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Intermediate Accounting 13th Edition Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield - Solutions
Identify the segment information that is required to be disclosed by GAAP.
What is an operating segment, and when can information about two operating segments be aggregated?
The controller for Lafayette Inc. recently commented, “If I have to disclose our segments individually, the only people who will gain are our competitors and the only people that will lose are our present stockholders.” Evaluate this comment.
An article in the financial press entitled “Important Information in Annual Reports This Year” noted that annual reports include a management’s discussion and analysis section. What would this section contain?
The financial statements of a company are management’s, not the accountant’s. Discuss the implications of this statement.
Olga Conrad, a financial writer, noted recently, “There are substantial arguments for including earnings projections in annual reports and the like. The most compelling is that it would give anyone interested something now available to only a relatively select few—like large stockholders,
The following comment appeared in the financial press: “Inadequate financial disclosure, particularly with respect to how management views the future and its role in the marketplace, has always been a stone in the shoe. After all, if you don’t know how a company views the future, how can you
What are interim reports? Why are balance sheets often not provided with interim data?
What are the accounting problems related to the presentation of interim data?
Dierdorf Inc., a closely held corporation, has decided to go public. The controller, Ed Floyd, is concerned with presenting interim data when a LIFO inventory valuation is used. What problems are encountered with LIFO inventories when quarterly data are presented?
What approaches have been suggested to overcome the seasonality problem related to interim reporting?
What is the difference between a CPA’s unqualified opinion or “clean” opinion and a qualified one?
Jane Eller by and Sam Callison are discussing the recent fraud that occurred at Low Rental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial reporting, and how does it differ from an
Where can authoritative iGAAP be found related to the various disclosure issues discussed in the chapter?
Bill Novak is working on an audit of an iGAAP client. In his review of the client’s interim reports, he notes that the reports are prepared on a discrete basis. That is, each interim report is viewed as a distinct period. Is this acceptable under iGAAP? If so, explain how that treatment could
The significance of financial statement data is not in the amount alone. Discuss the meaning of this statement.
A close friend of yours, who is a history major and who has not had any college courses or any experience in business, is receiving the financial statements from companies in which he has minor investments (acquired for him by his now-deceased father). He asks you what he needs to know to
Distinguish between ratio analysis and percentage analysis relative to the interpretation of financial statements. What is the value of these two types of analyses?
In calculating inventory turnover, why is cost of goods sold used as the numerator? As the inventory turnover increases, what increasing risk does the business assume?
What is the relationship of the asset turnover ratio to the rate of return on assets?
Explain the meaning of the following terms:(a) Common size analysis,(b) Vertical analysis,(c) Horizontal analysis,(d) Percentage analysis.
Presently, the profession requires that earnings per share be disclosed on the face of the income statement. What are some disadvantages of reporting ratios on the financial statements?
Why is it important to understand international accounting standards?
Describe some of the similarities between U.S. and international standard-setting structures.
