What is the purpose of FASB staff positions?
> Latta Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Latta Corp. requests you as its independent CPA to convert its cash-basis income statement data to the accrual bas
> Corinne Dunbar, M.D., maintains the accounting records of Dunbar Clinic on a cash basis. During 2012, Dr. Dunbar collected $142,600 from her patients and paid $60,470 in expenses. At January 1, 2012, and December 31, 2012, she had accounts receivable, un
> Snyder Miniature Golf and Driving Range Inc. was opened on March 1 by Mickey Snyder. The following selected events and transactions occurred during March. Mar. 1 Invested $60,000 cash in the business in exchange for common stock. 3 Purchased Michelle Wie
> Letterman Co. prepares monthly financial statements from a worksheet. Selected portions of the January worksheet showed the following data. During February no events occurred that affected these accounts, but at the end of February the following inform
> The adjusted trial balance for Madrasah Co. is presented in the following worksheet for the month ended April 30, 2012. Instructions Complete the worksheet and prepare a classified balance sheet. MADRASAH co. Worksheet (PARTIAL) For The Month Ended
> Presented below are selected accounts for Acevedo Company as reported in the worksheet at the end of May 2012. Instructions Complete the worksheet by extending amounts reported in the adjusted trial balance to the appropriate columns in the worksheet.
> When the accounts of Constantine Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period. 1. The prepaid insurance account shows a debit of $6,000, representing the cost of a 2-year fire insuran
> Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on December 31 for Zubin Insurance Co. Zubin uses the accounts Unearned Service Revenue and Service Revenue. In BE3-3 On July 1, 2012, Crowe Co. pays $15,000 to Zubin Insura
> Discuss the appropriate treatment in the income statement for the following items: (a) Loss on discontinued operations. (b) Non-controlling interest allocation.
> On July 1, 2012, Crowe Co. pays $15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31.
> Dresser Company’s weekly payroll, paid on Fridays, totals $8,000. Employees work a 5-day week. Prepare Dresser’s adjusting entry on Wednesday, December 31, and the journal entry to record the $8,000 cash payment on Friday, January 2.
> Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.
> Indicate whether each of the items below is a real or nominal account and whether it appears in the balance sheet or the income statement. (a) Prepaid Rent. (b) Salaries and Wages Payable. (c) Inventory. (d) Accumulated Depreciation—Equipment. (e) Equipm
> Distinguish between cash-basis accounting and accrual-basis accounting. Why is accrual-basis accounting acceptable for most business enterprises and the cash-basis unacceptable in the preparation of an income statement and a balance sheet?
> Midwest Enterprises made the following entry on December 31, 2012. What entry would Anaheim National Bank make regarding its outstanding loan to Midwest Enterprises? Explain why this must be the case. Interest Expense Interest Payable 10,000 10,000
> Jay Hawk, maintenance supervisor for Boston Insurance Co., has purchased a riding lawnmower and accessories to be used in maintaining the grounds around corporate headquarters. He has sent the following information to the accounting department. Compute
> Give an example of a transaction that results in: (a) A decrease in an asset and a decrease in a liability. (b) A decrease in one asset and an increase in another asset. (c) A decrease in one liability and an increase in another liability.
> “A worksheet is a permanent accounting record, and its use is required in the accounting cycle.” Do you agree? Explain.
> Employees are paid every Saturday for the preceding work week. If a balance sheet is prepared on Wednesday, December 31, what does the amount of wages earned during the first three days of the week (12/29, 12/30, 12/31) represent? Explain.
> As a newly enrolled accounting major, you are anxious to better understand accounting institutions and sources of accounting literature. As a first step, you decide to explore the FASB Conceptual Framework. Instructions If your school has a subscription
> Andrea Pafko, a fellow student, contends that the double-entry system means that each transaction must be recorded twice. Is Andrea correct? Explain.
