What was the SEC’s response to the FASB’s handling of accounting for oil- and gas-producing companies, and why was this action considered so significant?
> If a company is not required to follow U.S. GAAP, a statement of realization and liquidation can be prepared during liquidation. What information can be gained from this statement?
> A trustee for a company that is being liquidated voids a preference transfer. What has happened, and why did the trustee take this action?
> What did the FASB and IASB agree to do in the Norwalk Agreement?
> When is a Form 8–K issued by a company? What specific information does a Form 8–K convey?
> In a bankruptcy liquidation, what actions does the trustee perform?
> What is the purpose of a statement of financial affairs? Why might this statement be prepared before a bankruptcy petition is filed?
> Some say that IFRS are now GAAP in the European Union. How is this statement true, and how is it false?
> On January 1, 2017, Mona, Inc., acquired 80 percent of Lisa Company’s common stock as well as 60 percent of its preferred shares. Mona paid $65,000 in cash for the preferred stock, with a call value of 110 percent of the $50 per share p
> What is the difference between a Chapter 7 bankruptcy and a Chapter 11 bankruptcy?
> Why are administrative expenses that are incurred during a liquidation classified as liabilities having priority?
> In a bankruptcy proceeding, what is the significance of a liability with priority? What are the general categories of liabilities that have priority in a liquidation?
> What is the difference between fully secured liabilities, partially secured liabilities, and unsecured liabilities?
> A bankruptcy court enters an order for relief. How does this action affect an insolvent company and its creditors?
> A company preparing for a Chapter 7 liquidation has the following liabilities: ∙ Note payable A of $90,000 secured by land having a book value of $50,000 and a fair value of $70,000. ∙ Note payable B of $120,000 secured by a building having a $60,000 boo
> Under what circumstances might it be acceptable for a company preparing IFRS financial statements to follow an accounting treatment developed by the FASB?
> A bankruptcy case can begin with either a voluntary or an involuntary petition. What is the difference? What are the requirements for an involuntary petition?
> DeMilo, Inc., owns 100 percent of the 40,000 outstanding shares of Ricardo, Inc. DeMilo currently carries the Investment in Ricardo account at $490,000 using the equity method. Ricardo issues 10,000 new shares to the public for $15.75 per share. How doe
> What are the primary objectives of a bankruptcy proceeding?
> What federal legislation governs most bankruptcy proceedings?
> A company’s management believes that substantial doubt exists that the company can meet its financial obligations as they come due for a one-year period of time from the issuance of its financial statements. What possible disclosures are required?
> Smith, Inc., has the following stockholders’ equity accounts as of January 1, 2018: Preferred stock—$100 par, nonvoting and nonparticipating, 8% cumulative dividend . . . . . . . $2,000,000 Common stock—$20 par value . . . . . . . . . . . . . . . . . 4,0
> A company’s management believes that substantial doubt exists that the company can meet its financial obligations as they come due for a one-year period from the issuance of its financial statements. Management is studying the plans that have been develo
> A parent company buys bonds on the open market that had been previously issued by its subsidiary. The price paid by the parent is less than the carrying amount of the bonds on the subsidiary’s records. How should the parent report the difference between
> A company believes that there might be substantial doubt that it can meet its financial obligations as they come due for one year from the issuance of its financial statements. What plans might mitigate this concern?
> What situations might raise substantial doubt that a company can meet its financial obligations as they come due for one year from the issuance of the financial statements?
> A statement of financial affairs created for an insolvent corporation that is beginning the process of liquidation discloses the following data (assets are shown at net realizable values): Assets pledged with fully secured creditors . . . . . . . . . . .
> Why should a company monitor the reporting of goodwill prior to the filing of a bankruptcy petition?
> What does the term insolvent mean?
> What is a wraparound filing?
> The senior partner of Wojtysiak & Co., CPAs, has been approached by a small, publicly traded corporation wishing to change auditors. The Wojtysiak firm does not audit any other public companies. Because of the Sarbanes-Oxley Act of 2002, Mike Wojtysiak,
> Go to the website www.sec.gov and, under the Filings heading, click on “Filings” and then click on “Company Filing Search.” Enter the name of a well-known company such as Facebook. A list of available documents should be shown for that company. Required
> Tasch Corporation, a multilevel marketing and sales organization, plans to sell approximately $10,000,000 worth of “service agreements” to many of its customers. These service agreements guarantee a set return to the customer in exchange for an up-front
> Domer Corporation is preparing to issue a relatively small amount of securities and does not want to go to the trouble and expense of filing a registration statement with the SEC. Company officials hope to be exempt under provisions of Regulation A. Thes
> In general terms, how does IFRS for SMEs differ from full IFRS?
