Is a firm required to reconcile net income and net cash flows from operating activities if the direct format is used to present the statement of cash flows?
> Hastings College pooled the individual investments of three of its funds on December 31, 2014. The recorded value and the fair market value of the investments on December 31, 2014, are presented here: During 2015 the investment pool earned dividends of
> Citron Company is a U.S.-based citrus grower. On October 1, 2014, the company entered into a contract to ship 25,000 boxes of grapefruit on January 28 to Japan. Payment of 50,100,000 yen is to be received on March 29, 2015. On October 1, Citron also ente
> In the appendix to this chapter, the Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund for the City of Atlanta is reported. 1. How is the format used on the Statement of Revenues, Expenditures, and Changes in Fund Bal
> The following events relate to Grearson University Loan Fund: 1. $100,000 is received from an estate to establish a faculty and student loan fund. Annual interest rates range from 8% for students to 10% for faculty. 2. Loans to students totaled $60,000,
> The Franklin Public Library received a restricted contribution of $300,000 in 2015. The donor specified that the money must be used to acquire books of poetry written in the sixteenth century. As of December 31, 2015, only $100,000 of the restricted reso
> Select the best answer for each of the following items: 1. Depreciation should be recognized in the financial statements of (a) Private sector proprietary (for profit) hospitals only. (b) Both private sector proprietary (for profit) hospitals and not-for
> On January 1, 2015, Allentown issued $800,000 of 9% serial bonds at par. Semiannual interest is payable on January 1 and July 1 and principal of $80,000 matures each January 1 starting in 2016. The debt will be serviced through a special tax levy designe
> The following transactions take place: 1. The General Fund repaid the Special Revenue Fund a loan of $10,000 plus $900 in interest on the loan. 2. On January 1, the city issued 9% general obligation bonds with a face value of $2,000,000 payable in 10 yea
> The following events take place: 1. Hector Madras died and left 100 acres of undeveloped land to the city for a future park. He acquired the land at $100 an acre, but at the date of his death the land was appraised at $8,000 an acre. 2. The city authoriz
> On May 24, 2011, Invitel Holdings announced its financial results for the quarter ended March 31, 2011. The results reflect the consolidated financial results of Magyar Telecom B.V. and its subsidiaries. The reporting currency is the euro; however, the f
> The following events take place: 1. The Special Revenue Fund transfers $8,000 to the Internal Service Fund as a temporary loan. 2. The Internal Service Fund bills the Special Revenue Fund $20,000 for services performed. 3. Interest payments in the amount
> The following information was available about items that differed between the governmental funds and the government-wide statements. Assume that there are no internal service funds. The schedule of capital assets prepared for the year ended December 31,
> The following information is available about items that differ between the governmental funds and the government wide statements. Assume that there are no internal service funds. The schedule of capital assets prepared for the year ended December 31, 201
> Apple Company was incorporated in Delaware in 2012. On November 2, 2014, the controller of the company entered into a forward contract to sell 50,000 British pounds for $1.5920 on March 1, 2015. The following exchange rates were quoted on the indicated d
> The following schedule of capital assets was prepared for Capital City. All capital acquisitions were made in a capital projects fund (and paid for with cash). An asset was sold by the general fund for $65,000 cash. Required: Determine how the above i
> On January 1, 2015, Metropolis City issued a 7%, 5-year, $100,000 general obligation bond for $96,007. The bond pays interest annually (on December 31) and was issued to yield 8%. The bond was issued in the capital projects fund, and the proceeds are to
> Required: Using Illustrations 18-10, 18-11, 18-14, and 18-15, determine which of Model City’s funds qualify as major funds using the percentage cutoffs. Calculate aggregate amounts for all other nonmajor funds, and indicate how they would be presented.
