select the correct interest factor for the following situations. In addition, indicate the interest factor that would be used. a. Using PV of an Ordinary Annuity of $1 Table 7A.5: b. Using FV
> Compute the net cash flow from operating activities for Bernadino Company under the indirect reporting format. Bernadino Company provided you with the following information for the current year. Accounts Payable relate to Selling, General and Administrat
> Using the information from E6-7, compute net cash flow from operating activities for Tulsa Corporation under the direct reporting format. Data from E6-7:
> Tulsa Corporation provided you with the following information for the current year. Compute the net cash flow from operating activities under the indirect reporting format.
> Lake Company provided the following information for the current year ended December 31. Required: a. Prepare the current-year classified balance sheet using the report format. b. Prepare the current-year classified balance sheet using the account format
> Using the information provided in BE5-7, prepare a condensed, multiple-step income statement for the current year. Include supporting schedules. Data From BE5-7:
> For each item in the following, identify whether it is an advantage or disadvantage of the income statement.
> Explain why it is important to understand cognitive biases in decision making. Identify at least three techniques used to mitigate cognitive biases in practice.
> Match Each Cognitive Bias Below with Its Description.
> Identify areas where managers make estimates and assumptions in accounting for plant and equipment.
> Put the six steps of the research process in correct order (use 1–6).
> Identify areas where managers make estimates and assumptions in accounting for accounts receivable.
> Identify whether the following items are fundamental characteristics (FC) or enhancing characteristics (EC): Comparable. Relevant. Timely. Understandable. Faithful representation. Verifiable
> Discuss how well the historical cost concept satisfies the fundamental characteristics of relevance and faithful representation.
> Explain the costs standard setters consider when comparing the cost of requiring information to the benefits to the users of having the information when setting a new standard.
> Describe when financial information is a faithful representation.
> Describe the fundamental characteristics of financial information. Explain the enhancing characteristics of financial reporting information.
> What is the recognition principle and when is an item considered recognized?
> Explain the objective of financial reporting.
> Describe the primary users of the financial statements according to the conceptual framework. List the components of the current conceptual framework.
> Explain the difference between revenues and gains.
> Match the enhancing characteristic with its definition:
> Match the component of a faithful representation to its definition:
> List the components of the current conceptual framework.
> Indicate the assumption (going concern, business/economic entity, monetary unit, or periodicity) that best fits the following scenarios.
> The following events occurred at VG Consulting during the most recent month. a. VG provided consulting services and billed clients $2,000. b. VG collected $1,500 for consulting services performed in the prior month. c. VG paid its monthly electric bill o
> Match the measurement basis with its definition.
> What is the definition of an asset?
> Identify whether the following items are part of the general recognition principle under U.S. GAAP, IFRS, or both.
> Identify whether the following elements are elements under U.S. GAAP, IFRS, or both, and point-in-time or period-in-time elements.
> Match each element with its definition.
> Identify whether the following definitions relate to assets, liabilities, or equity.
> Discuss the three main approaches to recognizing expenses.
> Describe capital maintenance adjustments.
> Identify whether the items below are characteristics of a principles-based (P) or rules-based (R) accounting system: Provides a clear discussion of the accounting objective related to the standard. Contains detailed application guidance. Contains numerou
> What is the SEC’s role in standard setting, both historically and currently?
> What is the composition of the IASB’s membership?
> Order the steps in the Financial Accounting Standards Board’s standard setting process from 1 to 7. The Board issues an Exposure Draft (ED), which is intended to solicit input. After consultation with FASB members and others as appropriate, t
> What are the elements of financial reporting and where are they reported?
> What is the standard-setting process followed by FASB?
> Briefly explain how the financial statement preparers, users, and other interested parties are involved in the standard-setting process for U.S. GAAP.
> What is an economic entity?
> Identify at least three types of parties in the financial reporting process and discuss why each would be interested in the financial statements.
> Identify at least four different types of financial statement users and discuss why each would use the financial statements.
> Match the financial statement users and other parties involved in the use of and preparation of financial information with their role.
> What is the definition of financial accounting?
> Describe what is meant by the term “general-purpose financial statements.” Discuss what group(s) benefit(s) from general-purpose financial statements.
> What is the function of the accounting standard setters?
> What are the roles and responsibilities of an external auditor?
> What is the difference between a point-in-time element and a period-of-time element?
> How is the allocation of capital linked to the demand for financial reporting?
> What is the purpose of generating financial statements and who are the primary users of this information?
> Which items are included in the definition of financial information? Is this concept synonymous with the term financial statements? Explain.
> Are account balances found in the general ledger? Explain.
> Why is the general journal referred to as the “book of original entry”? How are transactions presented in the journal?
> What is meant by the term normal balance? Provide the normal balance for assets, liabilities, and stockholders’ equity.
> What do the terms debit and credit mean?
> Will all transactions have a dual effect on the accounting equation? Explain
> When will retained earnings contain a positive balance? Negative balance?
> What is equity? What are the three components of shareholders’ equity? Explain each component.
> In recent years, what has been the FASB’s approach to standard setting?
> What is the accounting equation and what does it demonstrate?
> What are closing entries? Describe the four closing entries and their effects.
> Which statements can be prepared from the adjusted trial balance? What must be done before preparing the financial statements?
> What is the purpose of the adjusted trial balance? What items are included in the adjusted trial balance?
> What is a deferred revenue? When will the full amount of the deferred revenue be recorded?
> Why are adjusting journal entries made? When do companies make these entries?
> Under the accrual basis of accounting, when do companies record deferrals and accruals?
> Explain the difference between the accrual basis of accounting and the cash basis of accounting? Which basis is acceptable under U.S. GAAP? Explain.
