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modern advanced accounting

Advanced Accounting 14th Edition Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik - Solutions

Go to the following story about the bankruptcy filing of Sears Holdings Corp., https://www.cnbc.com/2018/10/15/sears-files-for-bankruptcy.html. Search for other stories about the bankruptcy of Sears Holdings.Next, go to the Securities and Exchange Commission website (www.sec.gov) and click on
An investment analyst has been studying the long-term prospects of Six Flags Entertainment Corporation and has asked for assistance. Go to www.sixflags.com and click on “Investors” at the top of the page. Then, click on “Financial Information” on the left side of the next page and then on
Use the trial balance presented for Lynch, Inc., in problem (51). Assume that the company will be liquidated and the following transactions will occur:Accounts receivable of $18,000 are collected with remainder written off.All of the company’s inventory is sold for $40,000.Additional accounts
Lynch, Inc., is a hardware store operating in Boulder, Colorado. Management recently made some poor inventory acquisitions that have loaded the store with unsalable merchandise. Because of the drop in revenues, the company is now insolvent. The entire inventory can be sold for only $33,000. The
Becket Corporation’s accountant has prepared the following balance sheet as of November 10, 2020, the date on which the company is to release a plan for reorganizing operations under Chapter 11 of the Bankruptcy Reform Act:The company has presented the following proposal:The reorganization value
The following balance sheet has been produced for Litz Corporation as of August 8, 2020, the date on which the company is to begin selling assets as part of a corporate liquidation:The following events occur during the liquidation process:The investments are sold for $39,000.The inventory is sold
The following balance sheet has been prepared by the accountant for Limestone Company as of June 3, 2020, the date on which the company is to file a voluntary petition of bankruptcy:Additional InformationIf the company is liquidated, administrative expenses are estimated at $18,000.The accounts
Smith Corporation has gone through bankruptcy and is ready to emerge as a reorganized entity on December 31, 2020. On this date, the company has the following assets (fair value is based on discounting the anticipated future cash flows):The company has a reorganization value of $800,000.Smith has
Ristoni Company is in the process of emerging from a Chapter 11 bankruptcy. It will apply fresh start accounting as of December 31, 2020. The company currently has 30,000 shares of common stock outstanding with a $240,000 par value. As part of the reorganization, the owners will contribute 18,000
Jaez Corporation is in the process of going through a reorganization. As of December 31, 2020, the company’s accountant has determined the following information although the company is still several months away from emerging from the bankruptcy proceeding. Prepare a balance sheet in the
Shi Company is going through a Chapter 7 bankruptcy. All assets have been liquidated, and the company retains only $26,200 in free cash. The following debts, totaling $43,050, remain:Government claims to unpaid taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,000Salary during last
How should a company emerging from bankruptcy reorganization report its liabilities (other than deferred income taxes)?a. At their historical valueb. At zero because of fresh start accountingc. At the present value of the future cash flowsd. At the negotiated value less all professional fees
What accounting is made for professional fees incurred during a bankruptcy reorganization?a. They must be expensed immediately.b. They must be capitalized and written off over 180 months or less.c. They must be capitalized until the company emerges from the reorganization.d. They are either
Which of the following is not a reorganization item for purposes of reporting a company’s income statement during a Chapter 11 bankruptcy?a. Professional feesb. Interest revenuec. Interest expensed. Gains and losses on closing facilities
The New England Company has a debt to a bank of $55,000. The company is being liquidated, and officials believe that between $12,000 and $20,000 will be paid on that debt. According to the liquidation basis of accounting, what amount is reported for this liability?a. $12,000b. $16,000c. $20,000d.
When a company applies the liquidation basis of accounting, what reporting is appropriate for its assets?a. At cost less accumulated depreciationb. At the estimated amount of cash to be receivedc. At fair valued. At the lower of cost or market value
What financial statements must a company report when applying the liquidation basis of accounting?a. Statement of activities and a statement of financial positionb. Income statement and balance sheetc. Statement of liquidating cash flows and statement of current position during liquidationd.