> SMC Inc. operates restaurants based on various themes, such as Mex-delight, Chinese for the Buffet, and Steak-it and Eat-it. The Steak-it and Eat-it restaurants have not been performing well recently, but SMC prefers not to disclose these details for fea
> The Shady Tree Company is preparing to announce their quarterly earnings numbers. The company expects to beat the analysts’ forecast of earnings by at least 5 cents a share. In anticipation of the increase in stock value and before the release of the ear
> Executive stock options (ESOs) are used to provide incentives for executives to improve company performance. ESOs are usually granted “at-the-money,” meaning that the exercise price of the options is set to equal the market price of the underlying stock
> A vice president of marketing for your company has been charged with embezzling nearly $100,000 from the company. The vice president allegedly submitted fraudulent vendor invoices in order to receive payments. As the vice president of marketing for the c
> MF Global Holdings Ltd. reported items relating to foreign currency translation in several places in its 2011 10-K report. Included in general and other expenses on the 2011, 2010, and 2009 income statements respectively were translation gains or losses
> On the first page of this chapter, an article is referenced describing the recent activities of the chancellor of Vanderbilt University. Comment on the pros and cons, from an ethical perspective, of allowing a university employee in such a position great
> GASB 45 requires that the expected future costs of retiree health costs be recognized in the current period. Prior to this, governments used a pay-as-you-go plan in which only the current year’s actual payments affected the financial statements. Suppose
> Selco, a U.S. Company, imports and exports tools, shop equipment, and industrial construction supplies. The company uses a periodic inventory system. During April the company entered into the following transactions. All rate quotations are direct exchang
> At State College, where football has long reigned as king and fans are near fanatical in their attendance, the frenzy for football tickets has recently reached an all-time high. With requests for home game tickets at an unprecedented level, prices on eve
> You and two of your former college friends, Freeman and Oxyman, formed a partnership called FOB, which builds and installs fabricated swimming pools. The business has been operating for 15 years and has become one of the top swimming pool companies in th
> Many companies with defined benefit plans are curtailing or eliminating the plans altogether. With a defined benefit plan, the company guarantees some set amount (or formula-determined payment) when the employee retires. Because most pension assets are i
> Are International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) considered authoritative by the Codification?
> Where are estimated income taxes reported on the statement of financial condition for personal financial statements?
> How does the presentation of personal balance sheets differ from balance sheets for entities (in general terms)? Where is this located in the Codification?
> If a company does not present a separate fourth-quarter interim report for its income statement, but presents only the annual income statement at that time, are there any additional disclosure requirements? If so, what are they?
> Are interim periods considered stand-alone financial statements or are they considered an integral part of the annual financial statements under current GAAP? Do you concur with this position? Why or why not?
> Red Hat, Inc. reported comprehensive income from 2008 to 2010 as follows ($ thousands): Required: A. Assuming that Red Hat has not purchased or sold any available-for-sale securities, what has happened to the value of the available-for-sale investments
> If a non-SEC reporting company decided to issue monthly interim financial statements, would the GAAP Codification apply?
> Air France—KLM Group reports the following balance sheet for the year ended December 31, 2013. Required: A. In what order are assets listed on the balance sheet? B. Comment on other differences (IFRS relative to U.S. GAAP) that you mig
> A company incurred an extraordinary loss in the second quarter and has prorated this loss over the three remaining quarters in the current fiscal year. Is this appropriate? Why or why not?
> Is a firm required to report a Statement of Comprehensive Income on an interim basis?
> Practices vary in determining costs of inventory. For example, cost of goods produced may be determined based on standard or actual cost, while cost of inventory may be determined on an average, first-in, first-out (FIFO), or last-in, first-out (LIFO) co
> Can a gain or loss from a translation of foreign currencies due to a major devaluation in currency be treated as an extraordinary item?
> The rules providing guidance on foreign currency translation can be found in FASB Statement No. 52. Where is this information located in the Codification? List all the topics and subtopics in the codification (i.e., ASC XXX–XX). (Hint: There are three ma
> For purposes of topic 830, what is a highly inflationary economy and how is a highly inflationary economy determined?
> One of the items reported as part of comprehensive income relates to foreign currency translation gains or losses. Describe the circumstances under which such gains/losses appear only in comprehensive income and not in net income. List examples of other
> The Statement of Comprehensive Income was required by FASB in SFAS Statement No. 130; describe the formats that are acceptable to display the information in the statement.
> A company estimates an allowance for inventory obsolescence. However, this estimate is sensitive to changes in the short term. What are the disclosures required by current GAAP?
> Ivanhoe Energy, a Canadian company, incurs net foreign exchange adjustments in 2010. The U.S. dollar is the functional currency. In 2010, the Canadian dollar continued to strengthen relative to the U.S. dollar. Ivanhoe Energy raised $150 million in Canad
> The International Federation of Accountants’ web address is www.ifac.org. On this page is a section labeled “media center.” Next, choose “articles.” Choose one of the items on this page and write a brief description.
> The rules providing guidance on using the current rate in foreign currency translation can be found in FASB Statement No. 52, paragraph 12. Where is this information located in the Codification? List the paragraph number (i.e., ASC XXX-XX-XX-X).
> Is a company that prepares financial statements in U.S. dollars required to disclose supplementary information on the effects of changing prices?
> How does the Codification define a highly inflationary country?
> A resident of a continuing-care retirement community pays an advance fee in return for future services and the use of facilities. Such services include continuing- care retirement community housing-related services (for example, meals, laundry, housekeep
> How should a transaction gain or loss be reported that is related to an unsettled receivable recorded when the firm’s inventory was exported?