> What is a prospectus? What does a prospectus contain?
> Which organizations are normally exempted from the SEC’s registration requirements?
> Mondesto Company has the following debts: Unsecured creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $230,000 Liabilities with priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> What is a letter of comments? By what other name is it often called?
> What is a prefiling conference, and why might it be helpful to a registrant?
> What is incorporation by reference?
> Two forms commonly used in the registration process are Form S–1 and Form S–3. Which registrants should use each form?
> How does the SEC generate revenues?
> The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company: Additional Information ∙ Amortization expense resulting from Foreman’s excess acq
> What are the two parts of a registration statement? What does each part contain?
> Under what law is a registration statement filed?
> What is the purpose of a registration statement?
> Historically, what factors contributed to the diversity of accounting systems worldwide?
> Chesterfield Company holds cash of $60,000, inventory worth $110,000, and a building worth $140,000. Unfortunately, the company also has accounts payable of $190,000, a note payable of $90,000 (secured by the inventory), liabilities with priority of $22,
> Explain each of the following items: a. Staff Accounting Bulletins. b. Wraparound filing. c. Incorporation by reference. d. Division of Corporation Finance. e. Integrated disclosure system. f. Management’s discussion and analysis. g. Chief accountant of
> What is the purpose of Financial Reporting Releases and Staff Accounting Bulletins?
> How does the SEC affect the development of generally accepted accounting principles in the United States?
> Why is the content of a proxy statement considered to be so important?
> What information is required in a proxy statement?
> What are the goals of the SEC?
> What does the Securities Exchange Act of 1934 cover?
> Garfun, Inc., owns all of the stock of Simon, Inc. For 2018, Garfun reports income (exclusive of any investment income) of $480,000. Garfun has 80,000 shares of common stock outstanding. It also has 5,000 shares of preferred stock outstanding that pay a
> What does the Securities Act of 1933 cover?
> What is the purpose of Regulation S–K? a. Defines generally accepted accounting principles in the United States. b. Establishes required disclosure of nonfinancial information with the SEC. c. Establishes required financial disclosures with the SEC. d. I
> What are some of the major divisions and offices within the SEC?
> Pavin acquires all of Stabler’s outstanding shares on January 1, 2015, for $460,000 in cash. Of this amount, $30,000 was attributed to equipment with a 10-year remaining life and $40,000 was assigned to trademarks expensed over a 20-yea
> On January 1, 2016, Parker, Inc., a U.S.-based firm, acquired 100 percent of Suffolk PLC located in Great Britain for consideration paid of 52,000,000 British pounds ($), which was equal to fair value. The excess of fair value over book value is attribut
> What is covered by Regulation S–X?
> What is covered by Regulation S–K?
> What is the purpose of the inspection process created by the Sarbanes–Oxley Act?
> How has the Sarbanes–Oxley Act attempted to ensure that external auditors will be completely independent in the future?
> What is the impact of being registered with the PCAOB?
> Who must register with the Public Company Accounting Oversight Board?
> What is the SEC’s relationship to the Public Company Accounting Oversight Board?
> Aceton Corporation owns 80 percent of the outstanding stock of Voctax, Inc. During the current year, Voctax made $140,000 in sales to Aceton. How does this transfer affect the consolidated statement of cash flows? a. The transaction should be included if
> List several provisions of the Sarbanes–Oxley Act that are designed to restore public confidence in the U.S. capital market system.
> Primus, Inc., owns all outstanding stock of Sonston, Inc. For the current year, Primus reports net income (exclusive of any investment income) of $600,000. Primus has 100,000 shares of common stock outstanding. Sonston reports net income of $200,000 for
> Describe the provisions of the Sarbanes–Oxley Act as they relate to the creation and responsibilities of the Public Company Accounting Oversight Board.
> The income statement and the balance sheet are produced using a worksheet, but a consolidated statement of cash flows is not. What process is followed in preparing a consolidated statement of cash flows?
> Charles Edward Company established a subsidiary in a foreign country on January 1, 2017, by investing FC 3,200,000 when the exchange rate was $0.50/FC. Charles Edward negotiated a bank loan of FC 3,000,000 on January 5, 2017, and purchased plant and equi
> What are some of the possible reasons for the numerous corporate accounting scandals discovered during 2001 and 2002?
> Why were federal securities laws originally enacted by Congress?
