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Intermediate Accounting 14th Edition Kieso, weygandt and warfield. - Solutions

The following financial statement was prepared by employees of Walters Corporation. Note 1: New styles and rapidly changing consumer preferences resulted in a $71,500 loss on the disposal of discontinued styles and related accessories.Note 2: The corporation sold an investment in marketable
As audit partner for Grupo and Rijo, you are in charge of reviewing the classification of unusual items that have occurred during the current year. The following material items have come to your attention.1. A merchandising company incorrectly overstated its ending inventory 2 years ago. Inventory
Willie Nelson, Jr., controller for Jenkins Corporation, is preparing the company’s financial statements at year-end. Currently, he is focusing on the income statement and determining the format for reporting comprehensive income. During the year, the company earned net income of $400,000 and had
Counting Crows Inc. provided the following information for the year 2012. AccountingPrepare (a) a single step income statement for 2012, (b) a retained earnings statement for 2012, and (c) a statement of comprehensive income using the second income statement format. Shares outstanding during 2012
Your client took accounting a number of years ago and was unaware of comprehensive income reporting. He is not convinced that any accounting standards exist for comprehensive income.InstructionsIf your school has a subscription to the FASB Codification, go to aahq.org/asclogin.cfm to log in and
The Coca-Cola Company and PepsiCo, Inc. InstructionsGo 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 type of income format(s) is used by these two companies? Identify any differences in
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.InstructionsRefer to P&G’s financial statements and the accompanying notes to answer the following questions.(a) What type of income statement format
The Z-score bankruptcy prediction model uses balance sheet and income information to arrive at a Z-Score, which can be used to predict financial distress: EBIT is earnings before interest and taxes. MV Equity is the market value of common equity, which can be determined by multiplying stock
Dresser Industries provides products and services to oil and natural gas exploration, production, transmission and processing companies. A recent income statement is reproduced below.Dollar amounts are in millions. InstructionsAssume that 177,636,000 shares of stock were issued and outstanding.
One of the more closely watched ratios by investors is the price/earnings or P/E ratio. By dividing price per share by earnings per share, analysts get insight into the value the market attaches to a company’s earnings. More specifically, a high P/E ratio (in comparison to companies in the same
In this simulation, you are asked to compute various income amounts. Assume a tax rate of 30% and 100,000 shares of common stock outstanding during the year. Prepare responses to allparts.
Discuss the appropriate treatment in the income statement for the following items:(a) Loss on discontinued operations.(b) Non-controlling interest allocation.
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?
Presented below is information related to Viel Company at December 31, 2012, the end of its first year of operations.Sales revenue $310,000Cost of goods sold 140,000Selling and administrative expenses 50,000Gain on sale of plant assets 30,000Unrealized gain on
On the next page is the income statement for a British company, Avon Rubber plc. Avon prepares its financial statements in accordance with IFRS. Instructions(a) Review the Avon Rubber income statement and identify at least three differences between the IFRS income statement and an income
Your client took accounting a number of years ago and was unaware of comprehensive income reporting. He is not convinced that any accounting standards exist for comprehensive income.InstructionsAccess the IFRS authoritative literature at the IASB website (eifrs.iasb.org/). When you have accessed
The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at corporate.marksandspencer. com/documents/publications/2010/Annual_Report_2010.InstructionsRefer to M&S’s financial statements and the accompanying notes to answer the
How are FASB preliminary views and FASB exposure drafts related to FASB “statements”?
What is the difference between the Codification and the Codification Research System?
What are the primary advantages of having a Codification of generally accepted accounting principles?
What are the sources of pressure that change and influence the development of GAAP?
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?
Presented below are four statements which you are to identify as true or false. If false, explain why the statement is false.1. GAAP is the term used to indicate the whole body of FASB authoritative literature.2. Any company claiming compliance with GAAP must comply with most standards and
Presented below are four statements which you are to identify as true or false. If false, explain why the statement is false.1. The objective of financial statements emphasizes a stewardship approach for reporting financial information.2. The purpose of the objective of financial reporting is to
Answer the following multiple-choice questions.1. GAAP stands for:(a) Governmental auditing and accounting practices.(b) Generally accepted attest principles.(c) Government audit and attest policies.(d) Generally accepted accounting principles.2. Accounting standard-setters use the following
Presented below are comments made in the financial press. InstructionsPrepare 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 derivatives accounting standard and encouraged
What is the benefit of a single set of high-quality accounting standards?
Briefly describe FASB/IASB convergence process and the principles that guide their convergence efforts.
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 IASB’s Framework for the Preparation and Presentation of Financial Statements.InstructionsAccess the IASB Framework
The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed atcorporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010.InstructionsRefer to M&S’s financial statements and the accompanying notes to answer the
In this simulation, you are asked questions regarding accounting principles. Prepare responses to allparts.
