Precision Equipment, Inc., specializes in designing and installing customized manufacturing equipment. On February 1, 2021, it signs a contract to design a fully automated wristwatch assembly line for $2 million, which will be settled in cash upon completion of construction. Precision Equipment will install the equipment on the client’s property, furnish it with a customized software package that is integral to operations, and provide consulting services that integrate the equipment with Precision’s other assembly lines. How many performance obligations exist in this contract?
> International Network Solutions provides products and services related to remote access networking. The company has grown rapidly during its first 10 years of operations. As its segment of the industry has begun to mature, though, the fast growth of prev
> You are in your second year as an auditor with Dantly and Regis, a regional CPA firm. One of the firm’s longtime clients is Mayberry-Cleaver Industries, a national company involved in the manufacturing, marketing, and sales of hydraulic devices used in s
> You are assistant controller of Stamos & Company, a medium-size manufacturer of machine parts. On October 22, 2020, the board of directors approved a stock option plan for key executives. On January 1, 2021, a specific number of stock options were grante
> “Now what do I do?” moaned your colleague Matt. “This is a first for me,” he confided. You and Matt are recent hires in the Accounting Division of National Paper. A top executive in the company has been given share-based incentive instruments that permit
> While eating his Kellogg’s Frosted Flakes one January morning, Tony noticed the following article in his local paper: Kellogg Company Reports Fourth-Quarter 2017 Results and Provides Guidance For 2018 (in part) BATTLE CREEK, Mich., Feb. 8, 2018 /PRNewswi
> Aria Perfume, Inc., sold 3,210 boxes of white musk soap during January of 2021 at the price of $90 per box. The company offers a full refund to unsatisfied customers for any product returned within 30 days from the date of purchase. Based on historical e
> IGF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution, and sale of a variety of food products. Industry averages are derived from Troy’s The Almanac of Business and Industrial
> Microsoft provides compensation to executives in the form of a variety of incentive compensation plans, including restricted stock award grants. The following is an excerpt from a disclosure note from Microsoft’s 2017 annual report: Not
> AGF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution, and sale of a variety of food products. Industry averages are derived from Troy’s The Almanac of Business and Industrial
> Nike is the world’s leading designer, marketer, and distributor of authentic athletic footwear, apparel, equipment, and accessories. The following is a press release from the company: NIKE, INC. ANNOUNCES 11 PERCENT INCREASE IN QUARTERLY DIVIDEND BEAVERT
> Titan Networking became a public company through an IPO (initial public offering) two weeks ago. You are looking forward to the challenges of being assistant controller for a publicly owned corporation. One such challenge came in the form of a memo in th
> The shareholders’ equity portion of the balance sheet of Sessel’s Department Stores, Inc., a large regional specialty retailer. Disclosures elsewhere in Sessel’s annual report revealed the following changes in shareholders’ equity accounts for 2022, 2021
> Refer to the 2017 financial statements and related disclosure notes of FedEx Corporation. The financial statements can be found at the company’s website (www.fedex.com). Required: 1. Does FedEx sponsor defined benefit pension plans for its employees? Def
> You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet aircraft. VXI began a defined contribution pension plan three years ago. The plan is a so-called 401(k) plan (named after the Tax Code secti
> Refer to the financial statements and related disclosure notes of Microsoft Corporation (www.microsoft.com). Required: 1. What type of pension plan does Microsoft sponsor for its employees? Explain. 2. Who bears the “risk” of factors that might reduce re
> The focus of this case is question 1 in the previous case. Your instructor will divide the class into two to six groups, depending on the size of the class. The mission of your group is to assess the correctness of Barlow’s observation and to suggest the
> On January 1, 2021, Lego Construction Company signed a contract to build a custom garage for a customer and received $10,000 in advance for the job. The new garage will be built on the customer’s land. To complete this project, Lego must first build a co
> LGD Consulting is a medium-sized provider of environmental engineering services. The corporation sponsors a noncontributory, defined benefit pension plan. Alan Barlow, a new employee and participant in the pension plan, obtained a copy of the 2021 financ
> Stacy Persoff is the newly hired assistant controller of Kemp Industries, a regional supplier of hardwood derivative products. The company sponsors a defined benefit pension plan that covers its 420 employees. On reviewing last year’s financial statement
> Macy’s, Inc., operates about 700 Macy’s and Bloomingdale’s department stores and furniture galleries in 45 states and U.S. territories as well as Bloomingdale’s Outlet stores, macys.com, and bloomingdales.com. Refer to the financial statements for the ye
