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Question: What is meant by “interperiod equity,” and


What is meant by “interperiod equity,” and what is its consequence for financial reporting?


> Refer to the data given in the preceding exercise for Dolphin Company. Data from preceding exercise: 1. Production ......................................... 22,000 units Sales ................................................... 25,000 units 2. Produ

> Countrytime Studios is a r e cording studio in Nashville. The studio budgets and applies overhead costs on the basis of production time. Countrytime’s controller anticipates 10,000 hours of production time to be available during the year. The following o

> Wilmington Composites, Inc., developed its overhead application rate from the annual budget. The budget is based on an expected total output of 720,000 units requiring 3,600,000 machine hours. The company is able to schedule production uniformly througho

> Countrytime Studios is a recording studio in Nashville. The studio budgets and applies overhead costs on the basis of production time. Countrytime’s controller anticipates 10,000 hours of production time to be available during the year. The following ove

> Manitoba Paper Company packages paper for photocopiers. The company has developed standard overhead rates based on a monthly practical capacity of 90,000 direct-labor hours as follows: Standard costs per unit (one box of paper): Variable overhead (2 hour

> Kalamazoo Computer Accessory Company (KCAC) distributes keyboard trays to computer stores. The keyboard trays can be attached to the underside of a desk, effectively turning it into a computer table. The keyboard trays are purchased from a manufacturer t

> Refer to the data in Exercise 11–25 for Starlight Glassware Company. Prepare journal entries to: • Record the incurrence of actual variable overhead and actual fixed overhead. • Add variable and fixed overhead to Work-in-Process Inventory. • Close undera

> The controller for Rainbow Children’s Hospital, located in Munich, Germany, estimates that the hospital uses 25 kilowatt-hours of electricity per patient-day, and that the electric rate will be €.13 per kilowatt hour. The hospital also pays a fixed month

> You brought your work home one evening, and your nephew spilled his chocolate m ilk shake on the variance report you were preparing. Fortunately, knowing that overhead was applied based on machine hours, you were able to reconstruct the obliterated infor

> Refer to DCdesserts.com’s activity-based flexible budget in Exhibit 11–11. Suppose that the company’s activity in June is described as follows: Process hours ..........................................

> Choose a city or state in the United States (or a Canadian city or province), and use the Internet to explore the annual budget for the governmental unit you selected. For example, you could check out the annual budget for Los Angeles at www.losangeles.c

> Dolphin Company manufactures two-person sailboats with a variable cost of $1,000. The sailboats sell for $1,750 each. Budgeted fixed manufacturing overhead for the most recent year was $11,000,000. Planned and actual production for the year were the same

> You recently received the following note from the production supervisor of the company where you serve as controller. “I don’t understand these crazy variable-overhead efficiency variances. My employees are very careful in their use of electricity and pr

> Refer to the data in Exercise 11–25 for Starlight Glassware Company. Draw graphs similar to those in Exhibit 11–7 (variable overhead) and Exhibit 11–9 (fixed overhead) to depict the overhead variances

> Refer to the data in the preceding exercise. Use diagrams similar to those in Exhibits 11–6 and 11–8 to compute (1) the variable-overhead spending and efficiency variances, and (2) the fixed-overhead budget and volume

> Starlight Glassware Company has the following standards and flexible-budget data. Standard variable-overhead rate ......................... $18.00 per direct-labor hour Standard quantity of direct labor .............................. 2 hours per unit of

> Outdoor Optics Company produces binoculars of two quality levels: field and professional. The field model requires four direct-labor hours, while the professional binoculars require six hours. The firm uses direct-labor hours as the activity level for fl

> Mankato Control Company, which manufactures electrical switches, uses a standard-costing system. The standard production overhead costs per switch are based on direct-labor hours and are as follows: Variable overhead (5 direct-labor hours @ $12.00 per ho

> The following data are the actual results for Marvelous Marshmallow Company for August. Actual output ..............................................................13,500 cases Actual variable overhead .............................................. $607,