> The IFRS Foundation and IASB maintain a website at www.ifrs.org. Go to this website and access “Jurisdiction Profiles" to complete this case. (Under the IFRS tab, click on “Use around the world,” or under Quick Links, click on “Who uses IFRS?") Required
> Unless they use IFRS, foreign companies with securities listed in the United States (in the form of ADRs) are required to reconcile their net income and stockholders’ equity to U.S. GAAP in the annual report (Form 20–F) they file with the Securities and
> Quantacc Ltd. began operations on January 1, 2015, and uses IFRS to prepare its consolidated financial statements. Although not required to do so, to facilitate comparisons with companies in the United States, Quantacc reconciles its net income and stock
> Ataway Company has severe financial difficulties and is considering filing a bankruptcy petition. At this time, it has the following assets and liabilities. The assets are stated at net realizable value. Assets (pledged against debts of $70,000) . . . .
> Abacab Company’s shares are listed on the New Market Stock Exchange, which allows the use of either International Financial Reporting Standards (IFRS) or U.S. GAAP. On January 1, Year 1, Abacab Company acquired a building at a cost of $10 million. The bu
> Hirsch Company acquired equipment at the beginning of 2017 at a cost of $135,000. The equipment has a five-year life with no expected salvage value and is depreciated on a straight-line basis. At December 31, 2017, Hirsch compiled the following informati
> Rawl Corporation sold a building to a bank at the beginning of 2017 at a gain of $76,000 and immediately leased the building back for a period of four years. The lease is accounted for as an operating lease. a. Determine the appropriate accounting for th
> What is the importance of a Form 8–K? What is the importance of a proxy statement?
> What are blue sky laws?
> Trecek Corporation incurs research and development costs of $650,000 in 2017, 30 percent of which relate to development activities subsequent to IAS 36 criteria having been met that indicate an intangible asset has been created. The newly developed produ
> Parnell Company acquired construction equipment on January 1, 2017, at a cost of $78,400. The equipment was expected to have a useful life of six years and a residual value of $10,000 and is being depreciated on a straight-line basis. On January 1, 2018,
> Hughes Inc. has a wholly owned subsidiary in Canada that previously had been determined as having the Canadian dollar as its functional currency. Due to a recent restructuring, Hughes Inc.’s CFO believes that the functional currency of the Canadian compa
> Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 60,000 shares of its own common stock outstanding. During the current year, Porter earns net income (without any consideration of its investment in Street) of $150,0
> Harrington Company was sued by an employee in late 2017. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $20,000 to $70,000, with no amount in the r
> Xavier Company is going through a Chapter 7 bankruptcy. All assets have been liquidated, and the company retains only $26,200 in free cash. The following debts, totaling $43,050, remain: Government claims to unpaid taxes . . . . . . . . . . . . . . . . .
> Tapatio S.A. de C.V. acquired a new piece of manufacturing equipment on January 1, 2016, for a cash price of 500,000 pesos. The equipment was expected to have a useful life of 10 years and no residual value, and is being depreciated on a straight-line ba
> Sapporo K.K. was sued by a competitor in late 2017, and company management concluded that there was a 55 percent probability that the company would lose the lawsuit. The best estimate of the loss on December 31, 2017, was 4,000,000 yen. In 2018, the laws
> Llungby AB spent 1,000,000 krone in 2017 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed prod
> Mikkeli OY acquired a brand name with an indefinite life in 2015 for 40,000 markkas. At December 31, 2017, the brand name could be sold for 35,000 markkas, with zero costs to sell. Expected cash flows from the continued use of the brand are 42,000 markka
> On January 1, 2017, Xiamen Company made amendments to its defined benefit pension plan that resulted in 60,000 yuan of past service cost. The plan has 5,000 active employees with an average expected remaining working life of 15 years. There currently are
> Which forms do most companies file with the SEC in connection with the offering of securities to the public?
> Surat Limited paid cash to acquire an aircraft on January 1, 2017, at a cost of 30,000,000 rupees. The aircraft has an estimated useful life of 40 years and no salvage value. The company has determined that the aircraft is composed of three significant c
> Izmir A.S. issued convertible bonds at their face value of 100,000 lira on December 31, 2017. The bonds have a 10-year life with interest of 10 percent payable annually. At the date of issue, the prevailing interest rate for similar debt without a conver
> Sorocaba Ltda. sold a building to Banco Janeiro on January 1, 2017, for 200,000 reais and then leased it back under a 10-year lease agreement, which is accounted for as an operating lease. The building had a carrying amount of 150,000 reais and a fair va