> The board of examiners of the American Institute of Certified Public Accountants (AICPA) is responsible for preparing the CPA examination. The boards of accountancy of all 50 states, the District of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands, a
> Kroger Co. is one of the largest retail food companies in the United States as measured by total annual sales. The Kroger Co. operates supermarkets, convenience stores, and manufactures and processes food that its supermarkets sell. Using EDGAR (sec.gov)
> Access the 2016 financial statements and related disclosure notes of Ford Motor Company from its website at corporate.ford.com. Required: 1. In Note 21, find Ford’s net deferred tax asset or liability. What is that number? 2. Does Ford show a valuation a
> The Internal Revenue Service (IRS) maintains an information site on the Internet that provides tax information and services. Among those services is a server for publications and forms which allows a visitor to download a variety of IRS forms and publica
> The income tax disclosure note accompanying the January 31, 2017, financial statements of Walmart is reproduced below: Required: 1. Focusing on only the first part of Note 9, relating current, deferred, and total provision for income taxes, prepare a sum
> The date is November 15, 2017. You are the new controller for Engineered Solutions. The company treasurer, Randy Patey, believes that as a result of pending legislation, the currently enacted 40% income tax rate may be decreased for 2018 to 25% and is un
> Williams-Santana Inc. is a manufacturer of high-tech industrial parts that was started in 2007 by two talented engineers with little business training. In 2021, the company was acquired by one of its major customers. As part of an internal audit, the fol
> Refer to the situation described in BE 6–33. Assume that the building was completed during the second year, and construction costs incurred during the second year were $10 million. How much revenue and gross profit or loss will the company recognize in t
> Russell-James Corporation is a diversified consumer products company. During 2021, Russell-James discontinued its line of cosmetics, which constituted discontinued operations for financial reporting purposes. As vice president of the food products divisi
> The following is a portion of the balance sheets of Macy’s, Inc. for the years ended January 28, 2017 and January 30, 2016: Required: 1. What is Macy’s debt to equity ratio for the year ended January 28, 2017? 2. What
> Security Devices Inc. (SDI) needs additional office space to accommodate expansion. SDI wants to avoid income statement effects that would disrupt its attempts to “smooth” income over time. Required: 1. Which lease classification would management prefer?
> General Tools is seeking ways to maintain and improve cash balances. As company controller, you have proposed the sale and leaseback of much of the company’s equipment. As seller-lessee, General Tools would retain the right to essentially all of the rema
> Walmart Inc. is the world’s largest retailer. A large portion of the premises that the company occupies are leased. Its financial statements and disclosure notes revealed the following information: Required: 1. The net asset â
> Interstate Automobiles Corporation leased 40 vans to VIP Transport under a four-year noncancelable lease on January 1, 2021. Information concerning the lease and the vans follows: a. Equal annual lease payments of $300,000 are due on January 1, 2021, and
> “I don’t see that in my intermediate accounting text I saved from college,” you grumble to a colleague in the accounting division of Dowell Chemical Corporation. “This will take some research.” Your comments pertain to the appropriate accounting treatmen
> It is not unusual to issue long-term debt in conjunction with an arrangement under which lenders receive an option to buy common stock during all or a portion of the time the debt is outstanding. Sometimes the vehicle is convertible bonds; sometimes warr
> On August 31, 2018, Chickasaw Industries issued $25 million of its 30-year, 6% convertible bonds dated August 31, priced to yield 5%. The bonds are convertible at the option of the investors into 1,500,000 shares of Chickasaw’s common stock. Chickasaw re
> EDGAR, the Electronic Data Gathering. Analysis, and Retrieval system, performs automated collection, validation, indexing, acceptance and forwarding of submissions by companies and others who are required by law to file forms with the U.S. Securities and
> Refer to the situation described in BE 6–33. Assume that, during the first year the company billed its customer $7 million, of which $5 million was collected before year-end. What would appear in the year-end balance sheet related to this contract? Data
> AGF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution, and sale of a variety of food products. Industry averages are derived from Troy’s The Almanac of Business and Industrial
> The Jaecke Group, Inc. manufactures various kinds of hydraulic pumps. In June 2021, the company signed a fouryear purchase agreement with one of its main parts suppliers, Hydraulics, Inc. Over the four-year period, Jaecke has agreed to purchase 100,000 u
