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financial reporting
Financial Reporting And Analysis Using Financial Accounting Information 11th Edition Charles H. Gibson - Solutions
How does the declaration of a cash dividend affect the financial statements? How does the payment of a cash dividend affect the financial statements?
In the future, we should expect few presentations of a “cumulative effect of change in accounting principle.”Comment.
Why are unusual or infrequent items disclosed before tax?
A health food distributor selling wholesale dairy products and vitamins decides to discontinue the division that sells vitamins. How should this discontinuance be classified on the income statement?
Why is the equity in earnings of nonconsolidated subsidiaries sometimes a problem in profitability analysis?Discuss with respect to income versus cash flow.
Give three examples of unusual or infrequent items that are disclosed separately. Why are they shown separately? Are they presented before or after tax? Why or why not?
Which of the following would be classified as extraordinary?a. Selling expensee. Income tax expenseb. Interest expensef. Loss from prohibition of red dyec. Gain on the sale of marketable securities g. Loss from the write-down of inventoryd. Loss from flood
What are extraordinary items? How are they shown on the income statement? Why are they shown in that manner?
Describe the account Accumulated Other Comprehensive Income.
Which depreciation method will result in the most depreciation over the life of an asset?Q-3-37. Should depreciation be recognized on a building in a year in which the cost of replacing the building rises?Explain.
An accelerated system of depreciation is often used for income tax purposes but not for financial reporting. Why?
What are the three factors usually considered when computing depreciation?
Describe depreciation, amortization, and depletion. How do they differ?
How does a company recognize, in an informal or a formal way, that it has guaranteed commitments to future contributions to an ESOP to meet debt-service requirements?
What are some possible disadvantages of an employee stock ownership plan?
Why are commercial lending institutions, insurance companies, and mutual funds willing to grant loans to an employee stock ownership plan at favorable rates?
Describe employee stock ownership plans (ESOPs).
Assume that an equity-oriented deferred compensation plan involves cash or a subsequent election of either cash or stock. Describe the presentation of this plan on the balance sheet.
Describe quasi-reorganization.
Assume that a city donated land to a company. What accounts would be affected by this donation, and what would be the value?
Describe donated capital.
What is redeemable preferred stock? Why should it be included with debt for purposes of financial statement analysis?
Describe the item Unrealized Decline in Market Value of Noncurrent Equity Investments.
DeLand Company owns 100% of Little Florida, Inc. Will DeLand Company show a minority interest on its balance sheet? Would the answer change if it owned only 60%? Will there ever be a case in which the subsidiary, Little Florida, is not consolidated?
When would minority interest be presented on a balance sheet?
How is an unconsolidated subsidiary presented on a balance sheet?
A firm, with no opening inventory, buys 10 units at $6 each during the period. In which accounts might the $60 appear on the financial statements?
What is treasury stock? Why is it deducted from stockholders’ equity?
Describe the account Unrealized Exchange Gains or Losses.
Explain these preferred stock characteristics:a. Accumulation of dividendsb. Participation in excess of stated dividend ratec. Convertibility into common stockd. Callability by the corporatione. Preference in liquidation
Classify each of the following as a (CA) current asset, (NA) noncurrent asset, (CL) current liability, (NL)noncurrent liability, or (E) equity account. Choose the best or most frequently used classification.a. Supplies k. Wages payableb. Notes receivable l. Mortgage bonds payablec. Unearned
Explain how the issuance of a convertible bond can be a very attractive means of raising common equity funds.
Many assets are presented at historical cost. Why does this accounting principle cause difficulties in financial statement analysis?
To be conservative, how should minority interest on the balance sheet be handled for primary analysis?
A bond carries a stated rate of interest of 6% and par of $1,000. It matures in 20 years. It is sold at 83(83% of $1,000, or $830).a. Under normal conditions, why would the bond sell at less than par?b. How would the discount be disclosed on the statements?
A rental agency collects rent in advance. Why is the rent collected treated as a liability?
For reporting purposes, management prefers higher profits; for tax purposes, lower taxable income is desired. To meet these goals, firms often use different methods of depreciation for tax and reporting purposes. Which depreciation method is best for reporting and which for tax purposes? Why?
What is depreciation? Which tangible assets are depreciated, and which are not? Why?
What types of inventory will a retailing firm have? A manufacturing firm?
Differentiate between accounts receivable and accounts payable.
Differentiate between marketable securities and long-term investments. What is the purpose of owning each?
Usually, current assets are listed in a specific order, starting with cash. What is the objective of this order of listing?