> Name the accounts debited and credited for each of the following transactions. (a) Billing a customer for work done. (b) Receipt of cash from customer on account. (c) Purchase of office supplies on account. (d) Purchase of 15 gallons of gasoline for the
> As discussed in Chapter 1, the International Accounting Standards Board (IASB) develops accounting standards for many international companies. The IASB also has developed a conceptual framework to help guide the setting of accounting standards. While the
> After the presentation of your report on the examinationof the financial statements to the board of directors of Piper Publishing Company, one of the new directors expresses surprise that the income statement assumes that an equal proportion of the reven
> Homer Winslow and Jane Alexander are discussing various aspects of the FASB’s concepts statement on the objective of financial reporting. Homer indicates that this pronouncement provides little, if any, guidance to the practicing professional in resolvin
> Anderson Nuclear Power Plant will be “mothballed” at the end of its useful life (approximately 20 years) at great expense. The expense recognition principle requires that expenses be matched to revenue. Accountants Ana Alicia and Ed Bradley argue whether
> Recently, your Uncle Carlos Beltran, who knows that you always have your eye out for a profitable investment, has discussed the possibility of your purchasing some corporate bonds. He suggests that you may wish to get in on the “ground floor” of this dea
> Presented below are the assumptions, principles, and constraints used in this chapter. 1. Economic entity assumption 2. Going concern assumption 3. Monetary unit assumption 4. Periodicity assumption 5. Historical cost principle 6. Fair value principl
> The qualitative characteristics that make accounting information useful for decision-making purposes are as follows. Relevance Faithful representation Predictive value Confirmatory value Neutrality Completeness Timeliness Materiality Verifiability Unde
> What are some of the differences in elements in the IASB and FASB conceptual frameworks?
> Presented below is information related to Anderson, Inc. Instructions Comment on the appropriateness of the accounting procedures followed by Anderson, Inc. (a) Depreciation expense on the building for the year was $60,000. Because the building was incr
> Presented below are a number of facts related to Weller, Inc. Assume thatno mention of these facts was made in the financial statements and the related notes. Instructions Assume that you are the auditor of Weller, Inc. and that you have been asked to e
> What accounting constraint is illustrated by the items below? (a) Greco’s Farms, Inc. reports agricultural crops on its balance sheet at fair value. (b) Rafael Corporation discloses fair value information on its loans because it already gathers this info
> Vande Velde Company made three investments during 2012: (1) It purchased 1,000 shares of Sastre Company, a start-up company. Vande Velde made the investment based on valuation estimates from an internally developed model. (2) It purchased 2,000 shares of
> Describe the major constraint inherent in the presentation of accounting information.
> Mogilny Company paid $135,000 for a machine. TheAccumulated Depreciation account has a balance of $46,500 at the present time. The company could sell the machine today for $150,000. The company president believes that the company has a “right to this gai
> Statement of Financial Accounting Concepts No 5identifies four characteristics that an item must have before it is recognized in the financial statements. What are these four characteristics?
> The treasurer of Landowska Co. has heard that conservatism is a doctrine that is followed in accounting and, therefore, proposes that several policies be followed that is conservative in nature. State your opinion with respect to each of the policies lis
> When revenue is generally recognized? Why has that date been chosen as the point at which to recognize the revenue resulting from the entire producing and selling process?
> What is the fair value option? Explain how use of the fairvalue option reflects application of the fair value principle.
> In this simulation, you are asked to address questions regarding the FASB conceptual framework. Prepare responses to all parts. KWW_Professional_Simulation Conceptual Framework Time Remaining 4 hours 10 minutes Unsplit Split Horiz Split Vartical Spr
> In January 2013, Janeway Inc. doubled the amount of its outstanding stock by selling on the market an additional 10,000 shares to finance an expansion of the business. You propose that this information be shown by a footnote on the balance sheet as of De
> Briefly describe the types of information concerning financial position, income, and cash flows that might be provided: (a) Within the main body of the financial statements, (b) In the notes to the financial statements, (c) As supplementary information.
> If you were given complete authority in the matter, how would you propose that GAAP should be developed and enforced?
> Some individuals have indicated that the FASB must be cognizant of the economic consequences of its pronouncements. What is meant by “economic consequences”? What dangers exist if politics play too much of a role in the development of GAAP?
> What are the sources of pressure that change and influence the development of GAAP?