An annual report of Crestwood Industries states, “The company and its subsidiaries have long term leases expiring on various dates after December 31, 2010. Amounts payable under such commitments, without reduction for related rental income are expected to average approximately $5,711,000 annually
An annual report of Ford Motor Corporation states, “Net income a share is computed based upon the average number of shares of capital stock of all classes outstanding. Additional shares of common stock may be issued or delivered in the future on conversion of outstanding convertible debentures,
Morlan Corporation is preparing its December 31, 2010, financial statements. Two events that occurred between December 31, 2010, and March 10, 2011, when the statements were issued, are described below.1. Aliability, estimated at $160,000 at December 31, 2010, was settled on February 26, 2011, at
Tina Bailey, a student of intermediate accounting, was heard to remark after a class discussion on segment reporting, “All this is very confusing to me. First we are told that there is merit in presenting the consolidated results, and now we are told that it is better to show segmental results. I
Foley Corporation has seven industry segments with total revenues as follows. Penley $600 Cheng $ 225Konami 650 Takuhi
Operating profits and losses for the seven industry segments of Foley Corporation are: Penley $ 90 Cheng $ (20)Konami (40)
Identifiable assets for the seven industry segments of Foley Corporation are: Penley $500 Cheng $ 200Konami 550 Takuhi
Answer each of the questions in the following unrelated situations.(a) The current ratio of a company is 5:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $500,000, what is the amount of current liabilities?(b) A company had an average inventory last year of
Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming year are $144,000,000 and $99,000,000 respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present level of 9 times a year to a level of 12 times
Post-Balance-Sheet Events Keystone Corporation issued its financial statements for the year ended December 31, 2010, on March 10, 2011. The following events took place early in 2011.(a) On January 10, 10,000 shares of $5 par value common stock were issued at $66 per share.(b) On March 1, Keystone
Post-Balance-Sheet Events or each of the following subsequent (post-balance-sheet) events, indicate whether a company should(a) Adjust the financial statements,(b) Disclose in notes to the financial statements, or(c) Neither adjusts nor disclose.______ 1. Settlement of federal tax case at a cost
Segmented Reporting) LaGreca Company is involved in four separate industries. The following information is available for each of the four industries. Determine which of the operating segments are reportable based on the: (a) Revenue test. (b) Operating profit (loss) test. (c) Identifiable
Ratio Computation and Analysis; Liquidity) as loan analyst for Madison Bank, you have been presented the following information. Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Inasmuch as your bank has reached its quota for loans of this type, only
Analysis of Given Ratios Robbins Company is a wholesale distributor of professional equipment and supplies. The company?s sales have averaged about $900,000 annually for the 3-year period 2009?2011. The firm?s total assets at the end of 2011 amounted to $850,000. The president of Robbins Company
Ratio Analysis How ser Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for how ser and the industry averages for firms of similar size are presented below. How ser is being reviewed by several entities whose interests
Subsequent Events your firm has been engaged to examine the financial statements of Alma den Corporation for the year 2010. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2005. The
Segmented Reporting Cineplex Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2011. Sales of segments B and C included intersegment sales of $20,000 and $100,000, respectively. (a)
Ratio Computations and Additional Analysis Brad burn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Brad burn and is its current president. The company has been successful, but it
Horizontal and Vertical Analysis presented on page 1370 are comparative balance sheets for the Gilmour Company. (Round to two decimal places) (a) Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders'
Dividend Policy Analysis Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been
General Disclosures; Inventories; Property, Plant, and Equipment Koch Corporation is in the process of preparing its annual financial statements for the fiscal year ended April 30, 2011. Because all of Koch’s shares are traded intrastate, the company does not have to file any reports with the
Disclosures Required in Various Situations Ace Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems. In connection with her examination of Ace’s financial statements for the year ended December 31, 2011, Gloria Rodd, CPA, completed
Disclosures, Conditional and Contingent Liabilities Presented below are three independent situations.Situation 1A company offers a one-year warranty for the product that it manufactures. A history of warranty claims has been compiled, and the probable amounts of claims related to sales for a given
Post-Balance-Sheet Events At December 31, 2010, Coburn Corp. has assets of $10,000,000, liabilities of $6,000,000, common stock of $2,000,000 (representing 2,000,000 shares of $1 par common stock), and retained earnings of $2,000,000. Net sales for the year 2010 were $18,000,000, and net income was