Classify the following as (CA) current asset, (IV) investments, (IA) intangible asset, or (TA) tangible asset:a. Land g. Toolsb. Cash h. Prepaidsc. Copyrights i. Buildingsd. Marketable securities j. Accounts receivablee. Goodwill k. Long-term investment in stockf. Inventories l. Machinery
Are the following balance sheet items (A) assets, (L) liabilities, or (E) stockholders’ equity?a. Cash dividends payable k. Retained earningsb. Mortgage notes payable l. Donated capitalc. Investments in stock m. Accounts receivabled. Cash n. Taxes payablee. Land o. Accounts payablef. Inventory p.
Name and describe the three major categories of balance sheet accounts.
Comment on the impact on U.S. GAAP if the short-term convergence and the major topics are completed.
Describe the Norwalk Agreement.
Describe the filing deadline for Form 10-K.
Consolidation rules are similar between countries. Comment.
Describe how a company could be required to consolidate another company in which it has no or minor voting stock.
Indicate the two approaches to presenting consolidated statements.
Private companies are not under Sarbanes-Oxley. Why do some private companies follow the law?
Under Sarbanes-Oxley, management must include what report with the audited statements?
Under Sarbanes-Oxley, the auditing firm will include which two reports with the audited statements?(Note: These two reports can be combined into one report.)
Why is the COSO report on internal control systems important under requirements of the Sarbanes-Oxley Act?
Describe the Treadway Commission.
Where must a company’s code of ethics be made available?
What is the basic guideline for consolidation?
Consolidated statements may be issued to show financial position as it would appear if two or more companies were one entity. What is the objective of these statements?
Describe the purchase method of accounting for a business combination.
Considering the EMH, how could abnormal returns be achieved?
Considering the EMH, it is best if financial disclosure is made in the body of the financial statements.Comment.
Why would the use of insider information be of concern if the market is efficient?
Identify the usual forms of a business entity and describe the ownership characteristic of each.
The NYSE has trouble competing with many foreign exchanges in the listing of foreign stocks. Discuss.
Why aren’t all transactions recorded in the general journal?
Why are adjusting entries necessary?
A typical accrual recognition for salaries is as follows:Salaries Expense $1,000 (increase)Salaries Payable 1,000 (increase)Explain how the matching concept applies in this situation.
Define the following:a. Permanent accountsb. Temporary accounts
What is the relationship between the accounting equation and the double-entry system of recording transactions?
Identify the basic accounting equation.
What is the relationship between ethics and law?
Describe the relationship between the terms ethics and morals.
Where do we find a description of a firm’s accounting policies?
Why review notes to financial statements?
Can cash dividends be paid from retained earnings? Comment.
What are the three major categories on a balance sheet?
Which two principal financial statements explain the difference between two balance sheet dates? Describe how these financial statements explain the difference between two balance sheet dates.
What are the major sections of a statement of cash flows?
Comment on the typical number of financial pages in a summary annual report as compared to a full annual report.
If a company issues a summary annual report, where can the more extensive financial information be found?
Briefly describe a summary annual report.
Describe a proxy statement.
Which of the following events, occurring subsequent to the balance sheet date, would require a note?a. Major fire in one of the firm’s plantsb. Increase in competitor’s advertisingc. Purchase of another companyd. Introduction of new management techniquese. Death of the corporate treasurer
What are contingent liabilities? Are lawsuits against the firm contingent liabilities?
Why are notes to statements necessary?
What are the three principal financial statements of a corporation? Briefly describe the purpose of each statement.
Are all financial statements presented with some kind of an accountant’s report? Explain.
What type of opinion is expressed on a compilation?
Will the accountant express an opinion on reviewed financial statements? Describe the accountant’s report for reviewed financial statements.
Describe an auditor’s review of financial statements.
Why do some unqualified opinions have explanatory paragraphs?
What is the purpose of the SEC’s integrated disclosure system for financial reporting?
What are the roles of management and the auditor in the preparation and integrity of the financial statements?
Name the type of opinion indicated by each of the following situations:a. There is a material uncertainty.b. There was a change in accounting principle.c. There is no material scope limitation or material departure from GAAP.d. The financial statements do not present fairly the financial position,
Why did the FASB commence the Accounting Standards CodificationTM project?
Briefly describe the Public Company Accounting Oversight Board (PCAOB).
Comment on the materiality implications of the Sarbanes-Oxley Act.
Describe the book Accounting Trends & Techniques.
If its accounting period ends December 31, would a company be using a natural business year or a fiscal year?
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