> What is the justification for the following deviations from recognizing revenue at the time of sale? (a) Installment sales method of recognizing revenue. (b) Recognition of revenue at completion of production for certain agricultural products. (c) The pe
> What is the difference between realized and realizable? Give an example of where the concept of realizable is used to recognize revenue.
> Explain the role of the Emerging Issues Task Force inestablishing generally accepted accounting principles.
> The chairman of the FASB at one time noted that “the flow of standards can only be slowed if (1) Producers focus less on quarterly earnings per share and tax benefits and more on quality products, and (2) Accountants and lawyers rely less on rules and la
> Your aunt recently received the annual report for a company in which she has invested. The report notes that the statements have been prepared in accordance with “generally accepted accounting principles.” She has also heard that certain terms have speci
> Rank from the most authoritative to the least authoritative, the following three items: FASB Technical Bulletins, AICPA Practice Bulletins, and FASB Standards.
> What is the definition of fair value?
> Distinguish between FASB “statements of financial accounting standards” and FASB “statements of financial accounting concepts.”
> The life of a business is divided into specific time periods,usually a year, to measure results of operations for each such time period and to portray financial conditions at the end of each period. (a) This practice is based on the accounting assumption
> In what ways was it felt that the statements issued by the Financial Accounting Standards Board would carry greater weight than the opinions issued by the Accounting Principles Board?
> What are the four basic assumptions that underlie the financial accounting structure?
> Expenses, losses, and distributions to owners are all decreases in net assets. What are the distinctions among them?
> For what purposes did the AICPA in 1959 create theAccounting Principles Board?
> Why is it necessary to develop a definitional framework for the basic elements of accounting?
> What is the distinction between comparability and consistency?
> Presented below are comments made in the financial press. Instructions Prepare responses to the requirements in each item. (a) Rep. John Dingell, the ranking Democrat on the House Commerce Committee, threw his support behind the FASB’s controversial der
> An accountant must be familiar with the concepts involved in determining earnings of a business entity. The amount of earnings reported for a business entity is dependent on the proper recognition, in general, of revenue and expense for a given time peri
> What are the enhancing qualities of the qualitative characteristics? What is the role of enhancing qualities in the conceptual framework?
> Of what value is a common set of standards in financial accounting and reporting?
> Discuss whether the changes described in each of the cases below require recognition in the CPA’s audit report as to consistency. (Assume that the amounts are material.) (a) The company changed its inventory method to FIFO from weighted-average, which ha
> What is meant by the term “qualitative characteristics of accounting information”?
> How does accounting help the capital allocation process?
> Wayne Cooper has some questions regarding the theoretical framework in which GAAP is set. He knows that the FASB and other predecessor organizations have attempted to develop a conceptual framework for accounting theory formulation. Yet, Wayne’s supervis
> What is a conceptual framework? Why is a conceptual framework necessary in financial accounting?
> Briefly describe the purpose and content of the “What’s New” link.
> Click on the “Notice to Participants.” (a) Briefly describe the three main elements that are provided in the module. (b) What are the primary purposes for development of the Codification?
