What is the purpose of the FASB’s conceptual framework?
> Refer to the situation described in BE 7–15. Assuming that the sale criteria are not met, describe how Logitech would account for the transfer. In BE 7–15 Logitech Corporation transferred $100,000 of accounts receivable to a local bank. The transfer was
> On December 1, 2018, Davenport Company sold merchandise to a customer for $20,000. In payment for the merchandise, the customer signed a 6% note requiring the payment of interest and principal on March 1, 2019. How much interest revenue will the company
> Singletary Associates has accounts receivable due from normal credit customers, and also has an account receivable due from a director of the company. Singletary would like to combine both of those receivables on one line in the current assets section of
> Refer to the situation described in BE 7–4. Answer the questions assuming that Tristar uses the net method to account for sales discounts. In BE 7–4 On December 28, 2018, Tristar Communications sold 10 units of its new satellite uplink system to various
> Is any special accounting treatment required for the assigning of accounts receivable in general as collateral for debt?
> If a company has accounts receivable from ordinary customers and from related parties, can they combine those receivables in their financial statements under U.S. GAAP? Under IFRS?
> Do U.S. GAAP and IFRS differ in how bank overdrafts are treated? Explain.
> Explain the primary functions of internal controls procedures in the accounting area. What is meant by separation of duties?
> Describe how debits and credits affect assets, liabilities, and permanent owners’ equity accounts.
> Define cash equivalents.
> Define the present value of a single amount.
> Identify the three items of information necessary to calculate the future value of a single amount.
> What would cause the annual interest rate to be different from the annual effective rate or yield?
> Explain compound interest.
> Define interest.
> Franklin Construction entered into a fixed-price contract to build a freeway-connecting ramp for $30 million. Construction costs incurred in the first year were $16 million and estimated remaining costs to complete at the end of the year were $17 million
> Kerianne paints landscapes, and in late 2018 placed four paintings with a retail price of $250 each in the Holmstrom Gallery. Kerianne’s arrangement with Holmstrom is that Holmstrom will earn a 20% commission on paintings sold to gallery patrons. As of D
> Dowell Fishing Supply, Inc., sold $50,000 of Dowell Rods on December 15, 2018, to Bassadrome. Because of a shipping backlog, Dowell held the inventory in Dowell’s warehouse until January 12, 2019 (having assured Bassadrome that it would deliver sooner if
> Assume the same facts as in BE 5-5 but that Tulane Tires reports under IFRS. How much revenue should Tulane recognize under IFRS? In BE 5-5 Tulane Tires wrote a contract for a $100,000 sale to the new Garden District Tour Company. Tulane onlyanticipates
> What are the two general criteria that must be satisfied before a company can recognize revenue?
> How does a company report deferred gross profit resulting from the use of the installment sales method in its balance sheet?
> Listed below are several statements that relate to financial accounting and reporting. Identify the accounting concept that applies to each statement. 1. SiriusXM Radio Inc. files its annual and quarterly financial statements with the SEC. 2. The preside
> Distinguish between the installment sales method and the cost recovery method of accounting for installment sales.
> Revenue recognition for most installment sales occurs at the point of delivery of the product or service. Under what circumstances would a seller delay revenue recognition for installment sales beyond the delivery date?
> Security-Rand Corporation determines executive incentive compensation at the end of its fiscal year. At the end of the first quarter, management estimated that the amount will be $300 million. Depreciation expense for the year is expected to be $60 milli
> What is the standard-setting body responsible for determining IFRS? How does it obtain its funding?
> What are the functions of the conceptual framework under IFRS?
> Must bad debt expense be reported on its own line on the income statement? If not, how should it be disclosed?
> What measurement attributes are commonly used in financial reporting?
> When is an estimated loss on a long-term contract recognized, both for contracts that recognize revenue over time and those that recognize revenue at the point in time the contract is completed?
> In addition to the financial statement elements arrayed in the basic financial statements, what are some other ways to disclose financial information to external users?
