When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Karen Weller, controller, discusses with her financial vice president the need for early implementation of a rule that would result in a fairer presentation of the company’s financial condition and earnings. When the financial vice presidentFinancial Accounting and Accounting Standards determines that early implementation of the rule will adversely affect the reported net income for the year, he discourages Weller from implementing the rule until it is required. Instructions Answer the following questions. (a) What, if any, is the ethical issue involved in this case? (b) Is the financial vice president acting improperly or immorally? (c) What does Weller have to gain by advocacy of early implementation? (d) Which stakeholders might be affected by the decision against early implementation?
> 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
> The major classifications of activities reported in the statement of cash flows are operating, investing, and financing. Classify each of the transactions listed below as: 1. Operating activity—add to net income. 2. Operating activity—deduct from net inc
> Presented below is the trial balance of Vivaldi Corporation at December 31, 2012. Instructions Prepare a balance sheet at December 31, 2012, for Vivaldi Corporation. Ignore income taxes. Debits Credits Cash $ 197,000 Sales $ 7,900,000 Debt Investme
> Presented below is the adjusted trial balance of Abbey Corporation at December 31, 2012. Additional information: 1. Net loss for the year was $2,500. 2. No dividends were declared during 2012. Instructions Prepare a classified balance sheet as of Dece
> Mary Pierce is the controller of Arnold Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year. (a) On December 20, 2012, an employee filed a legal action against Arnol
> The current assets and current liabilities sections of the balance sheet of Agincourt Company appear as follows. The following errors in the corporation’s accounting have been discovered: 1. January 2013 cash disbursements entered as
> Pascal Corporation is preparing its December 31, 2012, balance sheet. The following items may be reported as either a current or long-term liability. 1. On December 15, 2012, Pascal declared a cash dividend of $2.00 per share to stockholders of record on
> Presented below are selected accounts of Aramis Company at December 31, 2012. The following additional information is available. 1. Inventories are valued at lower-of-cost-or-market using LIFO. 2. Equipment is recorded at cost. Accumulated depreciation
> The bookkeeper for Garfield Company has prepared the following balance sheet as of July 31, 2012. The following additional information is provided. 1. Cash includes $1,200 in a petty cash fund and $12,000 in a bond sinking fund. 2. The net accounts rec
> Bruno Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented on the next page in order to obtain additional funds for expansion. BRUNO COMPANY BALANCE SHEET DECEMBER 31, 2012 Current assets Cash ……………
> Assume that Gulistan Inc. has the following accounts at the end of the current year. 1. Common Stock. 2. Discount on Bonds Payable. 3. Treasury Stock (at cost). 4. Notes Payable (short-term). 5. Raw Materials. 6. Preferred Stock Investments (long-term).
> Assume that Masters Enterprises uses the following headings on its balance sheet. (a) Current assets. (b) Investments. (c) Property, plant, and equipment. (d) Intangible assets. (e) Other assets. (f) Current liabilities. (g) Long-term liabilities. (h) Ca
> Presented below are the captions of Nikos Company’s balance sheet. (a) Current assets. (b) Investments. (c) Property, plant, and equipment. (d) Intangible assets. (e) Other assets. (f) Current liabilities. (g) Non-current liabilities. (h) Capital stock.
> Presented below are a number of balance sheet accounts of Cunningham, Inc. (a) Investment in Preferred Stock. (b) Treasury Stock. (c) Common Stock. (d) Dividends Payable. (e) Accumulated Depreciation—Equipment. (f) Construction in Process. (g) Petty Cash
> The comparative balance sheets of Menachem Corporation at the beginning and end of the year 2012 appear below. Net income of $34,000 was reported, and dividends of $23,000 were paid in 2012. New equipment was purchased and none was sold. Instructions
> Chekov Corporation’s balance sheet at the end of 2011 included the following items. The following information is available for 2012. 1. Net income was $55,000. 2. Equipment (cost $20,000 and accumulated depreciation $8,000) was sold f
> Standard-setting bodies have issued a number of authoritative pronouncements. A list is provided on the left, below, with a description of these pronouncements on the right. Instructions Match the description to the pronouncements. 1. _____ Staff Positi
> A comparative balance sheet for Orozco Corporation is presented below. Additional information: 1. Net income for 2012 was $105,000. 2. Cash dividends of $40,000 were declared and paid. 3. Bonds payable amounting to $50,000 were retired through issuance
> Presented below is a condensed version of the comparative balance sheets for Sondergaard Corporation for the last two years at December 31. Additional information: Investments were sold at a loss (not extraordinary) of $7,000; no equipment was sold; ca
> Patrick Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2012: Prepaid Rent $12,000; Goodwill $50,000; Franchise Fees Receivable $2,000; Franchises $47,000; Patents $33,000; Trademarks $10,000. Prepare the intan
> Crane Corporation has the following accounts included in its December 31, 2012, trial balance: Equity Investments (trading) $21,000; Goodwill $150,000; Prepaid Insurance $12,000; Patents $220,000; Franchises $130,000. Prepare the intangible assets sectio
> Lowell Company’s December 31, 2012, trial balance includes the following accounts: Inventory $120,000; Buildings $207,000; Accumulated Depreciation—Equipment $19,000; Equipment $190,000; Land (held for investment) $46,000; Accumulated Depreciation—Buildi
> Included in Outkast Company’s December 31, 2012, trial balance are the following accounts: Prepaid Rent $5,200; Debt Investments $56,000; Unearned Fees $17,000; Land (held for investment) $39,000; Notes Receivable (long-term) $42,000. Prepare the long-te
> Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2012: Cash $7,000; Land $40,000; Patents $12,500; Accounts Receivable $90,000; Prepaid Insurance $5,200; Inventory $30,000; Allowance for Doubtful Accounts $
> Harding Corporation has the following accounts included in its December 31, 2012, trial balance: Accounts Receivable $110,000; Inventory $290,000; Allowance for Doubtful Accounts $8,000; Patents $72,000; Prepaid Insurance $9,500; Accounts Payable $77,000
> Using the information in BE5-14, determine Martinez’s free cash flow, assuming that it reported net cash provided by operating activities of $400,000. In BE5-14 Martinez Corporation engaged in the following cash transactions during 2012. Sale of land an
> Use the information presented in BE5-14 for Martinez Corporation to compute the net cash used (provided) by financing activities. In BE5-14 Martinez Corporation engaged in the following cash transactions during 2012. Sale of land and building …………………………
> Presented below are a number of accounting organizations and types of documents they have issued. Instructions Match the appropriate document to the organization involved. Note that more than one document may be issued by the same organization. If no do
> Martinez Corporation engaged in the following cash transactions during 2012. Sale of land and building ………………………………. $191,000 Purchase of treasury stock ……………………………….. 40,000 Purchase of land …………………………………………….. 37,000 Payment of cash dividend …………………………
> Ames Company reported 2012 net income of $151,000. During 2012, accounts receivable increased by $13,000 and accounts payable increased by $9,500. Depreciation expense was $44,000. Prepare the cash flows from operating activities section of the statement
> Stowe Company’s December 31, 2012, trial balance includes the following accounts: Investment in Common Stock $70,000; Retained Earnings $114,000; Trademarks $31,000; Preferred Stock $152,000; Common Stock $55,000; Deferred Income Taxes $88,000; Paid-in C
> Hawthorn Corporation’s adjusted trial balance contained the following accounts at December 31, 2012: Retained Earnings $120,000; Common Stock $750,000; Bonds Payable $100,000; Paid-in Capital in Excess of Par—Common Stock $200,000; Goodwill $55,000; Accu
> Use the information presented in BE5-8 for Adams Company to prepare the long-term liabilities section of the balance sheet. In BE5-8 Included in Adams Company’s December 31, 2012, trial balance are the following accounts: Accounts Payable $220,000; Pens
> Included in Adams Company’s December 31, 2012, trial balance are the following accounts: Accounts Payable $220,000; Pension Asset/Liability $375,000; Discount on Bonds Payable $29,000; Unearned Revenue $41,000; Bonds Payable $400,000; Salaries and Wages
> Thomas Corporation’s adjusted trial balance contained the following liability accounts at December 31, 2012: Bonds Payable (due in 3 years) $100,000; Accounts Payable $72,000; Notes Payable (due in 90 days) $22,500; Salaries and Wages Payable $4,000; Inc
> What is the relationship between current assets and current liabilities?
> What are some of the techniques of disclosure for the balance sheet?
> Net income for the year for Tanizaki, Inc. was $750,000, but the statement of cash flows reports that cash provided by operating activities was $860,000. Tanizaki also reported capital expenditures of $75,000 and paid dividends in the amount of $30,000.
> Wayne Rogers, an administrator at a major university, recently said, “I’ve got some CDs in my IRA, which I set up to beat the IRS.” As elsewhere, in the world of accounting and finance, it often helps to be fluent in abbreviations and acronyms. Instruct
> Kathleen Battle says, “Retained earnings should be reported as an asset, since it is earnings which are reinvested in the business.” How would you respond to Battle?
> Refer to the definition of assets. Discuss how a leased building might qualify as an asset of the lessee (tenant) under this definition.
> State the generally accepted accounting principle applicable to the balance sheet valuation of each of the following assets. (a) Trade accounts receivable. (b) Land. (c) Inventories. (d) Trading securities (common stock of other companies). (e) Prepaid e
> What is working capital? How does working capital relate to the operating cycle?
> The New York Knicks, Inc. sold 10,000 season tickets at $2,000 each. By December 31, 2012, 16 of the 40 home games had been played. What amount should be reported as a current liability at December 31, 2012?
> Should available-for-sale securities always be reported as a current asset? Explain.
> In its December 31, 2012, balance sheet Oakley Corporation reported as an asset, “Net notes and accounts receivable, $7,100,000.” What other disclosures are necessary?
> Perez Company reported an increase in inventories in the past year. Discuss the effect of this change on the current ratio (current assets ÷ current liabilities). What does this tell a statement user about Perez Company’s liquidity?
> What is meant by solvency? What information in the balance sheet can be used to assess a company’s solvency?
> What is the profession’s recommendation in regard to the use of the term “surplus”? Explain.
> 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 are the primary lines of business of these two companies as shown in their notes to the fina
> The net income for the year for Genesis, Inc. is $750,000, but the statement of cash flows reports that the cash provided by operating activities is $640,000. What might account for the difference?
> What guidance does the Codification provide on the classification of current liabilities?
> Access the Codification glossary (“Master Glossary”) to answer the following. (a) What is the definition provided for current assets? (b) What is the definition of an intangible asset? In what section of the Codification are intangible assets addressed?
> What are the objectives related to the statement of cash flows?
> What guidance does the Codification provide concerning the format of accounting disclosures?
> Bradshaw Company experienced a loss that was deemed to be both unusual in nature and infrequent in occurrence. How should Bradshaw report this item in accordance with IFRS?
> Explain the difference between the “nature-of-expense” and “function-of-expense” classifications.