> The following appeared in the October 15, 2021, issue of the Financial Smarts Journal: This announcement is not an offer of securities for sale or an offer to buy securities. New Issue: October 15, 2021 $750,000,000 CRAFT FOODS, INC. 7.75% Debentures Du
> In the March 2022 meeting of Valleck Corporation’s board of directors, a question arose as to the way a possible obligation should be disclosed in the forthcoming financial statements for the year ended December 31. A veteran board member brought to the
> “I see an all-nighter coming on,” Gayle grumbled. “Why did Mitch just now give us this assignment?” Your client, Western Manufacturing, is involved with several situations that possibly involve contingencies. The assignment Gayle refers to is to draft ap
> Domestic Transfer and Storage is a large trucking company headquartered in the Midwest. Rapid expansion in recent years has been financed in large part by debt in a variety of forms. In preparing the financial statements for 2018, questions have arisen r
> Outdoors R Us owns several membership-based campground resorts throughout the Southwest. The company sells campground sites to new members, usually during a get-acquainted visit and tour. The campgrounds offer a wider array of on-site facilities than mos
> IGF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution and sale of a variety of food products. Industry averages are derived from Troy’s The Almanac of Business and Industrial
> As a second-year financial analyst for A.J. Straub Investments, you are performing an initial analysis on Fizer Pharmaceuticals. A difficulty you’ve encountered in making comparisons with its chief rival is that Fizer uses U.S. GAAP and the competing com
> This was Joel Craig’s first visit to the controller’s corner office since being recruited for the senior accountant position in May. Because he’d been directed to bring with him his preliminary report on year-end adjustments, Craig presumed he’d done som
> Morgan Stanley is a leading investment bank founded in 1935. The company’s fiscal year ends December 31, 2013, and it filed its financial statements with the SEC on February 25, 2014. On February 5, 2014, Bloomberg reported that Morgan Stanley would make
> Kevin Brantly is a new hire in the controller’s office of Fleming Home Products. Two events occurred in late 2021 that the company had not previously encountered. The events appear to affect two of the company’s liabil
> EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the U.S. Securities and Ex
> Late in 2021, you and two other officers of Curbo Fabrications Corporation just returned from a meeting with officials of the City of Jackson. The meeting was unexpectedly favorable even though it culminated in a settlement with city authorities that req
> A fellow accountant has solicited your opinion regarding the classification of short-term obligations repaid prior to being replaced by a long-term security. Cheshire Foods, Inc., issued $5,000,000 of short-term commercial paper during 2020 to finance co
> Microsoft’s 2017 10-K includes the following information in Note 19—Accumulated Other Comprehensive Income relevant to its available-for-sale investments: Required: 1. Prepare a journal entry to record unrealized gains
> All publicly traded domestic companies use EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, to make the majority of their filings with the SEC. You can access EDGAR at www.sec.gov. Required: 1. Search for a public company with which
> Obtain the 2016 annual report of FCA Group (www.fcagroup.com), which manufactures Fiat-brand automobiles as well as other products. Required: Find FCA’s discussion of “Basis of Consolidation” in the “Significant Accounting Policies” note that follows the
> The following are excerpts from the 2016 financial statements of Renault, a large French automobile manufacturer. 14 – INVESTMENT IN NISSAN Renault and the Japanese automaker Nissan have chosen to develop a unique type of alliance between two distinct co
> All publicly traded domestic companies use EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, to make the majority of their filings with the SEC. You can access EDGAR at www.sec.gov. Required: 1. Locate a recent annual report of a publ
> As of December 31, 2021, Cady Construction has one construction job for which the construction in progress (CIP) account has a balance of $20,000 and the billings on construction contract account has a balance of $14,000. Cady has another construction jo
> The following disclosure note appeared in the December 31, 2016, annual report of the Intel Corporation. Note 5: Cash and Investments (partial) Available-for-sale investments as of December 31, 2016, and December 26, 2015, were as follows: Intel also ind
> The company controller, Barry Melrose, has asked for your help in interpreting the authoritative accounting literature that addresses the recognition and measurement of impairment losses for property, plant, and equipment and intangible assets. “We have
> Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the year ended December 31, 2021, reported the following amounts and subtotals ($ in millions): In 2022 the following situations occurred or came to light:
> The focus of the case is the situation described in Judgment Case 11–5. Your instructor will divide the class into two to six groups depending on the size of the class. The mission of your group is to determine the treatment of the overhaul expenditures.
