I found reviewing each company's financial statements to be one of the most interesting parts of each case. Another way this course benefited my undergraduate curriculum was the critical thinking approach I was able to take in many of the twelve cases below.
HOME HEATERS, INC
Beginning with the current assets section of the balance sheets, Glenwood has a large difference in cash compared to Eads. Finally, in the stockholders' equity section of the balance sheet, the only difference is the retained earnings.
MOLSON COORS BREWING COMPANY – PROFITABILITY AND
A classified income statement provides information about income and expenses within the company's main activities to calculate net income. Total income is calculated based on net income in addition to gains and losses that affect equity.
PEARSON PLC – ACCOUNTS RECEIVABLE
Use the information in Note 22 to complete a T-account showing the activity in the provision for bad and doubtful accounts during the year. Similar to the Provision for Bad and Doubtful Debt Expense, the provision for sales returns will also appear in the operating section of the income statement.
INTERMEDIATE ACCOUNTING PROBLEM
The next step is to create a t-account to correctly find the amount of bad debt expense for 2017. If doubtful accounts represent 3% of accounts receivable, determine the bad debt expense that should be reported for 2017.
PALFINGER AG – PROPERTY, PLANT, AND EQUIPMENT
The fifth case analyzes the financial statements of Palfinger AG Company, but in particular this case focuses on property, plant and equipment. Tangible assets are assets of a permanent nature that are used for business activities and not for resale, that are long-term in nature and generally depreciate, and that have a physical substance. Examples of tangible assets include land, building structures (offices, factories, warehouses) and equipment (machinery, furniture, tools).
Some qualities of property, plant and equipment include: they are used in operations and not for resale, they are long-term in nature and usually Types of property, plant and equipment include: land, building structures (ie offices, factories, warehouses) and equipment (machinery, furniture, tools). Once they are in use, they will begin to depreciate over the years and be classified under property, plant and equipment. e).
The statement of cash flows (not shown) reports that Palfinger received .. proceeds from the sale of property, plant and equipment in the amount of €1,655 in fiscal year 2007. Explain what these grants are and why they are deducted from . property, plant and equipment account. . €733.
VOLVO GROUP – RESEARCH AND DEVELOPMENT COSTS
The sixth example focuses specifically on Volvo Group's research and development costs in the financial statements. In general, all research and development costs should be expensed as incurred. What factors does the Volvo Group consider when deciding which R&D costs to capitalize and which costs?.
The line item on Volvo Group's balance sheet reporting this intangible asset is within assets, specifically within intangible assets for 2009. Years Proportion of Total R&D costs incurred that Volvo Group capitalized as product and software development intangible asset. ANALYSIS QUESTIONS . g) Assume that you work as a financial analyst for Volvo Group and want to compare Volvo's research and development expenditures with an American competitor, Navistar International Corporation.
Generally, all research and development costs should be expensed when incurred. The R&D costs that Volvo Group capitalizes each period are amortized in subsequent periods, similar to other capital assets such as property and equipment.
DATA AND ANALYTICS: IMB WATSON
IBM Watson is an automated system that answers questions through artificial intelligence and analytical software. IBM Watson is a computerized system called Deep QA that is able to answer questions using artificial intelligence and analytical software. Therefore, implementing IBM Watson to check the data and make sure the correct amount is there would make the company much more efficient.
This where IBM Watson can be extremely useful with data from current market conditions, the customer's data, etc. IBM Watson is also affordable and the benefits of the computerized system outweigh the costs in the long run. Once implemented, IBM Watson is extremely easy to operate and does not require many skills from employees.
The first potential downside to implementing IBM Watson is reluctance to change from employees. Ultimately, the benefits of IBM Watson will outweigh the costs in the long run.
RITE AID CORPORATION – LONG-TERM DEBT
Rite Aid has many different types of debt with a range of interest rates due to the terms. Prepare the journal entry that Rite Aid should have made when they record current liabilities $51,502. The journal entry that Rite Aid must have made when these notes were issued includes a debit to Cash and a credit to the Notes Due.