> The following data pertain to Alexis Electronics for the month of April. Static Budget Actual Required: Compute the sales-price and sales-volume variances for April. Static Budget Actual Units sold 15,000 13,500 Sales revenue . $180,000 $155,250 Va

> Colonial Cookies, Inc., bakes cookies for retail stores. The company’s best-selling cookie is chocolate nut supreme which is marketed as a gourmet cookie and regularly sells for $8.00 per pound. The standard cost per pound of chocolate

> Your next-door neighbor recently began a new job as assistant controller for Conundrum Corporation. As her first assignment, she prepared a performance report for March. She was scheduled to present the report to management the next morning, so she broug

> Cerritos Circuitry manufactures electrical instruments for a variety of purposes. The following costs related to maintaining product quality were incurred in May. Training of quality-control inspectors ……â&#1

> List six advantages of a standard-costing system.

> Describe how standard costs are used for product costing.

> Discuss several ways in which standard-costing systems should be adapted in today’s manufacturing environment.

> What is the interpretation of the direct-labor rate variance? What are some possible causes?

> Explain why the quantity purchased (PQ) is used in computing the direct-material purchase price variance, but the actual quantity consumed (AQ) is used in computing the direct-material price and quantity variances.

> What is the interpretation of the direct-material price variance and the direct-material purchase price variance?

> Distinguish between perfection and practical standards. Which type of standard is likely to produce the best motivational effects?

> Describe two methods of setting standards.

> List seven criticisms of standard costing in an advanced manufacturing environment.

> Refer to your solution for the preceding problem regarding Mc Cartney Company. Required: 1. Prepare journal entries to record all of the events listed for McCartney Company during July. Specifically, these journal entries should reflect the following ev

> The following costs were incurred by Akasaka Metals Company to maintain the quality of its products. 1. Operating an X-ray machine to detect faulty welds, 99,000 yen 2. Repairs of products sold last year, 103,000 yen 3. Cost of rewelding faulty joints, 1

> Huron Chalk Company manufactures sidewalk chalk which it sells online by the box at $25 per unit. Huron uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in

> The Chicago Youth Association (CYA) and the Palmer Athletic Club (PAC) are each considering purchasing a van. The CYA is a not‐for‐profit organization serving at‐risk inner‐city youth. It operates a center that provides after‐school tutoring, counseling,

> A town privatized its sanitation department, selling all its plant and equipment to a private corporation. The corporation agreed to hire most of the department’s managers and other employees and was given an exclusive franchise, for a limited number of

> In preparing its budget proposals, a city’s budget committee initially estimated that total revenues would be $120 million and total expenditures would be $123 million. In light of the balanced budget requirements that the city has to meet, the committee

> Suppose that you live on a street adjoining the college in which you are taking this course. 1. List all the governments (e.g., state, county, city) that have jurisdiction over the residents or property of that street. 2. Indicate why it may be difficult

> The financial statements that follow were adapted from those of the University of Arizona. Both the statement of changes in fund balances and the notes to the statements have been omitted. Moreover, the statements show only the combined â€&#15

> Go to the following websites and answer the questions. a. Visit the GASB website (www.gasb.org) 1. What is the GASB? 2. What is the mission of GASB? 3. Based on GASB’s White Paper, Why Governmental Accounting and Financial Reporting Is and Should Be Dif

> Select the best answer. 1. Rule 203 of the AICPA’s Code of Professional Conduct pertains to a. CPAs’ independence b. Authorities designated to establish accounting standards c. Standards of competency d. Solicitation of new clients by a CPA 2. Which of

> In what key ways does the FASB influence generally accepted accounting principles for governments?

> Why are measures of “service efforts and accomplishments” of more concern for government and not‐for‐profits than for businesses?

> Why has it proven especially difficult to establish accounting principles to satisfy all three elements of GASB’s first objective of financial reporting in a single statement of revenue and expenditures or a balance sheet?