> The Esposito Import Company had 1 million shares of common stock outstanding during 2018. Its income statement reported the following items: income from continuing operations, $5 million; loss from discontinued operations, $1.6 million. All of these amou
> What is the purpose of a journal? What is the purpose of a general ledger?
> What are restructuring costs and where are they reported in the income statement?
> Where can we find authoritative guidance for balance sheet presentation under IFRS?
> What are four key accounting practices that often are referred to as principles in current GAAP?
> Explain the periodicity assumption.
> What is the going concern assumption?
> What are the four basic assumptions underlying GAAP?
> Distinguish between operating and nonoperating income in relation to the income statement.
> [Based on Appendix A] What is the purpose of a worksheet? In a columnar worksheet similar to Illustration 2A–1, what would be the result of incorrectly transferring the balance in a liability account to column K, the credit column under income statement?
> Define the terms working capital, current ratio, and acid-test ratio (or quick ratio).
> The income statement is a change statement. Explain what is meant by this.
> For each of the following items, identify the appropriate financial statement element or elements: (1) probable future sacrifices of economic benefits; (2) probable future economic benefits owned by the company; (3) inflows of assets from ongoing, ma
> Define accrued liabilities. What adjusting journal entry is required to record accrued liabilities?
> What are the components of relevant information? What are the components of faithful representation?
> At the end of 2018, Barker Corporation’s preliminary trial balance indicated a current ratio of 1.2. Management is contemplating paying some of its accounts payable balance before the end of the fiscal year. Explain the effect this transaction would have
> Discuss the terms relevance and faithful representation as they relate to financial accounting information.
> Define prepaid expenses and provide at least two examples.
> For each of the following note disclosures, indicate whether the disclosure would likely appear in (A) the summary of significant accounts policies or (B) a separate note: (1) depreciation method; (2) contingency information; (3) significant issuance o
> Why does the FASB undertake a series of elaborate information-gathering steps before issuing a substantive accounting standard?
> Describe what is meant by transaction analysis.
> Describe what is meant by an operating cycle for a typical manufacturing company.
> What is the function and primary focus of financial accounting?
> What is an unadjusted trial balance? An adjusted trial balance?
> Define the terms paid-in-capital and retained earnings.
> Describe the events that correspond to the following two journal entries: 1. Inventory.. Accounts payable. 20,000 20,000 2. Accounts receivable 30,000 Sales revenue. Cost of goods sold. Inventory. 30,000 18,000 .... 18,000 ...*******.................
> Sherriane Baby Products’ salaries expense was $17 million. What is the amount of cash Sherriane paid to employees during the reporting period if its salaries payable increased by $3 million? Prepare a summary entry that represents the net effect of salar
> LaRoe Lawns’ inventory increased during the year by $6 million. Its accounts payable increased by $5 million during the same period. What is the amount of cash LaRoe paid to suppliers of merchandise during the reporting period if its cost of goods sold w
> April Wood Products’ accounts receivable increased during the year by $4 million. What is the amount of cash April Wood Products received from customers during the reporting period if its sales were $44 million? Prepare a summary entry that represents th
> Horton Housewares’ accounts receivable decreased during the year by $5 million. What is the amount of cash Horton received from customers during the reporting period if its sales were $33 million? Prepare a summary entry that represents the net effect of
> Explain how each of the following liabilities would be classified in the balance sheet: A note payable of $100,000 due in five years A note payable of $100,000 payable in annual installments of $20,000 each, with the first installment due next year
> Where can we find authoritative guidance for the statement of cash flows under IFRS?
> Compare the manner in which investing activities are reported on a statement of cash flows prepared by the direct method and by the indirect method.
> Refer to the situation described in BE 20–10. Assume the error was discovered in 2020, after the 2019 financial statements are issued. Ignoring income taxes, what journal entry will PKE use to correct the error? In BE 20–10 In 2018, internal auditors di
> In 2018, Adonis Industries changed its method of valuing inventory from the average cost method to the FIFO method. At December 31, 2017, Adonis’s inventories were $47.6 million (average cost). Adonis’s records indicated that the inventories would have t
> With regard to the correction of accounting errors, what is the difference between U.S. GAAP and IFRS?