> Redline Publishers, Inc. produces various manuals ranging from computer software instructional booklets to manuals explaining the installation and use of large pieces of industrial equipment. At the end of 2021, the company’s balance sheet reported total
> Amgen, Inc. is an American multinational biopharmaceutical company headquartered in Thousand Oaks, California. Located in the Conejo Valley, Amgen is the world’s largest independent biotechnology firm. Amgen reported the following in a
> At the beginning of 2019, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10-year service life and no residual value. The straigh
> Norfolk Southern Corporation, one of the nation’s premier transportation companies, reported the following amounts in the asset section of its balance sheets for the years ended December 31, 2016 and 2015: In addition, information from
> Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1,
> EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, performs automated collection, validation, indexing, and forwarding of submissions by companies and others who are required by law to file forms with the U.S. Securities and Exchange C
> Refer to the situation described in BE 5–8. What amount did Canliss borrow assuming that the first $10,000 payment was due immediately? Data from BE 5-8: Canliss Mining Company borrowed money from a local bank. The note the company signed requires five
> Pier 1 Imports, Inc., is a leading retailer of domestic merchandise and home furnishings. The company’s 2017 fixed-asset turnover ratio, using the average book value of property, plant, and equipment (PP&E) as the denominator, was a
> Mayer Biotechnical, Inc., develops, manufactures, and sells pharmaceuticals. Significant research and development (R&D) expenditures are made for the development of new drugs and the improvement of existing drugs. During 2021, $220 million was spent on R
> Thomas Plastics is in the process of developing a revolutionary new plastic valve. A new division of the company was formed to develop, manufacture, and market this new product. As of year-end (December 31, 2021), the new product has not been manufacture
> The focus of this case is the situation described in Case 10–9. What is the appropriate accounting for R&D costs? Do you believe that (1) capitalization is the correct treatment of R&D costs, (2) expensing is the correct treatment of R&D costs, or (3) th
> Mayfair Department Stores, Inc., operates over 30 retail stores in the Pacific Northwest. Prior to 2021, the company used the FIFO method to value its inventory. In 2021, Mayfair decided to switch to the dollar-value LIFO retail inventory method. One of
> Fred’s Inc. operates general merchandise retail discount stores and full-service pharmacies in the Southeastern United States. Access the company’s 10-K for the fiscal year ended January 28, 2017. You can find the 10-K by using EDGAR at www.sec.gov (Hint
> Abercrombie & Fitch Co. (A&F) is a specialty retail company operating over 1,000 stores globally. The following disclosure note was included in recent financial statement: 4. Change in Accounting Principle The Company elected to change its method of acco
> The management of the Esquire Oil Company believes that the wholesale price of heating oil that they sell to homeowners will increase again as the result of increased political problems in the Middle East. The company is currently paying $0.80 a gallon.