Determine the total amount of interest expense recorded by Rite Aid on these notes for the year ended February 27, 2010. The journal entry to record interest expense on these notes for fiscal year 2009 includes both parts calculated in the no . 2 and no. 3 above. Prepare the journal entry Rite Aid should have made when these notes were issued.
The interest payment is the face value of the bond times the bond's coupon rate. Based on the information above, prepare the journal entry that Rite Aid would have recorded on February 27, 2010 to calculate the interest expense on these notes.
MERCK & CO., INC. AND GLAXOSMITHKLINE PLC –
The number of issued shares is less than the number of authorized shares because not all the shares have yet been issued. Reconcile the number of shares issued on December 31, 2007 with the dollar value of common stock reported on the balance sheet. If you look at the consolidated balance sheet, you will see that the number of shares issued is much greater than the actual dollar amount of common stock.
The number of outstanding shares can be found by taking the number of issued shares and subtracting the number of own shares. On December 31, 2007, Merck's share price closed at $57.61 per share. share and the number of outstanding common shares calculated in. Usually when dividends are paid, a company's share price falls by the number of shares that are paid out.
First, dividends declared can be found on the consolidated statement of retained earnings under the line "Dividends declared on common stock." The amounts of these shares are in the financial statements or calculated on the basis of the information provided.
STATE STREET CORPORATION – MARKETABLE SECURITIES
If the market value of available-for-sale securities increased by $1 during the reporting period, what journal entry would the company record. Consider the balance sheet account “Available-for-sale investment securities” and the related information in Note 4. The 2012 year-end balance of the “Available-for-sale investment securities” account is $109,682, which can be found on the balance sheet.
What is the amount of net unrealized gains or losses on available-for-sale securities held by State Street at December 31, 2012. What was the amount of net realized gains (losses) on sales of available-for-sale securities for 2012. Show the journal entry State Street made to record the purchase of available-for-sale securities for 2012.
Show the journal entry that State Street made to record the sale of available-for-sale securities for 2012. The proceeds from the sale of available-for-sale securities are also reported in the problem above.
ZAGG INC. – DEFERRED INCOME TAXES
Both current and deferred tax liabilities and assets are based on the provisions of the adopted tax law. An example of a deferred tax liability would be when depreciation on the tax return is greater than. A deferred tax asset represents the increase in tax to be refunded (or saved) in future years as a result of deductible temporary differences that exist at the end of the current year.
An example of a deferred tax claim would be if the rent collected on the tax return was higher. This revaluation account is used to recognize a decrease in the carrying amount of deferred tax assets on the balance sheet. Only the deferred tax asset amount, net, in the above entry is divided into deferred income tax asset and deferred income tax.
Temporary accounts include both deferred tax assets and deferred tax liabilities that are on the balance sheet. Deferred tax liabilities represent the increase in tax payable in future years as a result of taxable temporary differences that exist at the end of the current year.
APPLE INC. – REVENUE RECOGNITION
Many parts of this case focus on the notes to the financial statements about revenue recognition. Does it seem to match the revenue recognition criteria you described in part b above? Yes, the criteria set by Apple in the notes on revenue recognition appear to be in line with the revenue recognition I described in Part B above.
What are multi-element contracts and why do they pose revenue recognition problems for companies? For online retail sales, the company defers revenue until the customer receives the product because the company legally assumes some of the risk of loss on these sales in transit.” Once the customer receives the product, Apple may recognize revenue in accordance with general accounting guidelines for revenue recognition. They are not recognized until then because “…the company legally bears some of the risk of loss on these sales in transit.” When the products arrive, Apple will recognize revenue in accordance with general accounting guidelines for revenue recognition.
This case was different from many of the previous cases because it ignored most of the information in this case and instead focused on the new revenue recognition standard in Apple's 10-k. The new revenue recognition standard uses an asset-liability approach that recognizes and measures revenue based on changes in assets and liabilities.
