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intermediate accounting volume 1
Intermediate Accounting 11th International Edition David Spiceland, Mark W. Nelson, Wayne M. Thomas - Solutions
Define the ECL model for accounts receivable. How does it differ from the CECL model?
Define the CECL model for accounts receivable. On what does it base the estimate of the allowance for uncollectible accounts?Q 7-12 How did the CARES Act affect adoption of the CECL model?
Explain the typical way companies account for uncollectible accounts receivable (bad debts). When is it permissible to record bad debt expense only at the time when receivables actually prove uncollectible?
Briefly explain the accounting treatment for sales returns.
Distinguish between the gross and net methods of accounting for cash discounts.
Explain the difference between a trade discount and a cash discount.
Do U.S. GAAP and IFRS differ in how bank overdrafts are treated? Explain.
Define a compensating balance. How are compensating balances reported in financial statements?
Is restricted cash included in the reconciliation of cash balances on a statement of cash flows? Explain.
What are the responsibilities of management described in Section 404 of the Sarbanes-Oxley Act? What are the responsibilities of the company’s auditor?
Explain the primary functions of internal controls procedures in the accounting area. What is meant by separation of duties?
Define cash equivalents.
When is an estimated loss on a long-term contract recognized, both for contracts that recognize revenue over time and those that recognize revenue at the point in time the contract is completed?
Periodic billings to the customer for a long-term construction contract are recorded as billings on a construction contract. How is this account reported in the balance sheet?
Explain how to account for revenue on a long-term contract over time as opposed to at a point in time. Under what circumstances should revenue be recognized at the point in time a contract is completed?
Explain the difference between contract assets, contract liabilities, and accounts receivable.
Must bad debt expense be reported on its own line on the income statement? If not, how should it be disclosed?
When does a company recognize revenue for a sale of a gift card?
When does a consignor typically recognize revenue for a consignment sale?
How might a license for symbolic intellectual property be treated differently under IFRS as compared to U.S.GAAP?
When does a company typically recognize revenue for a bill-and-hold sale?
In a franchise arrangement, what are a franchisor’s typical performance obligations?
When is revenue recognized with respect to licenses?
What are three methods for estimating stand-alone selling prices of goods and services that normally are not sold separately?
When should a seller view a payment to its customer as a refund of part of the price paid by the customer for the seller’s products or services?
Under what circumstances should sellers consider the time value of money when recognizing revenue?
What is the difference between a principal and an agent for determining the amount of revenue to recognize?
Is a customer’s right to return merchandise a performance obligation of the seller? How should sellers account for a right of return?
How are sellers constrained from recognizing variable consideration, and under what circumstances does the constraint apply?
Is variable consideration included in the calculation of a contract’s transaction price? If so, how is the amount of variable consideration estimated?
When a contract includes an option to buy additional goods or services, when does that option give rise to a performance obligation?
How might the definition of “probable” affect determining whether a contract exists under IFRS as compared to U.S. GAAP?
What must a contract include for the contract to exist for purposes of revenue recognition?
How does a seller allocate a transaction price to a contract’s performance obligations?
What characteristics make a good or service a performance obligation?
We recognize service revenue either at one point in time or over a period of time. Explain the rationale for recognizing service revenue using these two approaches.
What criteria determine whether a company can recognize revenue over time?
What indicators suggest that a performance obligation has been satisfied at a single point in time?
What are the five key steps a company follows to apply the core revenue recognition principle?
Explain how the time value of money concept is incorporated into the valuation of certain leases.
Compute the required annual payment in Question 5–13.
Assume that you borrowed $500 from a friend and promised to repay the loan in five equal annual installments beginning one year from today. Your friend wants to be reimbursed for the time value of money at an 8% annual rate. Explain how you would compute the required annual payment.
What is a deferred annuity?
Prepare a time diagram for the present value of a four-year annuity due of $200. Assume an interest rate of 10%per year.
Prepare a time diagram for the present value of a four-year ordinary annuity of $200. Assume an interest rate of 10% per year.
Explain the relationship between Table 2, Present Value of $1, and Table 4, Present Value of an Ordinary Annuity of $1.
Explain the difference between an ordinary annuity and an annuity due.
What is an annuity?
Explain the difference between monetary and nonmonetary assets and liabilities.
Define the present value of a single amount.
Identify the three items of information necessary to calculate the future value of a single amount.