> William Murray achieved one of his life-long dreams by opening his own business, The Caddie Shack Driving Range, on May 1, 2012. He invested $20,000 of his own savings in the business. He paid $6,000 cash to have a small building constructed to house the
> In light of the full disclosure principle, investors and creditors need to know the balances for assets, liabilities, and equity, as well as the accounting policies adopted by management to measure the items reported in the statement of financial positio
> Presented below is the balance sheet for Tomkins plc, a British company. Instructions (a) Identify at least three differences in balance sheet reporting between British and U.S. firms, as shown in Tomkins’ balance sheet. (b) Review To
> Rainmaker Company prepares its financial statements in accordance with IFRS. In 2012, Rainmaker recorded the following revaluation adjustments related to its buildings and land: The company’s building increased in value by $200,000; its land declined by
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M&S’s financial statem
> The professional simulation for this chapter asks you to address questions related to the balance sheet. KWW_Professional_Simulation Balance Sheet Time Remaining 3 hours 10 minutes Unsplit Split Horiz Split Vartical Spresdshoat Calculator Exit Finan
> In light of the full disclosure principle, investors and creditors need to know the balances for assets, liabilities, and equity as well as the accounting policies adopted by management to measure the items reported in the balance sheet. Instructions If
> Early in January 2013, Hopkins Company is preparing for a meeting with its bankers to discuss a loan request. Its bookkeeper provided the following accounts and balances at December 31, 2012. Except for the following items, Hopkins has recorded all adj
> Sherwin-Williams, based in Cleveland, Ohio, manufactures a wide variety of paint and other coatings, which are marketed through its specialty stores and in other retail outlets. The company also manufactures paint for automobiles. The Automotive Division
> Uniroyal Technology Corporation (UTC), with corporate offices in Sarasota, Florida, is organized into three operating segments. The high-performance plastics segment is responsible for research, development, and manufacture of a wide variety of products,
> The incredible growth of Amazon.com has put fear into the hearts of traditional retailers. Amazon’s stock price has soared to amazing levels. However, it is often pointed out in the financial press that it took the company several years
> In 1973, the responsibility for developing and issuing rules on accounting practices was given to the Financial Accounting Foundation and, in particular, to an arm of the foundation called the Financial Accounting Standards Board (FASB). The generally ac
> Beverly Crusher, a new staff accountant, is confused because of the complexities involving accounting standard-setting. Specifically, she is confused by the number of bodies issuing financial reporting standards of one kind or another and the level of au
> Presented below is the SEC-mandated disclosure of contractual obligations provided by Deere & Company in a recent annual report. Deere & Company reported current assets of $27,208 and total current liabilities of $15,922 at year-end. All dollars
> Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) What format(s) did these companies use to present their balance sheets? (b) How much working capit
> The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, www.wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
> In an examination of Arenes Corporation as of December 31, 2012, you have learned that the following situations exist. No entries have been made in the accounting records for these items. 1. The corporation erected its present factory building in 1997. D
> The partner in charge of the Kappeler Corporation audit comes by your desk and leaves a letter he has started to the CEO and a copy of the cash flow statement for the year ended December 31, 2012. Because he must leave on an emergency, he asks you to fin
> Carol Keene, corporate comptroller for Dumaine Industries, is trying to decide how to present “Property, plant, and equipment” in the balance sheet. She realizes that the statement of cash flows will show that the company made a significant investment in
> Presented below and is the balance sheet of Rasheed Brothers Corporation (000s omitted). Instructions Evaluate the balance sheet presented. State briefly the proper treatment of any item criticized. RASHEED BROTHERS CORPORATION BALANCE SHEET DECEMB
> Below are the titles of a number of debit and credit accounts as they might appear on the balance sheet of Hayduke Corporation as of October 31, 2012. Instructions Select the current asset and current liability items from among these debits and credits
> Presented below is the balance sheet of Sargent Corporation for the current year, 2012. The following information is presented. 1. The current assets section includes: cash $150,000, accounts receivable $170,000 less $10,000 for allowance for doubtful
> Presented below and on the next page is the balance sheet of Kishwaukee Corporation as of December 31, 2012. KISHWAUKEE CORPORATION BALANCE SHEET DECEMBER 31, 2012 Assets Goodwill (Note 2) ………………………………………………………..………..……… $ 120,000 Buildings (Note 1) ………
> Wal-Mart Stores provided the following disclosure in a recent annual report. New accounting pronouncement (partial) . . . the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101—“Revenue Recognition in Financial Statements” (SAB 1
> Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2012. Instructions Prepare a classified balance sheet in good form. Common stock authorized was 400,000 shares, and preferred stock authorized was 20,000 share
> Aero Inc. had the following balance sheet at December 31, 2011. During 2012, the following occurred. 1. Aero liquidated its available-for-sale investment portfolio at a loss of $5,000. 2. A tract of land was purchased for $38,000. 3. An additional $30,
> Lansbury Inc. had the balance sheet shown on the next page at December 31, 2011. During 2012, the following occurred. 1. Lansbury Inc. sold part of its investment portfolio for $15,000. This transaction resulted in a gain of $3,400 for the firm. The co
> The comparative balance sheets of Connecticut Inc. at the beginning and the end of the year 2012 appear shown below. Net income of $34,000 was reported, and dividends of $13,000 were paid in 2012. New equipment was purchased and none was sold. Instruc
