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intermediate accounting 11th
Intermediate Accounting 11th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions
(Accounting for Pollution Expenditure) Phil Mickelson Company operates several plants at which limestone is processed into quicklime and hydrated lime. The Eagle Ridge plant, where most of the equipment was installed many years ago, continually deposits a dusty white substance over the surrounding
(Accounting for Pre-Opening Costs) After securing lease commitments from several major stores, Lobo Shopping Center, Inc. was organized and built a shopping center in a growing suburb.The shopping center would have opened on schedule on January 1, 2003, if it had not been struck by a severe tornado
(Accounting for Research and Development Costs) Indiana Jones Co. is in the process of developing a revolutionary new product. A new division of the company was formed to develop, manufacture, and market this new product. As of year-end (December 31, 2003), the new product has not been manufactured
(Accounting for Research and Development Costs) Waveland Corporation’s research and development department has an idea for a project it believes will culminate in a new product that would be very profitable for the company. Because the project will be very expensive, the department requests
3M Company The financial statements of 3M are presented in Appendix 5B or can be accessed on the Take Action! CD.Instructions Refer to 3M’s financial statements and the accompanying notes to answer the following questions.(a) Does 3M report any intangible assets, especially goodwill, in its 2001
The Coca-Cola Company and PepsiCo, Inc.Instructions Go to the Take Action! CD and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc.(a) (1) What amounts for intangible assets were reported in their respective balance sheets by Coca-Cola
The online edition of the March 5, 2002, Wall Street Journal includes an article by John Carreyrou entitled“Vivendi May Reveal Write-Down of Up to $13 Billion for Goodwill.”Instructions Read the story and answer the following questions. (Subscribers to Business Extra can access the article at
Bayer, Smithkline Beecham, and Merck Presented below are data and accounting policy notes for the goodwill of three international drug companies.Bayer, a German company, prepares its statements in accordance with International Accounting Standards (IAS); Smithkline Beecham follows United Kingdom
Argot Co., organized in 2003, provided you with the following information.1. Purchased a franchise for $42,000 on July 1, 2003. The rights to the franchise will expire on July 1, 2011.2. Incurred a net loss of $33,000 in 2003, including a state incorporation fee of $2,000 and related legal fees of
Of what value is a common set of standards in financial accounting and reporting?
What are some of the developments or events that occurred between 1900 and 1930 that helped bring about changes in accounting theory or practice?
In what way is the Securities and Exchange Commission concerned about and supportive of accounting principles and standards?
In what ways was it felt that the statements issued by the Financial Accounting Standards Board would carry greater weight than the opinions issued by the Accounting Principles Board?
The chairman of the FASB at one time noted that “the flow of standards can only be slowed if (1) producers focus less on quarterly earnings per share and tax benefits and more on quality products, and (2) accountants and lawyers rely less on rules and law and more on professional judgment and
What is the purpose of FASB Technical Bulletins? How do FASB Technical Bulletins differ from FASB Interpretations?
What is AcSEC and what is its relationship to the FASB?
What are the sources of pressure that change and influence the development of accounting principles and standards?
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 financial reporting standards?
If you were given complete authority in the matter, how would you propose that accounting principles or standards should be developed and enforced?
One writer recently noted that 99.4 percent of all companiesprepare statements that are in accordance withGAAP. Why then is there such concern about fraudulentfinancial reporting?
Michael Sharpe, former Deputy Chairman of the International Accounting Standards Committee (IASC), made the following comments before the 63rd Annual Conference of the Financial Executives Institute(FEI).There is an irreversible movement towards the harmonization of financial reporting throughout
A number of foreign countries have reporting standards that differ from those in the United States. What are some of the main reasons why reporting standards are often different among countries?
How are financial accountants challenged in their work to make ethical decisions? Is technical mastery of GAAP not sufficient to the practice of financial accounting?
Identify the major financial statements and other means of financial reporting.
Explain how accounting assists in the efficient use of scarce resources.
Identify some of the challenges facing accounting.
Identify the objectives of financial reporting.
Explain the need for accounting standards.
Identify the major policysetting bodies and their role in the standardssetting process.
Explain the meaning of generally accepted accounting principles.
Describe the impact of user groups on the standards-setting process.
