When a corporation writes a put option on its own shares, what does the corporation receive? What does the corporation agree to do?
> Davidson Gasket Inc. computed a pretax financial loss of $25,000 for the first year of its operations, ended December 31, 2013. Analysis of the tax and book bases of its liabilities disclosed $55,000 in unearned rent revenue on the books that had been re
> In accounting for the equity of foreign companies, what is the primary purpose of equity reserves?
> Olympus Motors, Inc., computed a pretax financial income of $90,000 for its first year of operations ended December 31, 2013. In preparing the income tax return for the year, the tax accountant determined the following differences between 2013 financial
> Distinguish between time-factor and use-factor methods of depreciation.
> What three types of unrealized gains and losses are shown as direct equity adjustments (part of accumulated other comprehensive income), bypassing the income statement? Briefly explain each.
> Polytechnic Corporation reported taxable income of $2,340,000 for the year ended December 31, 2013. The controller is unfamiliar with the required treatment of temporary and permanent differences in reconciling taxable income to pretax financial income a
> The directors of The Dress Shoppe are considering declaring either a stock dividend or a stock split. They have asked you to explain the difference between a stock dividend and a stock split and the accounting for a small stock dividend versus a large st
> A. J. Johnson & Co. recorded certain revenues on its books in 2013 and 2014 of $15,400 and $16,600, respectively. However, such revenues were not subject to income taxation until 2015. The company records reveal pretax financial income and taxable in
> What is the historical significance of par value?
> Victoria Clothing reported the following amounts related to income taxes on its 2013 income statement. Income tax benefit from NOL carryback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,000 Income tax benefit from N
> The following announcement appeared on the financial page of a newspaper: The board of directors of Benton Co., at its meeting on June 15, 2013, declared the regular quarterly dividend on outstanding common stock of $1.40 per share, payable on July 10, 2
> Joyce Smithers Inc. reported the following amounts related to income taxes on its 2013 income statement. Income tax expense—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,
> How can retained earnings be restricted by law? In what other ways can retained earnings be restricted?
> The following historical financial data are available for Lexis Company. In 2013, Lexis Company suffered a $1 million net operating loss. The company will use the carryback provision of the tax law. 1. Using the information given, calculate the refund
> Distinguish between (a) A defined benefit pension plan and a defined contribution pension plan, (b) A contributory pension plan and a noncontributory pension plan, and (c) A multiemployer pension plan and a single-employer pension plan.
> How are errors corrected when they are discovered in the current year? In a subsequent year?
> The historical financial data shown below are available for the Bradshaw Manufacturing Company. In 2013, Bradshaw suffered an $820,000 net operating loss due to an economic recession. The company elects to use the carryback provision in the tax law. 1.
> What distinguishes a situation in which an obligation to issue shares is recorded as equity from a situation in which an obligation to issue shares is recorded as a liability?
> Dixon Type and Supply Company reported taxable income of $75,000 for 2013, its first fiscal year. The enacted tax rate for 2013 is 40%. Enacted tax rates and deductible amounts for 2014–2017 are as follows: 1. Prepare the journal entr
> What basic rights are held by each common stockholder?
> Friedman Construction reported taxable income of $50,000 for 2013, its first fiscal year. The enacted tax rate for 2013 is 40%. Enacted tax rates and deductible amounts for 2014–2016 are as follows: 1. Prepare the journal entries nece
> When money is borrowed and monthly payments are made, how does one determine the portion of the payment that is interest and the portion that is principal?
> Flatworld Shipping Company reports taxable income of $912,000 on its income tax return for the year ended December 31, 2013, its first year of operations. Temporary differences between financial income and taxable income for the year are as follows: Tax
> Why is it important to use present value concepts in properly valuing long-term liabilities?
> Fibertek, Inc., computed a pretax financial income of $40,000 for the first year of its operations ended December 31, 2013. Included in financial income was $25,000 of nondeductible expenses, $22,000 gross profit on installment sales that was deferred fo
> At what amount should liabilities generally be reported?
> What is a line of credit?
> Pro-Tech-Tronics Company computed pretax financial income of $35,000 for the first year of its operations ended December 31, 2013. Unearned rent revenue of $55,000 had been recognized as taxable income in 2013 when the cash was received but had not yet b
> Under what circumstances is a short-term loan classified among the long-term liabilities on the balance sheet?
> List and briefly describe the five basic components of net periodic pension expense.
> Distinguish between current and noncurrent liabilities.
> What four accounting issues were addressed by the FASB in relation to defined benefit pension plans?
> Why did the FASB decide to allow the fair value option?