What is the primary objective of financial reporting?
Briefly describe the two fundamental qualities of useful accounting information.
What are the enhancing qualities of the qualitative characteristics? What is the role of enhancing qualities in the conceptual framework?
What is the fair value option? Explain how use of the fair value option reflects application of the fair value principle.
Briefly describe the fair value hierarchy.
Selane Eatery operates a catering service specializing in business luncheons for large corporations. Selane requires customers to place their orders 2 weeks in advance of the scheduled events. Selane bills its customers on the tenth day of the month following the date of service and requires that
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 December 31, 2012. The president objects,
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 are conservative in nature. State your opinion with respect to each of the policies listed.(a) The company gives a 2-year warranty
Match the qualitative characteristics below with the following statements.1. Relevance 2. Faithful representation 3. Predictive value 4. Confirmatory value 5. Comparability6. Completeness7. Neutrality8. Timeliness(a) Quality of information that permits users to identify similarities in and
Match the qualitative characteristics below with the following statements.1. Timeliness 2. Completeness 3. Free from error 4. Understandability 5. Faithful representation6. Relevance7. Neutrality8. Confirmatory value(a) Quality of information that assures users that information represents
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 GE stock, which trades on the NYSE. (3) It
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 information internally.(c) Willis Company does
What accounting assumption, principle, or constraint would Target Corporation use in each of the situations below?(a) Target was involved in litigation over the last year. This litigation is disclosed in the financial statements.(b) Target allocates the cost of its depreciable assets over the life
Explain how you would decide whether to record each of the following expenditures as an asset or an expense. Assume all items are material.(a) Legal fees paid in connection with the purchase of land are $1,500.(b) Eduardo, Inc. paves the driveway leading to the office building at a cost of
Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position.(a) Accounting rule-making that relies on a body of concepts will result in useful and consistent pronouncements.(b) General-purpose financial
Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position.(a) The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability.(b) Relevant information
SFAC No. 8 identifies the qualitative characteristics that make accounting information useful. Presented below are a number of questions related to these qualitative characteristics and underlying constraints.(a) What is the quality of information that enables users to confirm or correct prior
The qualitative characteristics that make accounting information useful for decision-making purposes are as follows.Relevance Neutrality VerifiabilityFaithful representation Completeness UnderstandabilityPredictive value Timeliness ComparabilityConfirmatory value
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 principle 7. Expense recognition principle8. Full
Presented below are a number of operational guidelines and practices that have developed over time.InstructionsSelect the assumption, principle, or constraint that most appropriately justifies these procedures and practices.(Do not use qualitative characteristics.)(a) Fair value changes are not
Presented below are a number of facts related to Weller, Inc. Assume that no mention of these facts was made in the financial statements and the related notes.InstructionsAssume that you are the auditor of Weller, Inc. and that you have been asked to explain the appropriate accounting and related
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 supervisors have indicated that these theoretical
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 resolving accounting controversies. He believes
After the presentation of your report on the examination of 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 revenue is earned with the publication of every
On June 5, 2011, Argot Corporation signed a contract with Lopez Associates under which Lopez agreed (1) to construct an office building on land owned by Argot, (2) to accept responsibility for procuring financing for the project and finding tenants, and (3) to manage the property for 35 years. The
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 period. In some situations, costs are recognized
Accountants try to prepare income statements that are as accurate as possible. A basic requirement in preparing accurate income statements is to record costs and revenues properly. Proper recognition of costs and revenues requires that costs resulting from typical business operations be recognized
Daniel Barenboim sells and erects shell houses, that is, frame structures that are completely finished on the outside but are unfinished on the inside except for flooring, partition studding, and ceiling joists. Shell houses are sold chiefly to customers who are handy with tools and who have time
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 it is better to allocate the expense of
The AICPA Special Committee on Financial Reporting proposed the following constraints related to financial reporting.1. Business reporting should exclude information outside of management’s expertise or for which management is not the best source, such as information about competitors.2.
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 operations and spent $800 on golf clubs,
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 special meanings in accounting relative to
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 financial statements?(b) Which company has the
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.InstructionsRefer to P&G’s financial statements and the accompanying notes to answer the following questions.(a) Using the notes to the consolidated
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 101). This SAB deals with various
In this simulation, you are asked to address questions regarding the FASB conceptual framework. Prepare responses to allparts.
What two assumptions are central to the IASB conceptual framework?
Do the IASB and FASB conceptual frameworks differ in terms of the role of financial reporting? Explain.
What are some of the differences in elements in the IASB and FASB conceptual frameworks?
What are some of the challenges to the FASB and IASB in developing a converged conceptual framework?