Understand issues related to ethics and financial accounting
(Financial Accounting) Alan Rodriquez has recently completed his first year of studying accounting.His instructor for next semester has indicated that the primary focus will be the area of financial accounting.Instructions(a) Differentiate between financial accounting and managerial accounting.(b)
(Objectives of Financial Reporting) Celia Cruz, a recent graduate of the local state university, is presently employed by a large manufacturing company. She has been asked by Angeles Ochoa, controller, to prepare the company’s response to a current Discussion Memorandum published by the Financial
(Accounting Numbers and the Environment) Hardly a day goes by without an article appearing on the crises affecting many of our financial institutions in the United States. It is estimated that the savings and loan (S&L) debacle of the 1980s, for example, ended up costing $500 billion ($2,000 for
(Need for Accounting Standards) Some argue that having various organizations establish accounting principles is wasteful and inefficient. Rather than mandating accounting standards, each company could voluntarily disclose the type of information it considered important. In addition, if an investor
(AICPA’s Role in Standards Setting) One of the major groups involved in the standards-setting process is the American Institute of Certified Public Accountants. Initially it was the primary organization that established accounting principles in the United States. Subsequently it relinquished most
(FASB Role in Standards Setting) A press release announcing the appointment of the trustees of the new Financial Accounting Foundation stated that the Financial Accounting Standards Board (to be appointed by the trustees) “. . . will become the established authority for setting accounting
(Government Role in Standards Setting) Recently an article stated “the setting of accounting standards in the United States is now about 60 years old. It is a unique process in our society, one that has undergone numerous changes over the years. The standards are established by a private sector
(Politicization of Standards Setting) Some accountants have said that politicization in the development and acceptance of generally accepted accounting principles (i.e., standards setting) is taking place. Some use the term “politicization” in a narrow sense to mean the influence by
(Models for Setting Accounting Standards) Presented below are three models for setting accounting standards.1. The purely political approach, where national legislative action decrees accounting standards.2. The private, professional approach, where financial accounting standards are set and
(Standards-Setting Terminology) Andrew Wyeth, an administrator at a major university, recently said, “I’ve got some CDs in my IRA, which I set up to beat the IRS.” As elsewhere, in the world of accounting and finance, it often helps to be fluent in abbreviations and acronyms.Instructions
(Accounting Organizations and Documents Issued) Presented below are a number of accounting organizations and type of documents they have issued.Instructions Match the appropriate document to the organization involved. Note that more than one document may be issued by the same organization. If no
(Accounting Pronouncements) Anumber of authoritative pronouncements have been issued by standards-setting bodies in the last 50 years. A list is provided on the left, below, with a description of these pronouncements on the right.Instructions Match the description to the pronouncements 1. 12 2. 3.
(Issues Involving Standards Setting) When the FASB issues new standards, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Paula Popovich, controller, discusses with her financial vice president the need for early implementation of a standard
(Securities and Exchange Commission) The U.S. Securities and Exchange Commission (SEC)was created in 1934 and consists of five commissioners and a large professional staff. The SEC professional staff is organized into five divisions and several principal offices. The primary objective of the SEC is
(Standards-Setting Process) In 1973, the responsibility for developing and issuing rules on accounting practices was given to the Financial Accounting Foundation and, in particular, to an arm of the foundation called the Financial Accounting Standards Board (FASB). The generally accepted accounting
(History of Standards-Setting Organizations) Beta Alpha Psi, your university’s accounting society, has decided to publish a brief pamphlet for seniors in high school, detailing the various facets of the accountancy profession. As a junior accounting major, you have been asked to contribute an
(Economic Consequences) Presented below are comments made in the financial press.Instructions Prepare responses to the requirements in each item.Prepare responses to the requirements in each item.(a) Rep. John Dingell, the ranking Democrat on the House Commerce Committee, threw his support behind
(Standards-Setting Process, Economic Consequences) The following letter was sent to the SEC and the FASB by leaders of the business community.Dear Sirs:The FASB has been struggling with accounting for derivatives and hedging for many years. The FASB has now developed, over the last few weeks, a new
Kate Jackson, a new staff accountant, is confused because of the complexities involving accounting standards setting. Specifically, she is confused by the number of bodies issuing financial reporting standards of one kind or another and the level of authoritative support that can be attached to
Michael Sharpe, former Deputy Chairman of the International Accounting Standards Committee (IASC), made the following comments before the 63rd Annual Conference of the Financial Executives Institute(FEI).There is an irreversible movement towards the harmonization of financial reporting throughout
What is a conceptual framework? Why is a conceptual framework necessary in financial accounting?
What are the primary objectives of financial reporting as indicated in Statement of Financial Accounting Concepts No. 1?
What is meant by the term “qualitative characteristics of accounting information”?
Briefly describe the two primary qualities of useful accounting information.
According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on the needs of the users of financial statements.Explain the level of sophistication that the Board assumes about the users of financial statements.
What is the distinction between comparability and consistency?
Why is it necessary to develop a definitional framework for the basic elements of accounting?
Expenses, losses, and distributions to owners are all decreases in net assets. What are the distinctions among them?
Revenues, gains, and investments by owners are all increases in net assets. What are the distinctions among them?
What are the four basic assumptions that underlie the financial accounting structure?
The life of a business is divided into specific time periods, usually a year, to measure results of operations for each such time period and to portray financial conditions at the end of each period.(a) This practice is based on the accounting assumption that the life of the business consists of a
What is the basic accounting problem created by the monetary unit assumption when there is significant inflation? What appears to be the FASB position on a stable monetary unit?
The chairman of the board of directors of the company for which you are chief accountant has told you that he has little use for accounting figures based on cost. He believes that replacement values are of far more significance to the board of directors than “out-of-date costs.”Present some
When is revenue generally recognized? Why has that date been chosen as the point at which to recognize the revenue resulting from the entire producing and selling process?