> The sales manager for Off-Road Enterprises is entitled to a bonus equal to 12% of profits. What difficulties may arise in the interpretation of this profit-sharing agreement?
> (a) What is meant by executory contract? (b) Do these contracts fit the definition of liabilities included in this chapter?
> What is the full eligibility date, and why is it an important date in accounting for postretirement benefits?
> Distinguish between taxable temporary differences and deductible temporary differences, and give at least two examples of each type.
> Briefly explain the “fair value option.”
> What is meant by postretirement benefits, and what is the primary issue in accounting for their costs?
> What is meant by refinancing or refunding a bond issue? When may refinancing be advisable?
> What lease accounting proposal has been circulating among the members of the international accounting community?
> Unguaranteed residual values accrue to the lessor at the expiration of the lease. How are these values treated in a sales-type lease?
> (a) When computing the price to be paid for a debt security, the stated rate of interest is used to determine what value? (b) How does the market or effective rate affect a debt security’s value?
> Distinguish between a pension settlement and a pension curtailment.
> How does the classification of investment securities under International Financial Reporting Standards (trading, available for sale, and held to maturity) differ from the classification under U.S. GAAP?
> How can a variable interest entity (VIE) be used as a vehicle for off-balance-sheet financing?
> In the United States, we use the term “equity method investee” to describe a company in which another company has purchased between 20 and 50% of the shares and is thus able to exert significant influence. What term is used for an “equity method investee
> (a) What is a liquidating dividend? (b) Under what circumstances are such distributions made?
> What is noncontrolling interest?
> How does the accounting for convertible debt under IAS 32 differ from the accounting prescribed by U.S. GAAP?
> What two unusual accounting actions are taken when a long-term operating asset is classified as held for sale?
> Under IAS 36, there is basically one impairment test for intangible assets. Briefly describe the structure of that test.
> When a stock-based award calls for settlement in cash, how is the obligation accounted for?
> What are the distinguishing features of convertible debt securities? What questions relate to the nature of this type of security?
> What purpose is served by issuing callable bonds?
> How should mandatorily redeemable preferred shares be reported in the balance sheet?
> How does the international accounting standard for asset impairment differ from the standard used in the United States?
> With a performance-based stock option plan, a catch-up adjustment is necessary when the probable number of options that will vest changes from one year to the next. Describe this catch-up adjustment.
> What option value is used in the computation of compensation expense associated with a basic stock-based compensation plan?
> What criteria must be met for a security to be classified as a trading security?
> How does one compute the interest revenue to be recognized on a debt security if the effective-interest method is being used?
> What was the user response to the FASB proposal, in its November 2007 Preliminary Views document, that preferred stock be classified in the balance sheet as a liability?
> How does the international standard for classification of short-term obligations to be refinanced differ from U.S. GAAP?
> How is stock valued when it is issued in exchange for noncash assets or for services?
> What is the function of the pension disclosure requirement included in the pension standards?
> Distinguish between the functional and physical factors affecting the useful life of a tangible noncurrent operating asset.
> What criteria must be met for a security to be classified as held to maturity?
> Why might a company invest in the securities of another company?
> Distinguish among depreciation, depletion, and amortization expenses.
> The White Wove Corporation began operations in 2013. A summary of the first quarter appears below. The White Wove Corporation used the LIFO perpetual inventory method and correctly computed an inventory value of $38,300 at the end of the first quarter.
> You are the controller of the Ford Steel Co. The economy enters a period of high inflation. Although profits are higher this year than last, you realize that the cost to replace inventory is also higher. You are aware that many companies are changing to
> Charles & Sons, a U.S. computer supplies firm, had the following transactions with foreign companies during December 2012: (a) Goldstar Co., Ltd., a South Korea–based firm, sold 5,000 computer hard drives to Charles & Sons for 1
> On November 17, 2013, Antarctic Airlines entered into a commitment to purchase 3,000 barrels of aviation fuel for $150,000 on March 23, 2014. Antarctic entered into this purchase commitment to protect itself against the volatility in the aviation fuel ma
> In 2010, Van Hover Inc. adopted the dollar-value LIFO retail inventory method. The January 1, 2010, price index was 1.00. The following data are available for the 4-year period ending December 31, 2013. Instructions: Calculate the inventories to be re
> Bob’s Repair Shop began operations on January 1, 2008. After discussing the matter with his accountant, Bob decided dollar-value LIFO should be used for inventory costing. Information concerning the inventory of Bob’s
> List three ways that bonds are commonly retired prior to maturity. How should the early extinguishment of debt be presented on the income statement?
