Tyler Dee is the controller for Martinez Company, a major employer in the area. Tyler has just come from a meeting of a local civic group. The meeting was an opportunity for Tyler to present and explain Martinez’s financial statements for the fiscal year recently ended. A significant amount of time was spent discussing the large deferred tax liability reported by Martinez. Several members of the civic group questioned Tyler about the nature of this liability. In particular, Tyler was asked why the liability wasn’t discounted to reflect the time value of money. Tyler had no real answer, except to mumble something like, “That’s just the way the standard is written.” How might Tyler have better explained the lack of discounting of deferred taxes?
> Describe the specific lease disclosure requirements for lessees.
> Rasband Photography has a pension plan covering its 100 employees. Rasband anticipates an 11% return on its pension fund. The fund trustee furnishes Rasband with the following information relating to the pension fund for 2013: Compute the difference be
> What are the principal advantages to a lessor in leasing rather than selling property?
> During Year 1 (the first year of the company’s existence), employees of the company earned vacation days as follows: (1) Make the journal entry necessary at the end of Year 1 to record the unused vacation days earned during the year a
> Why is the principal portion of a lease receipt of a financing lease treated as an investment inflow on the lessor’s books while the principal portion of a lease payment is treated as a financial cash outflow on the lessee’s books?
> Longlee Electrical Company maintains a fund to cover its pension plan. The following data relate to the fund for 2013: Compute the 2013 actual return on the pension fund for Longlee Electrical. January 1 FVPF $875,000 Market-related value of the pe
> How does the recognition of an asset retirement obligation impact periodic depreciation expense? Interest expense?
> Under what circumstances are the minimum lease payments for the lessee different from those of the lessor?
> Osvaldo Awning Co. has prior service cost of $1,262,000 arising from a pension plan amendment. The board of directors decided to amortize this cost over the average remaining service period for its 45 employees on a straight-line basis. It is assumed tha
> Distinguish a sales-type lease from a direct financing lease.
> Da Vinci Inc. has a workforce of 400 employees. A new pension plan is negotiated on January 1, 2013, with the labor union. Based on the provisions of the pension agreement, prior service cost related to the new plan amounts to $4,823,000. The cost is to
> (a) How does a capital lease for equipment affect the lessee’s statement of cash flows? (b) How would the treatment on the statement of cash flows differ if the contract was identified as a purchase of equipment with a down payment and a long-term note p
> Using the information given for the following three independent cases, compute the amount of pension-related asset/liability that would be reported on the balance sheet. Clearly indicate whether the amount would be shown as an asset or as a liability. Al
> The use of the capital lease method for a given lease will always result in a lower net income than the operating lease method. Do you agree? Explain fully.
> Pension plan information for Naperville Window Company is as follows: Assuming no change in actuarial assumptions, what is the pension service cost for 2013? January 1, 2013 PBO. $4,780,000 АВО. $3,950,000 During 2013 Pension benefits paid to retir
> A capitalized lease should be amortized in accordance with the lessee’s normal depreciation policy. What time period should be used for lease amortization?
> Francisco Company has established a defined benefit pension plan for its lone employee, Derrald Ryan. Annual payments under the pension plan are equal to 3% of Derrald’s highest lifetime salary multiplied by the number of years with the company. Derrald’
> Describe how a change in enacted future tax rates is accounted for under the asset and liability method.
> Why do asset and liability balances for capital leases usually differ after the first year?
> General Aviation Company employs six people. Each employee is entitled to three weeks’ paid vacation every year the employee works for the company. The conditions of the paid vacation are (a) For each full year of work, an employee will
> What amount should be recorded as an asset and a liability for capital leases on the books of the lessee?
> Aggie Co. sells agricultural products. Aggie pays its salespeople a salary plus a commission. The salary is the same for each salesperson, $1,000 per month. The commission varies by length of employment and is a percentage of the company’s total gross sa
> If an operating lease requires the payment of uneven rental amounts over its life, how should the lessee recognize rental expense?
> Express Company paid one week’s wages of $21,200 in cash (net pay after all withholdings and deductions) to its employees. Income tax withholdings were equal to 17% of the gross payroll, and the only other deductions were 7.65% for FICA tax and $160 for
> What are the principal advantages to a lessee in leasing rather than purchasing property?
> On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. Prior service cost was $2,000; it was being amortized on a straight-line basis over the 5-year average remaining life
> What other factors are considered when determining whether effective control exists when the investor does not possess absolute voting control?
> Refer to Practice 17-6 and Practice 17-7. Assume that as of January 1, 2013, Wu Company changed the discount rate it uses to compute the PBO from 8% to 12%. Assume that before this change, Wu Company had the following pension-related balances: Projected
> Describe the component approach to computing depreciation.
> What is “the fair value option”?
> As of January 1, the company had the following pension-related balances: Projected benefit obligation (PBO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(15,000) Fair value of pension fund . . . . . . . . . . .