> Explain why a firm is exposed to an added risk when it enters into a transaction that is to be settled in a foreign currency.
> The donated services of volunteer workers on fund-raising campaigns are usually not given accounting recognition. Why?
> What is the relationship (if any) between board designated funds and nonmandatory transfers?
> NNOs distinguish between restricted and unrestricted funds. Why is this distinction important?
> Part A: The following departments of activities are recorded in the City of Atlanta’s Comprehensive Annual Financial Report in the appendix to this chapter. Indicate the type of fund that most likely would be used for each department by
> Why do most NNOs use fund accounting?
> Distinguish an annuity fund from a life income fund.
> How is a not-for-profit entity defined in the Codification?
> In which fund of a hospital are medical equipment and related long-term obligations recorded? Would your answer be the same for a voluntary health and welfare organization? Explain.
> What fund is used to account for the library books owned by a university? How should depreciation of the library books be reflected in the financial statements of the university?
> Universities and hospitals often reduce their standard service charge to students or patients. How are these reductions reflected in the statements of revenue and expenses of these organizations? Explain.
> What authoritative body(s) is (are) responsible for establishing financial accounting standards for NNOs?
> In what funds might property and other nonfinancial resources be recorded?
> In what funds would you expect bonds payable to be included?
> Expenditures may be classified by function, activity, object, or organizational unit. Give an example of each classification for a municipality. Which classification is the most appropriate for external financial reporting?
> The International Accounting Standards Board (IASB) web address is www.iasb.org. On this web page, there is a section labeled “news.” List some of the recent issues concerning the IASB.
> What are the major classifications of increases and decreases in expendable fund resources?
> What is the significance of the “unassigned fund balance” of an expendable fund entity?
> What columns would you suggest for a subsidiary ledger account in order that it might be a subsidiary not only to the “appropriations” control account but also the “encumbrances” and the “expenditures” control accounts?
> Distinguish between premium revenue and patient service revenue generated by a health care entity
> In an installment liquidation, why should the partners view each cash distribution as if it were the final distribution?
> To what extent can personal creditors seek recovery from partnership assets?
> What is “marshaling of assets”?
> During a liquidation, at which point may cash be distributed to any of the partners?
> Is it important to maintain separate accounts for a partner’s outstanding loan and capital accounts? Explain why or why not.
> In what manner should the final cash distribution be made in partnership liquidation?
> SMC Company purchases a building for $100,000. Included in this cost are $12,000 for electrical systems and $15,000 for the roof. The building is expected to have a 40-year useful life, but the electrical system will last for 20 years and the roof will l
> What is the “loss absorption potential”?
> What is the objective of the procedures used for the preparation of an advance cash distribution plan?
> How are unexpected costs such as liquidation expenses, disposal costs, or unrecorded liabilities covered in the safe distribution schedule?
> Differentiate between the admission of a new partner through assignment of an interest and through investment in the partnership.
> Define charity care. Does it qualify for revenue recognition?
> Explain the distinction between the terms “withdrawals” and “salaries.”
> What are some of the methods commonly used in allocating income and losses to the partners?
> Describe the circumstances where neither the goodwill nor the bonus method should be used to record the admission of a new partner.
> What is the general rule regarding the treatment of costs and expenses associated directly with revenues for interim reporting purposes?
> Describe the tax treatment of partnership income.
> The town of Aberdeen authorized a fire station to be built at an estimated cost of $150,000. On January 1, 2015, 6% bonds with a par value of $150,000 were authorized and issued. Any difference between the par value of the bonds and the proceeds from the
> What type of disclosure is required of a firm when the major portion of its operations takes place within a single reportable segment?
> If the operations of a firm in some foreign countries are grouped into geographic areas, what factors should be considered in forming the groups?
> Some accountants hold the view that each interim period should stand alone as a basic accounting period, whereas others view each interim period as essentially an integral part of the annual period. Distinguish between these views.
> What is the purpose of interim financial reporting?
> What is the objective of the temporal method of translation?
> What is a diagnosis-related group? What is capitation?
> A translation adjustment results from the process of translating financial statements of a foreign subsidiary from its functional currency into dollars. Where is the translation adjustment reported in the financial statements if the current rate method i
> How are foreign currency exchange gains and losses from hedging a forecasted transaction handled?
> Assuming that the temporal method is used, how are revenue and expense items in foreign currency financial statements converted?
> What criteria must be satisfied for a foreign currency transaction to be considered a hedge of an identifiable foreign currency commitment?