> What is the significance for financial reporting of a government’s power to levy a tax? How does it affect the government’s overall fiscal strength?

> Why is it difficult to develop accounting principles that are appropriate for governments within the same category (e.g., cities, counties) and even more difficult to develop them for governments within different categories?

> What is the significance for financial reporting of the many restrictions that are placed on a government’s resources?

> Why may the “matching concept” be less relevant for governments and not‐for‐profits than for businesses?

> Why is the budget a far more important document for both governments and not‐for‐profits than for businesses?

> Select the best answer. 1. The traditional business model of accounting is inadequate for governments and not‐for‐profit organizations primarily because businesses differ from governments and not‐for‐profit organizations in that a. They have different m

> What is the defining distinction between for‐profit businesses and not‐for‐profit entities, including governments? What are the implications of this distinction for financial reporting?

> Why is it more difficult to distinguish between internal and external users in governments than in businesses?

> This chapter has set forth several distinguishing features of state and local governments, the federal government, not‐for‐profit organizations, and businesses. Presently there are separate standard‐setting boards for state and local governments (the Gov

> Unquestionably, constituents of both governments and not‐for‐profits are no less interested in what the organization has accomplished than they are in financial data, such as revenues and expenses. How can you justify an accounting model and the resultan

> The Burnet County Road Authority was established as a separate government to maintain county highways. The road authority was granted statutory power to impose property taxes on county residents to cover its costs, but it is required to balance its budge

> A city engages in the transactions that follow. For each transaction, indicate the amount of revenue or expenditure that it should report in 2017. Assume first that the main objective of the financial statements is to enable users to assess budgetary com

> Assume that you are a loan officer of a bank. A local church is seeking a $4 million, 20‐year loan to construct a new classroom building. Church officers submit a comprehensive financial report that was audited by a reputable CPA firm. In summary form (t

> The statement of net position (i.e., a balance sheet) of a midsized city reports outstanding debt of $1,200,000,000. The city has a population of 800,000. The city is about to adopt the provisions of a new GASB pronouncement that changes the way defined

> Public officials, it is often charged, promote measures intended to make the government “look good” in the short term but that may be deleterious in the long term. Assume that the following actions, designed to increase a reported surplus, were approved

> A city operates a computer service department. The department maintains and repairs the computers of all other city departments, billing them for each job performed. The billing rates are established to cover the repair service’s full c

> How and why might the importance of the budget affect generally accepted accounting principles for external (general‐purpose) reports?

> You probably have never imagined the possibility of being an accountant who could have a direct impact on improving global ecosystems. Accountants who work for Ecotour Expeditions, Inc., an ecotourism company, might manage accounting details for guest ai

> You are responsible for preparing all of the journal entries for Regional Financial Services. You have correctly prepared the following entry for financial services provided on December 15: Your boss has asked you to change the date from December 15 to

> You work as an accounting clerk. You have received the following information supplied by a client, S. Winston, from the client’s bank statement, the client’s tax returns, and a variety of other July documents. The clie

> You are the new bookkeeper for a small business. The bookkeeper whose job you are taking is training you on the business’s manual system. As he journalizes, he writes the account number in the Post. Ref. column because he believes it’s easier. His thinki

> A friend of yours, Anika Valli, has decided to open a spa to serve her small resort town of about 7,000 people and 4 million tourists annually. She has named the business All About You Spa to convey the idea that the business intends to pamper those who

> Scott and Dave each invested $100,000 cash when they formed the SD Partnership and became equal partners. They agreed that the partnership would pay each partner a 5% guaranteed payment on his $100,000 capital account. Before the two guaranteed payments,

> Last year, Patty contributed land with a $4,000 basis and a $10,000 FMV in exchange for a 40% profits, loss, and capital interest in the PD Partnership. Dave contributed land with an $8,000 basis and a $15,000 FMV for the remaining 60% interest in the pa