Segment Reporting You are compiling the consolidated financial statements for Winsor Corporation International. The corporation's accountant, Anthony Reese, has provided you with the segment information shown on page 1373. Major Segments of Business WCI conducts funeral service and cemetery
Segment Reporting'Theory Presented below is an excerpt from the financial statements of H. J. Heinz Company. Segment and Geographic Data the company is engaged principally in one line of business'processed food products'which represents over 90% of consolidated sales. Information about the
Segment Reporting—Theory The following article appeared in the Wall Street Journal. WASHINGTON—The Securities and Exchange Commission staff issued guidelines for companies grappling with the problem of dividing up their business into industry segments for their annual reports. An industry
Interim Reporting Snider Corporation, a publicly traded company, is preparing the interim financial data which it will issue to its stockholders and the Securities and Exchange Commission (SEC) at the end of the first quarter of the 2010–2011 fiscal years. Snider’s financial accounting
Treatment of Various Interim Reporting Situations the following statement is an excerpt from the FASB pronouncement related to interim reporting. Interim financial information is essential to provide investors and others with timely information as to the progress of the enterprise. The usefulness
Financial Forecasts an article in Barron’s noted the following. Okay. Last fall, someone with a long memory and an even longer arm reached into that bureau drawer and came out with a moldy cheese sandwich and the equally moldy notion of corporate forecasts. We tried to find out what happened to
Disclosure of Estimates Nancy Tercek, the financial vice president, and Margaret Lilly, the controller, of Romine Manufacturing Company are reviewing the financial ratios of the company for the years 2010 and 2011. The financial vice president notes that the profit margin on sales ratio has
Reporting of Subsequent Events In June 2010, the board of directors for McElroy Enterprises Inc. authorized the sale of $10,000,000 of corporate bonds. Jennifer Grayson, treasurer for McElroy Enterprises Inc., is concerned about the date when the bonds are issued. The company really needs the cash,
Effect of Transactions on Financial Statements and Ratios the transactions listed below relate to Wainwright Inc. You are to assume that on the date on which each of the transactions occurred the corporation’s accounts showed only common stock ($100 par) outstanding, a current ratio of 2.7:1,
Where there is evidence that the utility of inventory goods, as part of their disposal in the ordinary course of business, will be less than cost, what is the proper accounting treatment?
Explain the rationale for the ceiling and floor in the lower of- cost-or-market method of valuing inventories.
Why are inventories valued at the lower-of-cost-or-market? What are the arguments against the use of the LCM method of valuing inventories?
What approaches may be employed in applying the lower-of-cost-or-market procedure? Which approach is normally used and why?
In some instances accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases.
What method(s) might be used in the accounts to record a loss due to a price decline in the inventories? Discuss.
What factors might call for inventory valuation at sales prices (net realizable value or market price)?
Under what circumstances is relative sales value an appropriate basis for determining the price assigned to inventory?
At December 31, 2011, Ashley Co. has outstanding purchase commitments for purchase of 150,000 gallons, at $6.20 per gallon, of a raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower. Assuming that the market price
What are the major uses of the gross profit method?
Distinguish between gross profit as a percentage of cost and gross profit as a percentage of sales prices. Convert the following gross profit percentages based on cost to gross profit percentages based on sales price: 25% and 331⁄3%. Convert the following gross profit percentages based on sales
Adriana Co. with annual net sales of $5 million maintains a markup of 25% based on cost. Adriana’s expenses average 15% of net sales. What is Adriana’s gross profit and net profit in dollars?
A fire destroys all of the merchandise of Assante Company on February 10, 2011. Presented below is information compiled up to the date of the fire.Inventory, January 1, 2011...............................................$ 400,000Sales to February 10,
What conditions must exist for the retail inventory method to provide valid results?
The conventional retail inventory method yields results that are essentially the same as those yielded by the lower-of-cost-or-market method. Explain. Prepare an illustration of how the retail inventory method reduces inventory to market.
(a) Determine the ending inventory under the conventional retail method for the ?furniture department of Mayron Department Stores from the following data (amounts ?in thousands). (b) If the results of a physical inventory indicated an inventory at retail of $295,000, what inferences would youdraw?
Deere and Company reported inventory in its balance sheet as follows:Inventories.................................$1,999,100,000What additional disclosures might be necessary to present the inventory fairly?
Of what significance is inventory turnover to a retail store?
Where can authoritative iGAAP guidance related to inventories be found?
Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP with respect to the accounting for inventories.