> Danville Bottlers is a wholesale beverage company. Danville uses the FIFO inventory method to determine the cost of its ending inventory. Ending inventory quantities are determined by a physical count. For the accounting yearend December 31, 2021, ending
> Some inventory errors are said to be self-correcting in that the error has the opposite financial statement effect in the period following the error, thereby correcting the original account balance errors. Required: Despite this self-correcting feature,
> Refer to the situation described in BE 5–6. How much will Leslie accumulate in three years by depositing $500 at the beginning of each of the next 12 quarters? Data from BE 5-6: Leslie McCormack is in the spring quarter of her freshman year of college.
> Assume that the opening balances in each of the accounts is zero except for cash, accounts receivable, and accounts payable that had opening balances of $65,000, $43,000, and $22,000, respectively.
> Hudson Company, which is both a wholesaler and a retailer, purchases its inventories from various suppliers. Additional facts for Hudson’s wholesale operations are as follows: a. Hudson incurs substantial warehousing costs. b. Hudson values inventory at
> EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, performs automated collection, validation, indexing, and forwarding of submission by companies and others who are required by law to file forms with the U.S. Securities and Exchange Co
> Income statement and balance sheet information abstracted from a recent annual report of Wolverine World Wide, Inc., appears below: The significant accounting policies note disclosure contained the following: Inventories The Company used the LIFO method
> In 2020, the Moncrief Company purchased from Jim Lester the right to be the sole distributor in the western states of a product called Zelenex. In payment, Moncrief agreed to pay Lester 20% of the gross profit recognized from the sale of Zelenex in 2021.
> At the end of 2021, the Biggie Company performed its annual physical inventory count. John Lawrence, the manager in charge of the physical count, was told that an additional $22,000 in inventory that had been sold and was in transit to the customer shoul
> Happlia Co. imports household appliances. Each model has many variations and each unit has an identification number. Happlia pays all costs for getting the goods from the port to its central warehouse in Des Moines. After repackaging, the goods are consi
> The table below contains selected financial information included in the 2017 financial statements of Kohl’s Corporation and Dillards, Inc., two companies in the department store industry. Required: 1. Calculate the 2017 gross profit rat
> You were recently hired to work in the controller’s office of the Balboa Lumber Company. Your boss, Alfred Eagleton, took you to lunch during your first week and asked a favor. “Things have been a little slow lately, and we need to borrow a little cash t
> You are spending the summer working for a local wholesale furniture company, Samson Furniture, Inc. The company is considering a proposal from a local financial institution, Old Reliant Financial, to factor Samson’s receivables. The company controller is
> Search on the Internet for the 2016 annual report for Sanofi-Aventis. Find the accounts receivable disclosure note. Required: 1. Has Sanofi-Aventis factored or securitized accounts receivable? How do you know? 2. Assume that Sanofi-Aventis decided to inc
> Refer to the situation described in BE 5–4. Suppose the opportunity requires John to invest $13,200 today. What is the interest rate John would earn on this investment? Data from BE 5-4: John has an investment opportunity that promises to pay him $16,00
> McLaughlin Corporation uses the allowance method to account for bad debts. At the end of the company’s fiscal year, accounts receivable are analyzed and the allowance for uncollectible accounts is adjusted. At the end of 2021, the company reported the fo
> EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, performs automated collection, validation, indexing, and forwarding of submissions by companies and others who are required by law to file forms with the U.S. Securities and Exchange C
> For each of the following independent situations, indicate whether there is an apparent internal control weakness, and, if one exists, suggest alternative procedures to eliminate the weakness. 1. John Smith is the petty cash custodian. John approves all
> You have recently been hired as the assistant controller for Stanton Industries, a large, publicly held manufacturing company. Your immediate superior is the controller who, in turn, is responsible to the vice president of finance. The controller has ass
> The following is an excerpt from Sam Antar, “Is Green Mountain Coffee Roasters Shuffling the Beans to Beat Earnings Expectations?” (Phil’s Stock World delivered by Newstex, May 9, 2011.) On May 3, 2011, Green Mountain Coffee Roasters (NASDAQ: GMCR) beat
> Hogan Company uses the net method of accounting for sales discounts. Hogan offers trade discounts to various groups of buyers. On August 1, 2021, Hogan factored some accounts receivable on a without recourse basis. Hogan incurred a finance charge. Hogan