When does the liquidation basis of accounting first have to be applied to financial statements to be viewed as in conformity with U.S. GAAP?a. When an involuntary bankruptcy petition is approved by the courtb. When liquidation is imminentc. When the first asset is soldd. At least 90 days before the
Which of the following is the minimum limitation necessary for filing an involuntary bankruptcy petition in connection with a company that has 57 unsecured creditors?a. The signature of 12 creditors to whom the debtor owes at least $14,775 in unsecured debtb. The signature of six creditors to whom
Which of the following is not a liability that has priority in a liquidation?a. Administrative expenses incurred during the liquidationb. Salary payable of $1,250 per person owed to 26 employeesc. Payroll taxes due to the federal governmentd. Advertising expense incurred before the company became
An order for relief creates an automatic stay. This automatic staya. Prohibits creditors from taking action to collect from an insolvent company without court approval.b. Calls for the immediate distribution of free assets to unsecured creditors.c. Can be entered only in an involuntary bankruptcy
An involuntary bankruptcy petition must be filed bya. The insolvent company’s attorney.b. The holders of the insolvent company’s debenture bonds.c. Unsecured creditors with total debts of at least $16,750.d. The company’s management.
The Jackston Company is to be liquidated as a result of bankruptcy. Until the liquidation occurs, on what basis are its assets reported?a. Present value calculated using an appropriate effective rateb. Net realizable valuec. Historical costd. Book value
In a bankruptcy case, which of the following statements is true?a. An order for relief results only from a voluntary petition.b. Creditors entering an involuntary petition must have debts totaling at least $21,625.c. Secured notes payable are considered liabilities with priority on a statement of
A company’s management has uncovered events that indicate that substantial doubt exists that the company can pay its debts as they come due over the following year. Management studies the plans created internally to address this risk. How can the company avoid disclosing that this substantial
A company’s management has monitored recent events that indicate that substantial doubt exists that the company can pay its debts as they come due over the following year. What should management do next?a. Management should disclose that substantial doubt exists that the company can remain in
How is goodwill computed if fresh start accounting is applied to a company emerging from bankruptcy reorganization?
When a company uses fresh start accounting, how does it report assets and liabilities?
Under what conditions must a company emerging from a bankruptcy reorganization apply fresh start accounting?
What accounting is made of the professional fees incurred during a reorganization?
While a company goes through a bankruptcy reorganization, how should its assets and liabilities be reported?
In following the liquidation basis of accounting, what financial statements must be presented?
If a company is not required to follow U.S. GAAP, a statement of realization and liquidation can be prepared during liquidation. What information can interested parties gain from this statement?
What federal legislation governs most bankruptcy proceedings?
What does the term insolvent mean?
Which of the following is not exempt from registration with the SEC under the Securities Act of 1933?a. Securities issued by a nonprofit religious organizationb. Securities issued by a government unitc. A public offering of $40 million to unaccredited investors under Regulation Ad. An offering to
What was the purpose of creating the EDGAR system?
What is the difference between a Form 10-K and a Form 10-Q?
What are blue sky laws?
How does the SEC generate revenues?
Under what law is a registration statement filed?
What does the Securities Exchange Act of 1934 cover?
What are some of the major divisions and offices within the SEC?
What is covered by Regulation S-X?
What is covered by Regulation S-K?
What is the SEC’s relationship to the Public Company Accounting Oversight Board?
The IFRS Foundation and IASB maintain a website at www.ifrs.org. Go to this website and access “Use of IFRS Standards by jurisdiction” (click on the “Around the World” tab). Select a country of interest, and access its “Jurisdictional Profile” (available as PDF file) to complete this
Vitous Ltd. began operations on January 1, 2018, and uses IFRS to prepare its consolidated financial statements. Although not required to do so, to facilitate comparisons with companies in the United States, Vitous keeps its books in U.S. dollars ($), and reconciles its net income and
A company located in a foreign country is preparing for a listing of its common shares on the New York Stock Exchange in the United States. The company must decide whether to use U.S. GAAP or IFRS in preparing the financial statements that will accompany its registration with the U.S. Securities
Hirsch Company acquired equipment at the beginning of 2020 at a cost of $135,000. The equipment has a five-year life with no expected salvage value and is depreciated on a straight-line basis. At December 31, 2020, Hirsch compiled the following information related to this equipment:Expected future
Trecek Corporation incurs research and development costs of $650,000 in 2020, 30 percent of which relate to development activities subsequent to IAS 36 criteria having been met that indicate an intangible asset has been created. The newly developed product is brought to market in January 2021 and
Parnell Company acquired construction equipment on January 1, 2020, at a cost of $78,400. The equipment was expected to have a useful life of six years and a residual value of $10,000 and is being depreciated on a straight-line basis. On January 1, 2021, the equipment was appraised and determined
