The following items are considered in the preparation of financial statements for Forde Inc. for the...

 

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The following items are considered in the preparation of financial statements for Forde Inc. for the year ended December 31, 2020. 1. The company is currently investigating whether a foreign division paid bribes to governmental officials in the Bahamas in order to obtain a sales contract with the government. The company is working with the SEC to resolve the matter. 2. A loan to a 5% shareholder was made on June 30, 2020, for $10,000. Interest is due annually beginning one year from the origination of the loan. 3. Short-term investments are valued at Level 1 in the fair value hierarchy for $40,550. The total net unrealized gain (affecting net income) related to the investments is $1,500. 4. Depreciation is determined on a straight-line basis for buildings and leasehold improvements over 2 to 40 years. 5. On February 1, 2021, the company declared a quarterly cash dividend of $0.40 per share, payable on March 15, 2021, for shareholders of record on March 10, 2021. 6. Equipment is measured at the fair value of $27,000 on a nonrecurring basis using significant unobservable inputs (Level 3). The total related impairment loss is $3,000 7. Land was sold to the company president at a price significantly under its appraised value. 8. All highly liquid investments with an original maturity of 90 days or less are considered to be cash equivalents. Requirements: a. For each of the items listed above, complete the following table. For the note disclosure category, choose from the following items: (1) summary of significant accounting policies, (2) fair value measurement, (3) related party transactions, (4) subsequent events, (5) errors, fraud, and illegal acts. For each item, indicate whether we would expect to potentially see an item affected on the face of the balance sheet and/or on the face of the income statement. b. For the note disclosure category, what treatment is required to present financial statements in accordance with the applicable financial reporting framework? The following items are considered in the preparation of financial statements for Forde Inc. for the year ended December 31, 2020. 1. The company is currently investigating whether a foreign division paid bribes to governmental officials in the Bahamas in order to obtain a sales contract with the government. The company is working with the SEC to resolve the matter. 2. A loan to a 5% shareholder was made on June 30, 2020, for $10,000. Interest is due annually beginning one year from the origination of the loan. 3. Short-term investments are valued at Level 1 in the fair value hierarchy for $40,550. The total net unrealized gain (affecting net income) related to the investments is $1,500. 4. Depreciation is determined on a straight-line basis for buildings and leasehold improvements over 2 to 40 years. 5. On February 1, 2021, the company declared a quarterly cash dividend of $0.40 per share, payable on March 15, 2021, for shareholders of record on March 10, 2021. 6. Equipment is measured at the fair value of $27,000 on a nonrecurring basis using significant unobservable inputs (Level 3). The total related impairment loss is $3,000 7. Land was sold to the company president at a price significantly under its appraised value. 8. All highly liquid investments with an original maturity of 90 days or less are considered to be cash equivalents. Requirements: a. For each of the items listed above, complete the following table. For the note disclosure category, choose from the following items: (1) summary of significant accounting policies, (2) fair value measurement, (3) related party transactions, (4) subsequent events, (5) errors, fraud, and illegal acts. For each item, indicate whether we would expect to potentially see an item affected on the face of the balance sheet and/or on the face of the income statement. b. For the note disclosure category, what treatment is required to present financial statements in accordance with the applicable financial reporting framework?

Answer rating: 100% (QA)

b The treatment required for note disclosures in financial statements is to provide sufficient and a... View the full answer