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intermediate accounting volume 1
Intermediate Accounting 11th International Edition David Spiceland, Mark W. Nelson, Wayne M. Thomas - Solutions
Why are holding gains and losses treated differently for trading securities and securities available-for-sale?
What is “comprehensive income”? Its composition varies from company to company but may include which items related to available-for-sale investments that are not included in net income?
Reporting an investment at its fair value means adjusting its carrying amount for changes in fair value after its acquisition (or since the last reporting date if it was held at that time). Such changes are called unrealized holding gains and losses because they haven’t yet been realized through
When a debt investment is acquired to be held for an unspecified period of time as opposed to being held to maturity, it is reported at the fair value of the investment securities on the reporting date. Why?
Does GAAP distinguish between fair values that are readily determinable from current market prices versus those needing to be calculated based on the company’s own assumptions? Explain how a user will know about the reliability of the inputs used to determine fair value.
When market rates of interest rise after a fixed-rate security is purchased, the value of the now-below-market, fixed-interest payments declines, so the market value of the investment falls. On the other hand, if market rates of interest fall after a fixed-rate security is purchased, the
All investments in debt securities are classified for reporting purposes in one of three categories, and can be accounted for differently depending on the classification. What are these three categories?
Under U.S. GAAP, litigation costs to successfully defend an intangible right are capitalized and amortized over the remaining useful life of the related intangible. How are these costs typically accounted for under IFRS?
Briefly explain the differences between U.S. GAAP and IFRS in the measurement of an impairment loss for goodwill.
Briefly explain the difference between U.S. GAAP and IFRS in the measurement of an impairment loss for property, plant, and equipment and finite-life intangible assets.
Identify any differences between U.S. GAAP and International Financial Reporting Standards in the subsequent valuation of property, plant, and equipment and intangible assets.
Explain the differences in the accounting treatment of repairs and maintenance, additions, improvements, and rearrangements.
Explain what is meant by the impairment of the value of property, plant, and equipment and intangible assets.How should these impairments be accounted for?
Explain the steps required to correct an error in accounting for property, plant, and equipment and intangible assets that is discovered in a year subsequent to the year the error was made.
Explain the accounting treatment and disclosures required when a change is made in depreciation method.
Explain the accounting treatment required when a change is made to the estimated service life of equipment.
What are some of the simplifying conventions a company can use to calculate depreciation for partial years?
Compare and contrast amortization of intangible assets with depreciation and depletion.
Define depletion and compare it with depreciation.
Briefly explain the differences and similarities between the group approach and composite approach to depreciating aggregate assets.
When an item of property, plant, and equipment is disposed of, how is gain or loss on disposal computed?
What are some factors that could explain the predominant use of the straight-line depreciation method?
Why are time-based depreciation methods used more frequently than activity-based methods?
Briefly differentiate between the straight-line depreciation method and accelerated depreciation methods.
Briefly differentiate between activity-based and time-based allocation methods.
What is meant by depreciable base? How is it determined?
Discuss the factors that influence the estimation of service life for a depreciable asset.
Identify and define the three characteristics of an asset that must be established to determine periodic depreciation, depletion, or amortization.
Depreciation is a process of cost allocation, not valuation. Explain this statement.
Explain the similarities in and differences among depreciation, depletion, and amortization.
(Based on Appendix 10) Explain the difference between the successful efforts and the full-cost methods of accounting for oil and gas exploration costs.
Identify any differences between U.S. GAAP and International Financial Reporting Standards in the treatment of software development costs.
Identify any differences between U.S. GAAP and International Financial Reporting Standards in the treatment of research and development expenditures.
Identify any differences between U.S. GAAP and International Financial Reporting Standards in accounting for government grants received.
Explain the difference in the accounting treatment of the cost of developed technology and the cost of in-process R&D in an acquisition.
Explain the accounting treatment of costs incurred to develop computer software.
Explain the accounting treatment of equipment acquired for use in R&D projects.
Define R&D according to U.S. GAAP.
Explain the difference between the specific interest method and the weighted-average method in determining the amount of interest to be capitalized.
Define average accumulated expenditures and explain how the amount is computed.
In what situations is interest capitalized?
Identify the two exceptions to valuing property, plant, and equipment and intangible assets acquired in nonmonetary exchanges at the fair value of the asset(s) given up.
What is the basic principle for valuing property, plant, and equipment and intangible assets acquired in exchange for other nonmonetary assets?
What account is credited when a company receives donated assets? What is the rationale for this choice?
Explain how property, plant, and equipment and intangible assets acquired through donation are valued.
Explain how assets acquired in exchange for equity securities are valued.
When an asset is acquired and a note payable is assumed, explain how acquisition cost of the asset is determined when the interest rate for the note is less than the current market rate for similar notes.
Explain the method generally used to allocate the cost of a lump-sum purchase to the individual assets acquired.
What is goodwill, and how is it measured?
Briefly summarize the accounting treatment for intangible assets, explaining the difference between purchased and internally developed intangible assets.
Identify the costs associated with the initial valuation of a developed natural resource.
What is included in the original cost of property, plant, and equipment and intangible assets acquired in an exchange transaction?
Explain the difference between tangible and intangible long-lived, revenue-producing assets.
(Based on Appendix 9) Explain how purchase commitments are recorded for the lower of contract price or market price.