Harrington Company was sued by an employee in late 2020. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $20,000 to $70,000, with no amount in the range more likely than any other. The lawsuit
Tapatio S.A. de C.V. acquired a new piece of manufacturing equipment on January 1, 2019, for a cash price of 500,000 pesos. The equipment was expected to have a useful life of 10 years and no residual value, and is being depreciated on a straight-line basis. On January 1, 2020, the equipment was
Sapporo K.K. was sued by a competitor in late 2020, and company management concluded that there was a 55 percent probability that the company would lose the lawsuit. The best estimate of the loss on December 31, 2020, was 4,000,000 yen. In 2021, the lawsuit is concluded with Sapporo paying its
Llungby AB spent 1,000,000 krone in 2020 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2021 and
Mikkeli OY acquired a brand name with an indefinite life in 2021 for 40,000 markkas. At December 31, 2020, the brand name could be sold for 35,000 markkas, with zero costs to sell. Expected cash flows from the continued use of the brand are 42,000 markkas, and the present value of this amount is
On January 1, 2020, Xiamen Company made amendments to its defined benefit pension plan that resulted in 60,000 yuan of past service cost. The plan has 5,000 active employees with an average expected remaining working life of 15 years. There currently are no retirees under the plan.a. Determine the
Surat Limited paid cash to acquire an aircraft on January 1, 2020, at a cost of 30,000,000 rupees. The aircraft has an estimated useful life of 40 years and no salvage value. The company has determined that the aircraft is composed of three significant components with the following original costs
Izmir A.S. issued convertible bonds at their face value of 100,000 lira on December 31, 2020. The bonds have a 10-year life with interest of 10 percent payable annually. At the date of issue, the prevailing interest rate for similar debt without a conversion option was 12 percent.a. Determine the
In which of the following areas does the IASB not allow firms to choose between two acceptable treatments?a. Measuring property, plant, and equipment subsequent to acquisition.b. Measuring noncontrolling interest in a business combination.c. Recognizing development costs that meet criteria for
Under IFRS, when an entity chooses the revaluation model as its accounting policy for measuring property, plant, and equipment, which of the following statements is correct?a. When an asset is revalued, the entire class of property, plant, and equipment (such as Land) to which that asset belongs
Which companies are required to provide a U.S. GAAP reconciliation in their annual report filed with the SEC?a. All foreign companies listed on a U.S. securities exchangeb. Foreign companies listed on a U.S. securities exchange that use IFRS in preparing financial statementsc. Domestic U.S.
Which of the following statements is true for a foreign company registered with the U.S. SEC to list its stock on the New York Stock Exchange?a. The company must file an annual report with the SEC that is prepared in accordance with U.S. GAAP.b. The company may file an annual report with the SEC
Which of the following best describes the extent to which the SEC requires or permits the use of IFRS by U.S. public companies?a. U.S. public companies are required to use IFRS.b. U.S. public companies may choose between IFRS and U.S. GAAP.c. U.S. public companies may use IFRS, but must also
What was the so-called Norwalk Agreement?a. An agreement between the FASB and SEC to allow foreign companies to use IFRS in their filing of financial statements with the SECb. An agreement between the U.S. FASB and the U.K. Accounting Standards Board to converge their respective accounting
Which of the following statements is correct with respect to the IFRS accounting policy hierarchy in situations where a specifically relevant IASB standard dealing with an accounting issue does not exist? a. The IASB Conceptual Framework for Financial Reporting takes precedence over other IASB
A company must prepare IFRS financial statements for the first time on December 31, 2022. According to IFRS 1, what is the date of transition to IFRS for this company?a. January 1, 2020b. January 1, 2021c. December 31, 2021d. December 31, 2022
For which of the following does IFRS for SMEs not provide a simplification of full IFRS?a. Goodwillb. Borrowing costsc. Development costsd. Inventory
For which of the following types of companies is IFRS for SMEs intended?a. Private companiesb. Publicly traded companiesc. Multinational corporationsd. Foreign companies
According to the IFRS Foundation, approximately how many countries either require or permit the use of IFRS by publicly traded companies?a. 40 countriesb. 80 countriesc. 130 countriesd. 195 countries
Which of the following countries uses IFRS?a. Canada.b. Mexico.c. Brazil.d. All of these answer choices are correct.
According to the IASB, IFRS comprise interpretations issued by the SIC and IFRIC, anda. International financial reporting standards issued by the IASB only.b. International accounting standards issued by the IASC only.c. International financial reporting standards issued by the IASB and
Which of the following is not a potential problem caused by differences in financial reporting practices across countries?a. Consolidation of financial statements by firms with foreign operations is more difficult.b. Firms incur additional costs when attempting to obtain financing in foreign
Which of the following historical reasons for accounting diversity could explain why accounting standards would be more detailed in some countries than in others?a. Different rates of inflation across countriesb. Different legal systems across countriesc. Differences across countries in the extent
What are two differences between IFRS and U.S. GAAP with respect to the recognition of financial statement items?