> Why is the impairment of a loan accounted for differently from the decline in value of a debt security?
> Refer to Practice 17-8. Enter all of the pension information, including the beginning balances, in a pension work sheet. Use the pension work sheet to display the computation of pension expense for the year as well as the ending balances for all pension-
> What additional disclosures are recommended under FASB Statement No. 115 for trading, available-for-sale, and held-to-maturity securities?
> You have just completed a preliminary draft of the year-end financial statements and notes and have distributed it to members of the board of directors for the upcoming board meeting. At the meeting, board members will have an opportunity to analyze, ask
> Where are the cash flow effects of purchases and sales of equity securities reported?
> Deferred taxes in the United Kingdom have historically been computed in a slightly different manner than in the United States. The concept underlying this “crystallisation” approach is that if a liability is deferred indefinitely, then the present value
> What securities fall under the scope of FASB ASC Topic 320?
> FASB ASC Topic 740 discusses uncertain tax positions and highly certain tax positions. In one page or less, discuss the difference between an uncertain tax position and a highly certain tax position.
> How should compensated absences be accounted for?
> Are trading, available-for-sale, and held-to-maturity securities disclosed on the balance sheet as current or long-term assets?
> Sara Lee Corporation owns the following brands: Ball Park franks, Sara Lee bakery goods, Hillshire Farm, Jimmy Dean, Kiwi shoe care products, and many other products. The following information relates to the company’s deferred taxes.
> How are realized gains and losses on trading securities handled in the statement of cash flows? How are unrealized gains and losses on trading securities handled?
> The 2009 financial statements for The Walt Disney Company can be found on the Internet. 1. Using the financial statements and information contained in the notes, determine how much income tax expense Disney reported for the fiscal year ended October 3, 2
> When transferring securities between categories, how is the transfer accounted for? At what value are the securities recorded?
> Assume that you go to work for one of the large accounting firms upon your graduation from college and that for your first assignment, you are asked to review the deferred income tax asset account to determine whether a valuation allowance seems to be wa
> What impact does the sale of investment securities during the year have on the computation of unrealized gains and losses on trading securities? On unrealized increases and decreases on available-for-sale securities?
> When the corporate tax rate was lowered from 46% to 34% in 1986, most firms that had adopted the asset and liability method of deferred tax accounting reported onetime gains as a result of the revaluation of their deferred tax items. In fact, one writer
> How is an “other-than-temporary” decline in the value of investments recorded?
> Briefly describe group depreciation, and describe how asset retirements are recorded under this method.
> What type of account is Market Adjustment? How is it disclosed on the financial statements?
> Hurst Inc. is a new corporation that has just completed a highly successful first year of operations. Hurst is a privately held corporation, but its president, Byron Hurst, has indicated that if the company continues to do as well for the next four or fi
> How are changes in value reported in the financial statements for trading securities? Available-for-sale securities? Held-to-maturity securities?
> 1. At December 31, 2013, Bren Co. had the following deferred income tax items: • A deferred income tax liability of $15,000 related to a noncurrent asset • A deferred income tax asset of $3,000 related to a noncurrent liability • A deferred income tax as
> How is a joint venture a form of off-balance-sheet financing?
> The financial history below shows the income and losses for Irontree Company for the 10-year period 2004–2013. Assume that no adjustments to taxable income are necessary for purposes of the NOL carryback and that the company elects to u
> (a) What factors may indicate the ability of an investor owning less than a majority voting interest to exercise significant influence on the investee’s operating and financial policies? (b) What factors may indicate the investor’s inability to exercise
> The following information is taken from the financial statements of Aruban Enterprises. The company elects to use the carryback provisions of the tax law. Instructions: 1. Given the information from the financial statements, compute the amount of inco
> Explain the difference in the accounting for detachable and nondetachable warrants.
> Hermann Company analyzed its temporary differences as of December 31, 2013. The enacted tax rate was 35% for 2013 and all future tax years. The total amount of taxable temporary differences as of the end of 2013 was $540,000. All the temporary difference
> Gross payroll is taxed by both federal and state governments. Identify these taxes and indicate who bears the cost of the tax, the employer or the employee.
> Identify the major components included in the definition of liabilities established by the FASB.
> Using the Internet, find the comprehensive annual financial report (CAFR) of a local government selected by your instructor. At a minimum, a CAFR includes (1) MD&A, (2) the basic financial statements—governmentwide and fund-based financial statements, (3
> The following are selected transactions of the specific-purpose fund, the plant fund, and the endowment fund of Toddville Hospital, a not-for-profit entity: 1. Received in the endowment fund new permanent endowments totaling $150,000 and new term endo
> This case provides learning opportunities using available databases and/or the Internet to obtain contemporary information about the topics in advanced financial accounting. Note that the Internet is dynamic and the specific address of the website listed
> The following are transactions and events of the general fund of Sycamore Hospital, a not-for-profit entity, for the 20X6 fiscal year ending December 31, 20X6. 1. Provided a total of $6,200,000 in patient services. 2. Had total operating expenses o
> What are two examples of contributions to an ONPO that should be reported as temporarily restricted and two that should be reported as permanently restricted?