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 FASB and IASB have issued converged concepts
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 IFRS. She has also heard that certain terms have special meanings in accounting relative to everyday use. She would like you to explain
The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. InstructionsRefer to M&S’s financial statements and the accompanying notes to answer the
On January 1, 2012, Lombard Co. sells property for which it had paid $690,000 to Sargent Company, receiving in return Sargent’s zero-interest-bearing note for $1,000,000 payable in 5 years. What entry would Lombard make to record the sale, assuming that Lombard frequently sells similar items of
Moon Hardware is planning to factor some of its receivables. The cash received will be used to pay for inventory purchases. The factor has indicated that it will require “recourse” on the sold receivables. Explain to the controller of Moon Hardware what “recourse” is and how the recourse
You are evaluating Woodlawn Racetrack for a potential loan. An examination of the notes to the financial statements indicates restricted cash at year-end amounts to $100,000. Explain how you would use this information in evaluating Woodlawn’s liquidity
Wilton, Inc. had net sales in 2012 of $1,400,000. At December 31, 2012, before adjusting entries, the balances in selected accounts were: Accounts Receivable $250,000 debit, and Allowance for Doubtful Accounts $2,400 credit. If Wilton estimates that 2% of its net sales will prove to be
Finman Company designated Jill Holland as petty cash custodian and established a petty cash fund of $200. The fund is reimbursed when the cash in the fund is at $15. Petty cash receipts indicate funds were disbursed for office supplies $94 and miscellaneous expense $87. Prepare journal entries for
Presented below are a number of independent situations.InstructionsFor each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain the rationale.1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance
The chief accountant for Dollywood Corporation provides you with the following list of accounts receivable written off in the current year. Dollywood Corporation follows the policy of debiting Bad Debt Expense as accounts are written off. The chief accountant maintains that this procedure is
The trial balance before adjustment for Sinatra Company shows the following balances. InstructionsUsing the data above, give the journal entries required to record each of the following cases. (Each situation is independent.)1. To obtain additional cash, Sinatra factors without recourse $20,000 of
On July 1, 2012, Rentoul Inc. made two sales.1. It sold land having a fair value of $900,000 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,416,163. The land is carried on Rentoul’s books at a cost of $590,000. 2. It rendered services in exchange for a 3%,
On December 31, 2011, Hurly Co. performed environmental consulting services for Cascade Co. Cascade was short of cash, and Hurly Co. agreed to accept a $300,000 zero-interest-bearing note due December 31, 2013, as payment in full. Cascade is somewhat of a credit risk and typically borrows funds at
McMann, Inc. decided to establish a petty cash fund to help ensure internal control over its small cash expenditures. The following information is available for the month of April.1. On April 1, it established a petty cash fund in the amount of $200.2. A summary of the petty cash expenditures made
Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Manilow's Accounts Receivable account was $555,000 and the Allowance for Doubtful Accounts had a credit balance of $40,000. The year-end balance reported in the balance
The Flatiron Pub provides catering services to local businesses. The following information was available for The Flatiron for the years ended December 31, 2011 and 2012. Flatiron management is preparing for a meeting with its bank concerning renewal of a loan and has collected the following
As the new staff person in your company’s treasury department, you have been asked to conduct research related to a proposed transfer of receivables. Your supervisor wants the authoritative sources for the following items that are discussed in the securitization agreement.InstructionsIf your
Occidental Petroleum Corporation reported the following information in a recent annual report. Instructions(a) What items other than coin and currency may be included in "cash"?(b) What items may be included in "cash equivalents"?(c) What are compensating balance arrangements, and how should they
Microsoft is the leading developer of software in the world. To continue to be successful Microsoft must generate new products, which requires significant amounts of cash. Shown below is the current asset and current liability information from Microsoft??s June 30, 2009, balance sheet (in
The Coca-Cola Company and PepsiCo, Inc.InstructionsGo to the book’s companion website and use the information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc.(a) What were the cash and cash equivalents reported by Coca-Cola and PepsiCo at the end of
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.InstructionsRefer to P&G’s financial statements and the accompanying notes to answer the following questions.(a) What criteria does P&G use to classify
In this simulation, you are asked to address various requirements regarding the accounting for receivables. Prepare responses to allparts.
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?
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 expenses.
Refer to the definition of assets on page 216. Discuss how a leased building might qualify as an asset of the lessee (tenant) under this definition.
Each of the following items must be considered in preparing a statement of cash flows. Indicate where each item is to be reported in the statement, if at all. Assume that net income is reported as $90,000.(a) Accounts receivable increased from $34,000 to $39,000 from the beginning to the end of
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; Cash $30,000. Prepare the current assets
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 $4,000; Equity Investments (trading)
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-term investments section of the balance sheet.

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