What are two differences between IFRS and U.S. GAAP with respect to the measurement of financial statement items?
How are IFRS currently used in the United States?
Was the IASB–FASB convergence process successful?
What are two countries that do not allow domestic publicly traded companies to use IFRS to prepare consolidated financial statements?
What are the different ways a country might use IFRS?
What authoritative pronouncements make up International Financial Reporting Standards (IFRS)?
Historically, what factors contributed to the diversity of accounting systems worldwide?
On January 1, 2019, Parker, Inc., a U.S.-based firm, acquired 100 percent of Suffolk PLC located in Great Britain for consideration paid of 52,000,000 British pounds (£), which was equal to fair value. The excess of fair value over book value is attributable to land (part of property, plant, and
Charles Edward Company established a subsidiary in a foreign country on January 1, 2020, by investing FC 3,200,000 when the exchange rate was $0.50/FC. Charles Edward negotiated a bank loan of FC 3,000,000 on January 5, 2020, and purchased plant and equipment in the amount of FC 6,000,000 on
Many companies make annual reports (sometimes on Form 10-K) available on their corporate website. Access the annual report indicated for each of the following U.S.-based multinational corporations to complete the requirements: International Business Machines Corporation, 2017 Annual Report. Oracle
Millager Company is a U.S.-based multinational corporation with the U.S. dollar (USD) as its reporting currency. To prepare consolidated financial statements for 2020, the company must translate the accounts of its subsidiary in Mexico, Cadengo S.A. On December 31, 2019, Cadengo’s balance sheet
Diekmann Company, a U.S.-based company, acquired a 100 percent interest in Rakona A.S. in the Czech Republic on January 1, 2019, when the exchange rate for the Czech koruna (Kčs) was $0.05.Rakona’s financial statements as of December 31, 2020, two years later, follow:Additional InformationThe
On January 1, 2019, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $126,000. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial
Sendelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto. Although this wholly owned company operates primarily in Canada, it engages in some transactions through a branch in Mexico. Therefore, the subsidiary
The following account balances are for the Agee Company as of January 1, 2020, and December 31, 2020. All amounts are denominated in kroner (Kr).Additional InformationAgee issued additional shares of common stock during the year on April 1, 2020. Common stock at January 1, 2020, was sold at the
Livingston Company is a wholly owned subsidiary of Rose Corporation. Livingston operates in a foreign country with financial statements recorded in pounds (P), the company’s functional currency. Financial statements for the year 2020 are as follows:Additional InformationThe common stock was
Kingsfield establishes a subsidiary operation in a foreign country on January 1, 2020. The country’s currency is the rial (R). To start this business, Kingsfield invests 10,000 rials. Of this amount, it spends 3,000 rials immediately to acquire equipment. Later, on April 1, 2020, it also
Christina Company (a U.S.-based company) has a subsidiary in Canada that began operations at the start of 2020 with assets of 132,000 Canadian dollars (CAD) and liabilities of CAD 54,000. During this initial year of operation, the subsidiary reported a profit of CAD 26,000. It distributed two
Lancer, Inc. (a U.S.-based company), establishes a subsidiary in Croatia on January 1, 2019. The following account balances for the year ending December 31, 2020, are stated in kuna (K), the local currency:Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2020 with three assets: Cash of 20,000 dinars, Accounts receivable of 80,000 dinars, and Land that cost 200,000 dinars when acquired on April 1, 2019. On January 1, 2020, Zugar has a 150,000 dinar Note payable, and no
Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria, where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary had the following balance sheet (amounts are in thousands [000s]):The subsidiary acquired the inventory on August 1, 2019, and the land and
Refer to the information in problem 26. Prepare a statement of cash flows in pounds for Sullivan’s Island Company’s foreign subsidiary, and then translate this statement into U.S. dollars.Data from Problem 26Sullivan’s Island Company began operating a subsidiary in a foreign country on
Sullivan’s Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 60,000 pounds. The subsidiary immediately borrowed 140,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The
The Isle of Palms Company (IOP), a U.S.-based entity, has a wholly owned subsidiary in Israel that has been determined as having the Israeli shekel (ILS) as its functional currency. On October 1, 2019, the Israeli subsidiary borrowed 500,000 Swiss francs (CHF) from a bank in Geneva for two years at

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