> Describe the statement of activities for an ONPO. How does it compare with a VHWO’s statement of activities?
> Are donated services received by an ONPO accounted for in the same manner as those received by hospitals? Why or why not?
> An alumna of a sorority donates $12,000 to it for restricted use in its community service activity. How does this ONPO account for the contribution? How does it account for the $12,000 expenditure?
> Describe the statement of functional expenses. What organizations must prepare it?
> How do VHWOs account for donated services?
> Why do VHWOs not report all pledges received in the period in the unrestricted assets section of the statement of activities? Identify what is not included.
> How does a VHWO account for pledges from donors?
> An individual contributes $10,000 to a VHWO for restricted use in a public health education service. How does the VHWO account for this contribution and for the $10,000 expenditure?
> Where does a VHWO record fixed assets? Does it record depreciation?
> Which of the following would be included in the unrestricted funds of a not-for-profit hospital? a. Permanent endowments. b. Term endowments. c. Board-designated funds originating from previously accumulated income. d. Funds desig
> A donor contributes $15,000 to a hospital to use for operating costs in the intensive care unit. How does it account for this contribution? How does it account for the expenditure of the $15,000?
> How does a hospital account for donated services, equipment, and medical supplies?
> What are the major differences in financial reporting for a public university and a private university?
> What are the classifications of net assets reported in the statement of financial position by private colleges? Identify the types of assets assigned to each classification.
> How are tuition scholarships reported by a private college or university?
> Answer the following questions by reading the most recent consolidated financial statements of the American Red Cross (ARC) at its website, www.redcross.org . (The financial statements may be accessed through the Publications link on the website’s home p
> Finley, a manager in a public accounting firm, has volunteered to audit the financial statements of the Community Chest, a not-for-profit organization that raises funds to assist people in central Illinois who are homeless or have low incomes. In reviewi
> Gardner is the treasurer for the Central Illinois chapter of a national not-for-profit organization, the Alzheimer’s Association. The chapter sends some of the money it raises to the national organization to support research into Alzheimer’s disease. The
> Access the website for United Way Worldwide (www.unitedway.org) and then look through the site until you locate the most recent consolidated financial statements and supplemental schedule and the Form 990. Review the statements and Form 990 and then prep
> How are infrastructure and other long-term assets as well as general long-term debt reported on the government wide financial statements?
> An unrestricted gift pledge from an annual contributor to a not-for-profit hospital made in December 20X1 and paid in March 20X2 would generally be credited to a. Contribution revenue in 20X1. b. Contribution revenue in 20X2. c. Other i
> Gibson City reported the following items at December 31, 20X2. It has no component units and does not depreciate its infrastructure fixed assets. It issued all bonds—general obligation bonds and revenue—to acquire capi
> The City of Elmtree is preparing its financial statements for the year ended December 31, 20X2, and has asked for your assistance in determining whether its special revenue fund is a major or a non major fund for the financial statements of its governmen
> 1. The budgetary comparison schedule in the governmentwide financial statements for the period requires only the final budget and the actual amounts. 2. The accrual basis of accounting is used in the governmentwide financial statements. 3. A comp
> The City of Sycamore is preparing its financial reports for the year and has requested that you prepare the reconciliation schedules to accompany its governmentwide financial statements based on the following information: 1. The fund balances reported
> The City of Somerset has the following fund information: Required: Apply the criteria specified in GASB 34 to determine which of these funds meets the major fund reporting criteria. Expenditures (Expenses) Fund Assets Llabilities Revenues Gener
> Items 1 through 10 in the left-hand column represent various transactions pertaining to a municipality that uses encumbrance accounting. Items 11 through 20, also listed in the left-hand column, represent the funds and accounts used by the municipality.
> GASB 34 requires a budgetary comparison schedule for each governmental fund that has a legally adopted budget. What information does this budgetary comparison schedule present?
> A reconciliation schedules is a required disclosure in the government wide financial statements. What are the purpose and content of these reconciliation schedules?
> The following information relates to Dane City during its fiscal year ended December 31, 20X2: 1. On October 31, 20X2, to finance the construction of a city hall annex, Dane issued 8 percent, 10-year general obligation bonds at their face value of $60
> What are component units of a government, and how are they reported on the governmentwide financial statements?
> Donated medicines that a hospital normally would purchase should be recorded at fair value and should be credited directly to a. Unrestricted revenue. b. Expense of medicines. c. Fund balance. d. Deferred revenue
> The following information relates to Vane City during the year ended December 31, 20X8: 1. On October 31, 20X8, to finance the construction of a city hall annex, Vane issued 8 percent, 10-year general obligation bonds at their face value of $800,000.