> For financial reporting, a reporting entity can be a single company, or it can be a group of companies that reports a single set of financial statements. When changes occur that cause the financial statements to be those of a different reporting entity,
> It’s not easy sometimes to distinguish between a change in principle and a change in estimate. In these cases, how should the change be accounted for?
> There are three basic accounting approaches to reporting accounting changes. What are they?
> On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless
> Refer to the situation described in BE 19–3. Suppose that the options expire without being exercised. What journal entry will National record? In BE 19–3 Under its executive stock option plan, National Corporation granted 12 million options on January 1
> Describe what is meant by posting, the fourth step in the processing cycle.
> If stock options and restricted stock are outstanding when calculating diluted EPS, what are the components of the “proceeds” available for the repurchase of shares under the treasury stock method?
> A convertible security may appear to be dilutive when looked at individually but might be antidilutive when included in combination with other convertible securities. How should the order be determined for inclusion of convertible securities in an EPS ca
> Distinguish between basic and diluted EPS.
> Nestlé S.A., the largest food and beverage company in the world, prepares its financial statements according to International Financial Reporting Standards. Its financial statements include ordinary share capital, translation reserve, and share premium.
> Refer to the situation described in BE 18–13, but assume a 2-for-1 stock split instead of the 5% stock dividend. Prepare the journal entry to record the stock split if it is not to be effected in the form of a stock dividend. What is the par per share af
> Hamilton Boats issued 175,000 shares of its no par common stock to Sudoku Motors in exchange for 1,000 four-stroke outboard motors that normally sell in quantity for $3,500 each. By what amount should Hamilton’s shareholders’ equity increase as a result
> Companies occasionally sell more than one security for a single price. How is the issue price allocated among the separate securities?
> How does the Model Business Corporation Act affect the way corporations operate?
> Distinguish between not-for-profit and for-profit corporations.
> Identify and briefly describe the two primary sources of shareholders’ equity.
> What is the primary objective of financial accounting?
> The components of postretirement benefit expense are similar to the components of pension expense. In what fundamental way does the service cost component differ between these two expenses?
> Which are the components of pension expense that involve delayed recognition?
> What two components of pension expense may be negative (i.e., reduce pension expense)?
> Define the interest cost component of the periodic pension expense.
> Define the service cost component of the periodic pension expense.
> Name three events that might change the balance of the plan assets.
> Name five events that might change the balance of the PBO.
> What is the vested benefit obligation?
> Java Hut leased a specialty expresso machine for a 10-year noncancelable term. At the end of the 10-year term, Java Hut has four consecutive one-year renewal options. A replacement machine can be acquired, but due to an expensive installation process and
> Manning Imports is contemplating an agreement to lease equipment to a customer for five years. Manning normally sells the asset for a cash price of $100,000. Assuming that 8% is a reasonable rate of interest, what must be the amount of quarterly lease pa
> If none of the adjusting journal entries prepared in BE 2–7 were recorded, would assets, liabilities, and shareholders’ equity on the 12/31/18 balance sheet be higher or lower and by how much?
> Corinth Co. leased nonspecialized equipment to Athens Corporation for an eight-year period, at which time possession of the equipment will revert back to Corinth. The equipment cost Corinth $16 million and has an expected useful life of 12 years. Its nor
> What is the primary objective of the required lease disclosures for the lessor and lessee?
> A lease that has a lease term (including any options to terminate or renew that are reasonably certain) of twelve months or less is considered a “short-term lease.” How does a lessee record a lease using the short-cut approach available as an option for
> At the beginning of an operating lease, the lessee will record what asset and liability, if any?
> Zimmern Machines sold equipment with a 10-year economic life to Bourdain Acres, while concurrently entering into an 8-year leaseback. Eight years is considered a major part of the economic life of the equipment. The sale agreement contains no option for