LaTour Inc. is based in France and prepares its financial statements in accordance with iGAAP. In 2010, it reported cost of goods sold of €578 million and average inventory of €154 million. Briefly discuss how analysis of LaTour’s inventory turns over ratio (and comparisons to a company
Reed Pentak, finance major, has been following globalization and made the following observation concerning accounting convergence: “I do not see many obstacles concerning development of a single accounting standard for inventories.” Prepare a response to Reed to explain the main obstacle to
What modifications to the conventional retail method are necessary to approximate a LIFO retail flow?
Presented below is information related to Rembrandt Inc.’s inventory. Determine the following:(a) The two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for skis;(b) The cost amount that should be used in the
Floyd Corporation has the following four items in its ending inventory. Determine the final lower-of-cost-or-market inventory value for each item.
Kumar Inc. uses a perpetual inventory system. At January 1, 2011, inventory was $214,000 at both cost and market value. At December 31, 2011, the inventory was $286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under(a) The direct method and(b) The indirect
Bell, Inc. buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $8,000. Bell will group the CDs into three price categories for resale, as indicated below. Determine the cost per CD for each group, using the relative sales value
Kemper Company signed a long-term non-cancelable purchase commitment with a major supplier to purchase raw materials in 2011 at a cost of $1,000,000. At December 31, 2010, the raw materials to be purchased have a market value of $950,000. Prepare any necessary December 31 entry.
Use the information for Kemper Company from BE9-5. In 2011, Kemper paid $1,000,000 to obtain the raw materials which were worth $950,000. Prepare the entry to record the purchase.
Fosbre Corporation’s April 30 inventory was destroyed by fire. January 1 inventory was $150,000, and purchases for January through April totaled $500,000. Sales for the same period were $700,000. Fosbre’s normal gross profit percentage is 35% on sales. Using the gross profit method, estimate
Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000; net markdowns were $7,000; and sales were $147,000. Compute ending inventory at cost using the conventional retail method.
In its 2007 annual report, Wal-Mart reported inventory of $33,685 million on January 31, 2007, and $31,910 million on January 31, 2006, cost of sales of $264,152 million for fiscal year 2007, and net sales of $344,992 million. Compute Wal-Mart’s inventory turnover and the average days to sell
Use the information for Boyne Inc. from BE9-8. Compute ending inventory at cost using the LIFO retail method.
Use the information for Boyne Inc. from BE9-8, and assume the price level increased from 100 at the beginning of the year to 115 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method.
Lower-of-Cost-or-Market The inventory of Oheto Company on December 31, 2011, consists of the following items. (a) Determine the inventory as of December 31, 2011, by the lower-of-cost-or-market method, applying this method directly to each item. (b) Determine the inventory by the
Lower-of-Cost-or-Market Riegel Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2011, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below. Using the
Lower-of-Cost-or-Market Sedato Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. From the information above, determine the amount of Sedato Company inventory.
Lower-of-Cost-or-Market—Journal Entries Dover Company began operations in 2010 and determined its ending inventory at cost and at lower-of-cost-or-market at December 31, 2010, and December 31, 2011. This information is presented below.(a) Prepare the journal entries required at December 31, 2010,
Lower-of-Cost-or-Market'Valuation Account Presented below is information related to Knight Enterprises. (a) From the information, prepare (as far as the data permit) monthly income statements in columnar form for February, March, and April. The inventory is to be shown in the statement at cost, the
Lower-of-Cost-or-Market ?Error Effect LaGreca Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2010, included product X. Relevant per-unit data for product X appear below. There were 1,000 units of product X
Relative Sales Value Method Larsen Realty Corporation purchased a tract of unimproved land for $55,000. This land was improved and subdivided into building lots at an additional cost of $30,000. These building lots were all of the same size but owing to differences in location were offered for sale
Relative Sales Value Method During 2011, Crawford Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Crawford for a lump sum of $60,000, because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs
Purchase Commitments Prater Company has been having difficulty obtaining key raw materials for its manufacturing process. The company therefore signed a long-term non-cancelable purchase commitment with its largest supplier of this raw material on November 30, 2011, at an agreed price of $400,000.
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