> The Bergman Company sells three different products. Five years ago, management adopted the LIFO inventory method and established three specific pools of goods. Bergman values all incremental layers of inventory at the average cost of purchases within the
> The following information for Whittier Technologies was taken from the company’s financial statements (amounts in thousands): Instructions: 1. Compute the inventory turnover and the number of days’ sales in inventory
> The Sonntag Corporation has adjusted and closed its books at the end of 2012. The company arrives at its inventory position by a physical count taken on December 31 of each year. In March of 2013, the following errors were discovered: (a) Merchandise tha
> In December 2013, JB Masterpiece Merchandise Inc. had a significant portion of its inventory stolen. The company determined the cost of inventory remaining to be $32,400. The following information was taken from the records of the company: Instructions
> The following information was taken from the records of Prairie Company. Instructions: Using the gross profit method, compute the value to be assigned to the inventory as of September 30, 2013, and prepare an income statement for the 9-month period en
> Reagan Manufacturing began operations five years ago. On August 13, 2013, a fire broke out in the warehouse destroying all inventory and many accounting records relating to the inventory. The information available is presented below. All sales and purcha
> The Hansen Company values its inventory at the lower of FIFO cost or market. The inventory accounts at December 31, 2012, had the following balances: Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> The Jamison Appliance Company began business on January 1, 2012. The company decided from the beginning to grant allowances on merchandise traded in as partial payment on new sales. During 2013, the company granted trade-in allowances of $64,035. The who
> Far East Sales Co. uses the first-in, first-out method in calculating cost of goods sold for three of the products that Far East handles. Inventories and purchase information concerning these three products are given for the month of March. On March 31,
> Witte Inc. carries four items in inventory. The following per-unit data relate to these items at the end of 2013: Instructions: 1. Calculate the value of the inventory under each of the following methods: (a) Cost (b) The lower of cost or market applie
> Which pension-related items impact the reported amount of accumulated other comprehensive income?
> The Greenriver Manufacturing Company manufactures two products: Raft and Float. At December 31, 2012, Greenriver used the FIFO inventory method. Effective January 1, 2013, Greenriver changed to the LIFO inventory method. The retroactive effect of this ch
> Norsk Corporation sells household appliances and uses LIFO for inventory costing. The inventory contains 10 different products, and historical LIFO layers are maintained for each of them. The LIFO layers for one of the products, Cook Right, were as follo
> A portion of the Stark Company’s balance sheet appears as follows: Stark Company pays for all operating expenses with cash and purchases all inventory on credit. During 2013, cash totaling $471,700 was paid on accounts payable. Operat
> The Marci Manufacturing Co. was organized in 2011 to produce a single product. The company’s production and sales records for the period 2011–2013 are summarized below. All units produced in a given year are assigned
> Records of the Swain New Products Co. show the following data relative to Product M: March 2 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450 units at $26.00 3 Sale . . . . . . . . . . . . . . . . .
> Information pertaining to Hedlund Corporation’s property, plant, and equipment for 2013 follows. The salvage values of the depreciable assets are immaterial. Depreciation is computed to the nearest month. Transactions during 2013 and
> Wild Expansion Co. acquired the following assets in exchange for various nonmonetary assets. 2013 Mar. 15 Acquired from another company a large lathe in exchange for three small lathes. The small lathes had a total cost of $28,000 and a remaining book va
> A review of the books of Lakeshore Electric Co. disclosed that there were five transactions involving gains and losses on the exchange of fixed assets. The transactions were recorded as indicated in the following ledger accounts: Investigation disclose
> On December 31, 2012, Magily Company acquired the following three intangible assets: (a) A trademark for $30,000. The trademark has seven years remaining in its legal life. It is anticipated that the trademark will be renewed in the future, indefinitely,
> On January 3, 2005, Merris Company spent $89,000 to apply for and obtain a patent on a newly developed product. The patent had an estimated useful life of 10 years. At the beginning of 2009, the company spent $16,000 in successfully prosecuting an attemp
> What is the recommended accounting treatment for bond restructurings effected as (a) An asset swap? (b) An equity swap? (c) A modification of terms?
> JJS Corporation purchased a building on January 1, 2009, for a total of $12,000,000. The building has been depreciated using the straight-line method with a 20-year useful life and no residual value. As of January 1, 2013, JJS is evaluating the building
> Deedle Company purchased four convenience store buildings on January 1, 2007, for a total of $13,000,000. The buildings have been depreciated using the straight-line method with a 20-year useful life and 5% residual value. As of January 1, 2013, Deedle h