(Based on Appendix 9) Define purchase commitments. What is the advantage(s) of these agreements to buyers?
Identify any differences between U.S. GAAP and IFRS when applying the lower of cost or net realizable value rule to inventory valuation.
It is discovered in 2024 that ending inventory in 2022 was understated. What is the effect of the understatement on the following:2022: Cost of goods sold Net income Ending retained earnings 2023: Net purchases Cost of goods sold Net income Ending retained earnings
Explain the accounting treatment of material inventory errors discovered in an accounting period subsequent to the period in which the error is made.
When a company changes its inventory method to LIFO, an exception is made for the way accounting changes usually are reported. Explain the difference in the accounting treatment of a change to the LIFO inventory method from other inventory method changes.
Describe the accounting treatment for a change in inventory method other than to LIFO.
Explain the difference between the retail inventory method using LIFO and the dollar-value LIFO retail method.
Discuss the treatment of freight-in, purchase returns, purchase discounts, normal spoilage, sales returns, sales discounts, and employee discounts in the application of the retail inventory method.
Explain the LIFO retail inventory method.
What is the conventional retail method?
Explain how to estimate the average cost of inventory when using the retail inventory method.
Define each of the following retail terms: initial markup, additional markup, markup cancellation, markdown, markdown cancellation.
Both the gross profit method and the retail inventory method provide a way to estimate ending inventory. What is the main difference between the two estimation techniques?
Explain the retail inventory method of estimating ending inventory.
The Rider Company uses the gross profit method to estimate ending inventory and cost of goods sold. The cost percentage is determined based on historical data. What factors could cause the estimate of ending inventory to be overstated?
Explain the gross profit method of estimating ending inventory.
Describe the typical approach for recording inventory write-downs.
What are the various levels of aggregation to which the LCNRV and LCM approaches can be applied?
Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or market(LCM) approach to valuing inventory.
Identify any differences between U.S. GAAP and International Financial Reporting Standards in the methods allowed to value inventory.
The Austin Company uses the dollar-value LIFO inventory method with internally developed price indexes.Assume that ending inventory at year-end cost has been determined. Outline the remaining steps used in the dollar-value LIFO computations.
Identify two advantages of dollar-value LIFO compared with unit LIFO.
What is a LIFO inventory pool? How is the cost of ending inventory determined when pools are used?
Describe the ratios used by financial analysts to monitor a company’s investment in inventories.
Explain what is meant by the Internal Revenue Service conformity rule with respect to the inventory method choice.
Explain why proponents of LIFO argue that it provides a better match of revenue and expenses. In what situation would it not provide a better match?
It’s common in the electronics industry for unit costs of raw materials inventories to decline over time. In this environment, explain the difference between LIFO and FIFO in terms of the effect on cost of goods sold and ending inventory. Assume that inventory quantities remain the same for the
Identify four inventory costing methods for assigning cost to ending inventory and cost of goods sold and briefly explain the difference in the methods.
The Esquire Company employs a periodic inventory system. Indicate the effect (increase or decrease) of the following items on cost of goods sold:1. Beginning inventory 2. Purchases 3. Ending inventory 4. Purchase returns 5. Freight-in
Distinguish between the gross and net methods of accounting for purchase discounts.
What is a consignment arrangement? Explain the accounting treatment of goods held on consignment.
The Boxcar Company shipped inventory to Depot Corporation on December 28, 2024. Depot received the shipment on January 3, 2025. December 31 is the fiscal year-end for both companies. The inventory was shipped f.o.b. shipping point. Explain the difference in the accounting treatment of the inventory
The Cloud Company employs a perpetual inventory system, and the Sky Corporation uses a periodic system.Describe the differences between the two systems in accounting for the following events: (1) purchase of inventory, (2) sale of inventory, (3) return of inventory to supplier, and (4) payment of
What is the main difference between a perpetual inventory system and a periodic inventory system? Which system is used more often by major companies?
Describe the three types of inventory of a manufacturing company.
How did the CARES Act affect accounting for loan modifications as Troubled Debt Restructurings?
(Based on Appendix 7B) Marshall Companies, Inc., holds a note receivable from a former subsidiary. Due to financial difficulties, the former subsidiary has been unable to pay the previous year’s interest on the note. Marshall agreed to restructure the debt by both delaying and reducing remaining
(Based on Appendix 7A) How is a petty cash fund established? How is the fund replenished?
(Based on Appendix 7A) In a two-step bank reconciliation, identify the items that might be necessary to adjust the bank balance to the corrected cash balance. Identify the items that might be necessary to adjust the book balance to the corrected cash balance.
What are the key variables that influence a company’s investment in receivables? Describe the two ratios used by financial analysts to monitor a company’s investment in receivables.
What is meant by the discounting of a note receivable? Describe the four-step process used to account for discounted notes.
Do U.S. GAAP and IFRS differ in the criteria they use to determine whether a transfer of receivables is treated as a sale? Explain.
Explain any possible differences between accounting for an account receivable factored with recourse compared with one factored without recourse.
Is any special accounting treatment required for the assigning of accounts receivable in general as collateral for debt?
If a company has accounts receivable from ordinary customers and from related parties, can they combine those receivables in their financial statements under U.S. GAAP? Under IFRS?
Briefly explain the difference between the income statement approach and the balance sheet approach to estimating bad debts.
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