Magnus Eatery operates a catering service specializing in business luncheons for large corporations. Magnus requires customers to place their orders 2 weeks in advance of the scheduled events. Magnus bills its customers on the tenth day of the month following the date of service and requires that
What is the difference between realized and realizable?Give an example of where the concept of realizable is used to recognize revenue.
What is the justification for the following deviations from recognizing revenue at the time of sale?(a) Installment sales method of recognizing revenue.(b) Recognition of revenue at completion of production for certain agricultural products.(c) The percentage-of-completion basis in long-term
Jane Hull Company paid $135,000 for a machine in 2005.The Accumulated Depreciation account has a balance of$46,500 at the present time. The company could sell the machine today for $150,000. The company president believes that the company has a “right to this gain.” What does the president mean
Three expense recognition methods (associating cause and effect, systematic and rational allocation, and immediate recognition) were discussed in the text under the matching principle. Indicate the basic nature of each of these types of expenses and give two examples of each.
Statement of Financial Accounting Concepts No. 5 identifies four characteristics that an item must have before it is recognized in the financial statements. What are these four characteristics?
Briefly describe the types of information concerning financial position, income, and cash flows that might be provided: (a) within the main body of the financial statements,(b) in the notes to the financial statements, or (c)as supplementary information.
In January 2005, Alan Jackson 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, 2004.The president objects,
Describe the two major constraints inherent in the presentation of accounting information.
What are some of the costs of providing accounting information? What are some of the benefits of accounting information? Describe the cost-benefit factors that should be considered when new accounting standards are being proposed.
How are materiality (and immateriality) related to the proper presentation of financial statements? What factors and measures should be considered in assessing the materiality of a misstatement in the presentation of a financial statement?
The treasurer of Joan Osborne 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 below.(a) The company gives a 2-year
Describe the usefulness of a conceptual framework.
Describe the FASB’s efforts to construct a conceptual framework.
Understand the objectives of financial reporting.
Identify the qualitative characteristics of accounting information.
Define the basic elements of financial statements.
Describe the basic assumptions of accounting.
Explain the application of the basic principles of accounting.
Describe the impact that constraints have on reporting accounting information.
Discuss whether the changes described in each of the cases below require recognition in the CPA’s report as to consistency. (Assume that the amounts are material.)(a) After 3 years of computing depreciation under an accelerated method for income tax purposes and under the straight-line method for
Identify which qualitative characteristic of accounting information is best described in each item below. (Do not use relevance and reliability.)(a) The annual reports of Best Buy Co. are audited by certified public accountants.(b) Black & Decker and Cannondale Corporation both use the FIFO cost
For each item below, indicate to which category of elements of financial statements it belongs.(a) Retained earnings (e) Depreciation (h) Dividends(b) Sales (f) Loss on sale of equipment (i) Gain on sale of investment(c) Additional paid-in capital (g) Interest payable (j) Issuance of common
Identify which basic assumption of accounting is best described in each item below.(a) The economic activities of FedEx Corporation are divided into 12-month periods for the purpose of issuing annual reports.(b) Solectron Corporation, Inc. does not adjust amounts in its financial statements for the
Identify which basic principle of accounting is best described in each item below.(a) Norfolk Southern Corporation reports revenue in its income statement when it is earned instead of when the cash is collected.(b) Yahoo, Inc. recognizes depreciation expense for a machine over the 2-year period
Which constraints on accounting information are illustrated by the items below?(a) Zip’s Farms, Inc. reports agricultural crops on its balance sheet at market value.(b) Crimson Tide Corporation does not accrue a contingent lawsuit gain of $650,000.(c) Wildcat Company does not disclose any
Presented below are three different transactions related to materiality. Explain whether you would classify these transactions as material.(a) Marcus Co. has reported a positive trend in earnings over the last 3 years. In the current year, it reduces its bad debt allowance to ensure another
If the going concern assumption is not made in accounting, what difference does it make in the amounts shown in the financial statements for the following items?(a) Land.(b) Unamortized bond premium.(c) Depreciation expense on equipment.(d) Merchandise inventory.(e) Prepaid insurance.
What accounting assumption, principle, or modifying convention does Target Corporation use in each of the situations below?(a) Target uses the lower of cost or market basis to value inventories.(b) Target was involved in litigation over the last year. This litigation is disclosed in the financial
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) Benjamin Bratt, Inc. paves the driveway leading to the office building at a cost of
(Qualitative Characteristics) SFAC No. 2 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
(Qualitative Characteristics) The qualitative characteristics that make accounting information useful for decision-making purposes are as follows.Relevance Timeliness Representational faithfulness Reliability Verifiability Comparability Predictive value Neutrality Consistency Feedback value
(Elements of Financial Statements) Ten interrelated elements that are most directly related to measuring the performance and financial status of an enterprise are provided below.Assets Distributions to owners Expenses Liabilities Comprehensive income Gains Equity Revenues Losses Investments by
(Assumptions, Principles, and Constraints) Presented below are the assumptions, principles, and constraints used in this chapter.1. Economic entity assumption 5. Historical cost principle 9. Materiality 2. Going concern assumption 6. Matching principle 10. Industry practices 3. Monetary unit
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