What would cause the annual interest rate to be different from the annual effective rate or yield?
Explain compound interest.
Define interest.
[Based on Appendix 4] What is the primary difference between interim reports under IFRS and U.S. GAAP?
Interim reports are issued for periods of less than a year, typically as quarterly financial statements. Should these interim periods be viewed as separate periods or integral parts of the annual period?
Show the DuPont framework’s calculation of the three components of return on equity. What information about a company do these ratios offer?
Show the calculation of the following profitability ratios: (1) the profit margin on sales, (2) the return on assets, and (3) the return on equity. What information about a company do these ratios offer?
Show the calculation of the following activity ratios: (1) the receivables turnover ratio, (2) the inventory turnover ratio, and (3) the asset turnover ratio. What information about a company do these ratios offer?
Describe the potential statement of cash flows classification differences between U.S. GAAP and IFRS.
Distinguish between the direct method and the indirect method for reporting the results of operating activities in the statement of cash flows.
Explain what is meant by noncash investing and financing activities pertaining to the statement of cash flows.Give an example of one of these activities.
Identify and briefly describe the three categories of cash flows reported in the statement of cash flows.
Describe the purpose of the statement of cash flows.
Define comprehensive income. What are the two ways companies can present comprehensive income?
Define earnings per share (EPS). For which income statement items must EPS be disclosed?
The correction of a material error discovered in a year subsequent to the year the error was made is considered a prior period adjustment. Briefly describe the accounting treatment for prior period adjustments.
Accountants very often are required to make estimates, and very often, those estimates prove incorrect. In what period(s) is the effect of a change in an accounting estimate reported?
What is meant by a change in accounting principle? Describe the possible accounting treatments for a mandated change in accounting principle.
How are discontinued operations reported in the income statement?
Define intraperiod tax allocation. Why is the process necessary?
What are restructuring costs and where are they reported in the income statement?
Explain what is meant by the term earnings quality.
Briefly explain the difference between the single-step and multiple-step income statement formats.
Distinguish between operating and nonoperating income in relation to the income statement.
What transactions are included in income from continuing operations? Briefly explain why it is important to segregate income from continuing operations from other transactions affecting net income.
The income statement is a change statement. Explain what is meant by this.
(Based on Appendix 3) Describe any differences in segment disclosure requirements between U.S. GAAP and IFRS.
(Based on Appendix 3) For segment reporting purposes, what amounts are reported by each operating segment?
(Based on Appendix 3) Segment reporting facilitates the financial statement analysis of diversified companies.What determines whether an operating segment is a reportable segment for this purpose?
Describe at least two differences between U.S. GAAP and IFRS in balance sheet presentation.
Where can we find authoritative guidance for balance sheet presentation under IFRS?
Show the calculation of the following solvency ratios: (1) the debt to equity ratio, and (2) the times interest earned ratio.
Define the terms working capital, current ratio, and acid-test ratio (or quick ratio).
The auditor’s report provides the analyst with an independent and professional opinion about the fairness of the representations in the financial statements. What are the four main types of opinion an auditor of a public company might issue? Describe each.
What are the three main types of sustainability disclosures? How can those disclosures provide information to shareholders and stakeholders?
What is a proxy statement? What information does it provide?
Every annual report of a public company includes an extensive discussion and analysis provided by the company’s management. Specifically, which aspects of the company must this discussion address? Isn’t management’s perspective too biased to be of use to investors and creditors?
Define a subsequent event.
A summary of the company’s significant accounting policies is a required disclosure. Why is this disclosure important to external financial statement users?
Disclosure notes are an integral part of the information provided in financial statements. In what ways are the notes critical to understanding the financial statements and evaluating the firm’s performance and financial health?
Define the terms paid-in capital and retained earnings.
Explain how each of the following liabilities would be classified in the balance sheet:• A note payable of $100,000 due in five years.• A note payable of $100,000 payable in annual installments of $20,000 each, with the first installment due next year.
Distinguish between property, plant, and equipment and intangible assets.
Describe the common characteristics of assets classified as property, plant, and equipment and identify some assets included in this classification.
Explain the difference(s) between investments in equity securities classified as current assets versus those classified as long-term (noncurrent) assets.
Describe what is meant by an operating cycle for a typical manufacturing company.
Define current liabilities and list the typical liability categories included in this classification.
Define current assets and list the typical asset categories included in this classification.
Explain why the balance sheet does not portray the market value of the entity.
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