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, employees will retire in 12 years, their expected life following retirement is 8 years, and the required payment made at the end of each year after retirement is $800,000. The interest rate is 6% compounded annually. What is the PV of the pension liability the company should report on its balance sheet?
> Easthoff, Incorporated provided the following balance sheets and income statement for the current year. Prepare the operating activities section of the cash flow statement using the direct method. Accrued expenses relate to Selling, General, and Administ
> Prepare the statement of cash flows under the indirect method for Snail Company using the information from P6-10 and the following cash flow information: Data From P6-10:
> Prepare the statement of cash flows under the direct method for the Snail Company using the information from P6-9 and the following cash flow information: Data From P6-9:
> The Golden Fence Company and Stone Wall Corporation are competitors in manufacturing walls and fences. You are interested in comparing the two firms’ profitability. Their income statements and other information follow. Required: a. Pre
> Use the information in P5-3 for Right Angle Manufacturing Company and the following additional information provided to complete the requirements. Right Angle issued $20,000 of no-par common stock in the current year. The company also repurchased $15,000
> Tortarella Timber Company provided the following information for the current year: 1. Operating income amounted to $345,000. 2. The company sold investments in bonds at a pre-tax loss of $23,500. 3. Tortarella reported a $5,600 unrealized loss on an avai
> Steven Stores, Inc. provided the following statement of net income for the current year. All income is subject to a 40% income tax rate. The company also had $735 of unrealized holding gains on its available-for-sale investment portfolio. Prepare a stat
> Delaney Products, Inc. provided the following information from its current-year trial balance. Delaney issued $55,000 of common stock on October 1 of the current year. The company also repurchased $13,500 of its shares at the end of the reporting period
> Clockers, Inc. committed to sell a division on March 22, 2018. It sold the division on June 14, 2020. Income from operating this division was $3,240,000, $1,005,000, and $332,000 in 2018, 2019 and 2020, respectively. On December 31, 2018, the carrying va
> Complete the following table by indicating: 1. The section of the income statement where the item should be included (e.g., operating, non-operating, discontinued operations), and 2. Whether the event is reported net of tax. The first event is completed
> Beach and Poole, CPA is reviewing income statement presentation with some interns that are working with the firm during the summer break. The interns were asked to list three things that were true about the multiple step income statement. Choose the item
> Moore Furniture Inc., a public company, has experienced a consistent 5% increase in net income over the past three years. Moore’s management team is under a lot of pressure from investors to maintain its earnings ratios. In order to do so, the CEO could
> Lyon Company has the following transactions in the current year. Assuming that all of the transactions are material, which of them will most likely have no effect on current year net income? a. The sale of a factory building that was contributed by a sha
> On its current year income statement, Vegas Parties, Inc. reported sales revenue of $945,000. Changes occurred in several balance sheet accounts, including the following: Accounts receivable: 90,000 decrease Unearned revenue: $75,000 increase What amo
> In its year-end income statement, Black Knights Company reported cost of goods sold of $450,000. Changes occurred in several balance sheet accounts during the year as follows: Inventory $160,000 decrease Accounts payable-suppliers 40,000 decrease What am
> Big Dollars Corporation’s comparative financial statements included the following amounts for the current year: On its current-year statement of cash flows, what is Big Dollars’ net cash provided by operating activiti
> Bales Company is preparing a statement of cash flows. Which of the following would be shown on the statement? a. Stock dividend b. Stock split c. Appropriation of retained earnings d. None of the answer choices is correct
> Coftee Company committed to a plan on October 1 of the current year to discontinue its beverage segment. Income from operating the segment was $1,250,000 for January through September and $727,000 for October through November. Coftee sold the segment on
> Kong Co. purchased a three-month U.S. Treasury bill. Kong’s policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Kong’s statement of
> Which of the following items would not be included in the operating activities section of an entity’s statement of cash flows under U.S. GAAP? a. Interest received b. Proceeds from the sale of trading securities c. Dividends paid d. Income taxes paid
> During Year 1, Brianna Company had the following transactions related to its financial operations: On its Year 1 statement of cash flows, net cash used in financing activities should be: a. $717,000 b. $716,000 c. $597,000 d. $535,000
> Sykes Corporation’s comparative balance sheets at December 31, Year 2 and Year 1, reported accumulated depreciation balances of $800,000 and $600,000, respectively. Property with a cost of $50,000 and a carrying amount of $40,000 was the only property so
> Glass Doors Inc. (GDI) is preparing the stockholders’ equity section of their balance sheet. The following items occurred during the year. Which one of the following will not directly impact the stockholder’s equity section of the balance sheet? a. GDI o
> Szuba Corporation reported the following transactions for the current year: Sales $500,000 Cost of goods sold 300,000 Operating expenses 100,000 Cash dividend 50,000 Unrealized gain on available-for-sale security 10,000 Unrealized gain on trading securit
> Chili Co. had the following balances at December 31: Foreign currency translation gain $150,000 Unrealized loss on trading security (35,000) Net income 650,000 Loss on discontinued operations (75,000) The company’s effective tax rate is 40%. What amount
> 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
> 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?
> 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. Informatio
> 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.