> Rugby Corporation has a $50,000 NOL in the current year. Rugby’s taxable income in each of the previous two years was $25,000. Rugby expects its taxable income for next year to exceed $400,000. What issues should Rugby consider with respect to the use of

> You are the CPA who prepares the tax returns for Don, his wife, Mary, and their two corporations. Don owns 100% of Pencil Corporation’s stock. Pencil’s current year taxable income is $100,000. Mary owns 100% of Eraser Corporation’s stock. Eraser’s curren

> Williams Corporation sold a truck with an adjusted basis of $100,000 to Barbara for $80,000. Barbara owns 25% of the Williams stock. What tax issues should Williams and Barbara consider with respect to the sale/purchase?

> When is a corporate tax return due for a calendar-year taxpayer? What extension(s) of time in which to file the return are available?

> Describe the situations in which a corporation must file a tax return.

> What penalties apply to the underpayment of estimated taxes? The late payment of the remaining tax liability?

> What is a “large” corporation for purposes of the estimated tax rules? What special rules apply to such large corporations?

> What corporations must pay estimated taxes? When are the estimated tax payments due?

> Explain the tax consequences to both the corporation and a shareholder-employee if an IRS agent determines that a portion of the compensation paid in a prior tax year exceeds a reasonable compensation level.

> What are the tax advantages of substituting fringe benefits for salary paid to a shareholder-employee?

> Explain how the IRS has interpreted the phrase “in control immediately after the exchange” for purposes of a Sec. 351 exchange.

> What are the major advantages and disadvantages of filing a consolidated tax return?

> Why do special restrictions on using the progressive corporate tax rates apply to controlled groups of corporations? List five restrictions on claiming multiple tax benefits that apply to controlled groups of corporations.

> Describe the three types of controlled groups.

> What special restrictions apply to the deduction of a loss realized on the sale of property between a corporation and a shareholder who owns 60% of the corporation’s stock? What restrictions apply to the deduction of expenses accrued by a corporation at

> Crane Corporation incurs a $75,000 NOL in the current year. In which years can Crane use this NOL if it makes no special elections? When might a special election to forgo the carryback of the NOL be beneficial for Crane?

> Why are corporations allowed a dividends-received deduction? What dividends qualify for this special deduction?

> Carver Corporation uses the accrual method of accounting and the calendar year as its tax year. Its board of directors authorizes a cash contribution on November 3 of Year 1, that the corporation pays on March 9 of Year 2. In what year(s) is it deductibl

> Describe three ways in which the treatment of charitable contributions by individual and corporate taxpayers differ.

> What are start-up expenditures? How are they treated for tax purposes?

> What are organizational expenditures? How are they treated for tax purposes?

> How is “control” defined for purposes of Sec. 351(a)?

> Compare the tax treatment of capital gains and losses by a corporation and by an individual.

> Stan and Susan, two calendar year taxpayers, are starting a new business to manufacture and sell digital circuits. They intend to incorporate the business with $600,000 of their own capital and $2 million of equity capital obtained from other investors.

> Port Corporation wants to change its tax year from a calendar year to a fiscal year ending June 30. Port is a C corporation owned by 100 shareholders, none of whom own more than 5% of the stock. Can Port change its tax year? If so, how can it accomplish

> List four types of differences that can cause a corporation’s book income to differ from its taxable income.

> What is the advantage of a special apportionment plan for the benefits of the 15%, 25%, and 34% tax rates to members of a controlled group?

> Budget Corporation is a personal service corporation. Its taxable income for the current year is $75,000. What is Budget’s income tax liability for the year?

> Deer Corporation is a C corporation. Its taxable income for the current year is $200,000. What is Deer Corporation’s income tax liability for the year?

> Why is a dividends-received deduction disallowed if the stock on which the corporation pays the dividend is debt-financed?

> Zero Corporation contributes inventory (computers) to State University for use in its mathematics program. The computers have a $1,225 cost basis and a $2,800 FMV. How much is Zero’s charitable contribution deduction for the computers? (Ignore the 10% li

2.99

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