The following compilation of cases explores the complexities of public accounting by simulating real-life situations and problems encountered in using and applying accounting. Victoria Dickinson, Ph.D., CPA, from the Patterson School of Accountancy, I applied my knowledge of accounting concepts.
ADJUSTING ENTRIES , EADS HEATERS
Glenwood's current assets are more likely to meet its current liabilities than Eads' in the next year.
INCOME STATEMENT DISCLOSURE AND ADVISEMENT, TOTS AND
The cost of goods sold section of the income statement should be presented in a similar manner to Totz, Inc.'s net sales revenue. in accordance with the FASB Codification. Cost of goods sold in the income statement for 2015 must be classified and presented in one number, classified as "cost of goods sold".
FINANCIAL STATEMENT PREPARATION, ROCKY MOUNTAIN
Rocky Mountain Statement of Cash Flows for the Year Ended February 28, 2010 Cash Flows from Operations.
CASH/RECEIVABLES: EXAMINING POTENTIAL FRAUD SCHEMES
To protect the operations of the craft workshop, Kayla should implement internal control systems that include checks and balances created to prevent and detect fraud. Segregation of Duties – Kayla should separate responsibilities for receiving, depositing, recording and reconciling cash so that the employee cannot commit and cover up fraud. Segregation of Duties - Although sharing all responsibilities may be difficult because the company is small, segregation of duties provides greater internal control.
Segregation of Duties – One associate will order the inventory with Kayla's permission, and another associate will record the inventory as it arrives at the store. Access Control – The types of transactions employees can enter should be limited and employees must receive authorization before issuing a refund or entering an irregular transaction into the cash register. Physical Check – Kayla must move the credit card machine next to the cash registers to ensure the credit card is scanned and the transaction is completed correctly at the correct price.
Application and access control – Kayla may consider purchasing more sophisticated software that automatically records sales to prevent data manipulation. Application Control – Kayla must use software that indexes each sale with details such as transaction number, date, amount and clerk's name. This internal control provides unaltered records of sales for audits and allows the actual cash balance to be reconciled with the sales of the register tape.
INVENTORY ANALYSIS
Raw materials are the total cost of goods purchased from suppliers to produce goods that have not yet been moved into the production process. These are only materials that have not yet been completed and transferred to finished products. This account appears in the company's financial statements, either under inventories, as a contra-asset account, or in a note to the financial statements if inventories are stated net.
As an investor, I would like to know more about what is causing these finished goods inventories to become obsolete. It would also be useful to know the current ratio of the company as Inventory is a current asset.
ASSET CAPITALIZATION, WORLDCOM
Assets as described in my CON 6 are: Probable future economic benefits derived or controlled by a particular entity as a result of past transactions or events. Expenses described in CON 6 are: outflows or other uses of assets or incurrences of liabilities (or a combination of both) from supplying or producing goods, providing services, or performing other activities that affect current major or constitute the entity's central activities.
EMPLOYEE TERMINATION BENEFITS, TARGA COMPANY
First, however, I am concerned about the amount of time between the date of communication and the date of termination. To account for employee termination benefits, Targa will record a loss and a liability for $3,050,000. An employer that provides termination benefits will recognize a liability and a loss when it is probable that employees will be entitled to the benefits and the amount can be reasonably estimated.
The severance costs recognized as a liability and loss include the amount of any lump sum payments and the present value of all expected future payments." In addition, a liability for retraining and relocation costs will be recognized, but only when these costs are incurred. Other costs related to the exit activity or disposals, include but are not limited to the costs of consolidation or closure of facilities and relocation of employees.
A liability should not be recognized before it is incurred, even if the costs are incremental to other operating costs and will be incurred as a direct result of the plan. A liability for other costs associated with an exit or disposal activity should be recognized in the period in which the liability is incurred (generally when the goods or services related to the activity are received.)'.
DIVIDENDS, MERCK
Merck paid about the same dividend even with a $1.2 billion net decline. The dividend payout ratio above 1 indicates that they paid more dividends in 2007 than they made in net income.
STOCK OPTIONS, XILINX, INC
Stock options allow employees to buy shares at a lower price than the market price at some point in the future. The value of the share price is based on the company's performance; therefore, they will want to see the company succeed. Restricted Stock Units (RSUs) would give employees less risk of losing the value of the award.
Stock options would provide more benefit if the company was very profitable very quickly after issuance. An employee can then buy the stock at a low price and sell it before the option expiration date for a larger profit. Expiry date: Date on which an employee no longer has the right to exercise the option at the given exercise price.
Granted options/RSUs: RSUs are granted valued in the form of shares of the Company's stock, but the Company's stock is not issued at the time of grant. Options/RSUs Forfeited or Canceled: Options or RSUs that were never exercised on the expiration date. This purchase plan differs from share option plans because option plans give employees the right to buy a number of shares at a fixed price over a defined period of time.
REVENUE RECOGNITION, BEER AND PRETZELS
If these goods or services are different, the promises are performance obligations and are billed separately. A good or service is separate if the buyer can benefit from the good or service alone or together with other resources immediately available to the customer, and the company's promise to transfer the good or service to the customer is separable from other promises. in the contract. The transaction price may be a fixed amount of the customer's consideration, but may sometimes include variable consideration or non-cash consideration.
The transaction price is also adjusted for the effects of the time value of money if the contract contains a significant financing component and for any compensation payable to the customer. If the consideration is variable, an entity estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
Sometimes the transaction price includes a discount or a variable amount of consideration that relates entirely to a part of the contract. The requirements specify when an entity assigns the discount or variable consideration to one or more, but not all, performance obligations (or separate goods or services) in the contract. For performance obligations that are satisfied over time, an entity recognizes revenue over time by choosing an appropriate method to measure the entity's progress towards complete satisfaction of that performance obligation.
DEFERRED INCOME TAXES, ZAGG, INC
However, for tax purposes, revenue is recognized on a cash basis, meaning that revenue is not recognized until the cash is collected. Permanent tax differences: Permanent tax differences result from items that enter financial income before tax but never taxable income, or enter taxable income but never financial income before tax. Temporary tax differences: the difference between the tax base of an asset or liability and its reported amount in the financial statements, which will result in taxable amounts or deductible amounts in future years.
However, for tax purposes the cash basis is used, so the income is not taxed until the payment is received. This would create a future taxable amount because the taxable income will be higher than the future book income. This is calculated by taking the income tax expense (provision) and dividing it by the recorded accounting income.
A company generally reports deferred income taxes as part of total income tax expense because of differences in reporting standards. For example, companies will recognize revenues and expenses when they can reasonably expect that said revenues and expenses will occur, however, for tax purposes, these revenues and expenses will not be recognized until cash is paid. The balance of the deferred income tax asset is represented in current assets for the current portion of 6,912 and in non-current assets for the long-term portion of 6,596.
LEASES, BUILD-A-BEAR WORKSHOP
Some leases can also benefit a tenant because ownership can be returned to them at the end of the lease term. An operating lease is a lease that: 1. Does not transfer ownership to the lessee. The lease term is not equal to or is less than 75% or more of the estimated economic life of the leased property.
Sale Lease Type: A lease that is the same as a direct financing lease, except that the gross profit recognized at lease inception is the PV of all lease payments less the cost of the leased asset. This lease is operational because it does not meet any of the four requirements for a capital lease. The liquidity ratio will be better because of the greater increase in assets than current liabilities.
The solvency rate will be weaker at the beginning of the Lease Term when much of the lease obligation is outstanding.
