To complete each case, our group used our combined accounting knowledge, texts from other classes, and the FASB Codification to work through the given questions. The skills and knowledge gained in this course have helped me in my courses and internship.
Home Heaters
I think they have potential to grow and will start the year stronger than Eads Heaters, Inc. Glenwood also has a higher retained earnings balance at the end of the year due to their net income.
Totz
Since Totz is a retailer and Doodlez provides services, the net sales and income of each of them must, by their nature, be presented separately under sales on Totz's income statement. Doodlez's service turnover amounted to more than 10 percent of the combined turnover, so the turnover must be reported in separate items in the profit and loss account. While total gross profit increased between fiscal 2015 and 2016, cost of sales, which affects the gross profit calculation, also increased due to Doodlez's service charge.
State the amount separately. a) cost of tangible goods sold, (b) operating expenses of public or other services, (c) expenses applicable to rental income, (d) cost of services, and. e) expenses applicable to other income.". If cost of sales or operating expenses exclude charges for depreciation, depletion and amortization of property, plant and equipment, the description of the item should be something like the following: "Cost of goods sold (excluding items shown separately below)" or " Cost of goods sold (excluding depreciation shown separately below)." To avoid placing undue emphasis on "cash flows", depreciation, depletion and amortization should not be positioned on the income statement in a way that results in reporting a figure for income before depreciation. All of the above will be under the cost of sales section of the income statement.
ASC-605-10-S99-1 also states: “Gains or losses on the sale of assets should be reported as 'other general expenses.'
Rocky Mountain Chocolate Factory, Inc
Cash/Receivables Internal Controls
Lucy has access to the accounting system, even though she is responsible for the banking affairs. Although the unique code is a start to preventing unauthorized access to the cash registers, it is susceptible to theft by another employee. Instead, you can arrange for your employee responsible for creating a physical inventory count to provide you with one.
These duties must be separated, as the same person performing both duties opens the door to fraud. While employee autonomy is important, you or Lucy must check the validity of each transaction as well as reconcile the transactions with her.
Analyzing Manufacturing Inventories
In Note 2, the company discusses its allowance for obsolete or unliquidated inventory—an account against the inventory balance. The company does not directly disclose the balance or activity in this account in its public reports. The account is not explicitly stated in the company's financial statements, but is included in the inventory amount on the balance sheet.
What portion of the reserve for obsolete inventory do you think is attributable to each of the three types of inventory held by the company. Recreate the entries that the company prepared to record the activity in the reserve for accounting for obsolete inventory during the year. On average, how many days did the company take to produce and sell its inventory for the current year and the previous year.
Determine the percentage of finished goods that the company estimated as obsolete in the current year.
WorldCom
For the profit and loss account, his income is higher earlier because the expenses are not incurred all at once. These were costs that were part of ongoing operations paid to a third party company to ensure that the company could make customer calls as stated earlier. The costs do not meet the relevant definition a because all of these costs did not anticipate revenue for WorldCom and were not related to a long-term investment.
They only appear in the cash flow statement if they are recorded as expenses under depreciation. In an affidavit to the Securities and Exchange Commission, WorldCom disclosed details of the improperly capitalized amounts (in millions) in the first quarter, $610 in the second quarter, $743 in the third quarter and $931 in the fourth quarter. Further, suppose that depreciation begins in the quarter in which assets are purchased (or costs are capitalized).
Use your answer to parts e and f above to determine what WorldCom's net income would have been in 2001 if line costs had not been improperly capitalized.
Targa Co
They are also considering relocating part of the production activities, which will result in relocation costs and the conclusion of irrevocable contracts. The company will be required to disclose details of the contract termination plan in its financial statements in the period it formally commences the plan. The company will also have to recognize a liability and a loss in the amount of severance payments.
Retraining and Relocation Costs - If the company decides to relocate one of its manufacturing operations, it will incur costs of $500,000. The company has also entered into irrevocable contracts with several parties due to the restructuring. The company must disclose all these costs in their accounts, corresponding to the severance pay.
Since the company has moved operations to a new area, it is considered a start-up according to the FASB definition.
Merck & Co., Inc.- Shareholder’s Equity
Reconcile the number of shares issued on December 31, 2007 with the dollar value of common stock reported on the balance sheet. They may also think that their share price is undervalued, so they repurchase and issue shares at a higher par value. The treasury stock is recorded at the cost for which the company repurchased it.
On average, how much did Merck pay in total and per share to buy back its stock in 2007. Ratio Analysis - What differences do you see in Merck's dividend ratios over the two years. This has resulted in a negative trend in their split ratios, except for their dividend payout ratio, which has increased since 2006.
Xilinx, Inc.- Stock-Based Compensation
Stock option plans also encourage employees to work to improve the company's financial status so that the stock price will rise. Grant date - the date the company declares the stock options or restricted stock to the employee. Vesting period - the period the employee must work to exercise the stock option or receive the restricted stock.
Granted options/RSUs - stock options or restricted shares to which an employee is entitled, given that they meet the requirements of the job. The stock purchase plan allows employees to purchase shares at 85% of the fair market price. What trends does the article discuss in the use of employee stock options and restricted stock awards.
The article states that the use of stock options is decreasing, while the use of restricted stock is increasing.
Revenue Recognition
The bartender then pours the beer into a large cup and hands it to the student. The individual retail prices are $5 for the beer and $3 for the mug, so the student got a bargain on the combined purchase. The student takes the beer into the new mug and enjoys it while reading the codification.
Week 3: The same student goes to the Bier Haus and brings his beer mug and orders a large beer and pretzels. The bartender then offers the student a large beer and a coupon for two pretzels (this is typical business practice). The waiter pours beer into a beer mug and hands it to the student.
The student then grabs a beer and coupon and heads to the dorm to study for an upcoming accounting midterm exam.
Zagg, Inc
Explain in general terms why a company reports deferred income taxes as part of their total income tax expense. To adhere to fair representation, a company must show deferred income tax as part of total income tax expense to show what they will have to pay from activity in that period. If a company does not show the deferred income taxes, they would not accurately represent what happened in that period.
An example of deferred tax liabilities is when a company reports higher book income than taxable income. Using information in the first table in Note 8, show the journal entry that ZAGG recorded for the income tax provision in fiscal 2012. Using the information in the third table in Note 8, decompose the amount of "net deferred income tax" recorded in income in the tax journal entry in part f.
The amount of deferred income tax assets is broken down by current and non-current on the balance sheet.
Build-A-Bear Workshop, Inc.- Leases
These criteria are: the lease transfers ownership of the property to the tenant, contains a purchase option, the term is equal to 75% or more of the estimated economic life of the leased property, and the present value of the minimum lease payments. (excluding implementation costs) is equal to or greater than 90% of the fair value of the rented property. A direct finance lease is essentially the financing of the lessee's purchase of an asset. The lessor records a lease receivable in lieu of a leased asset and is the present value of the minimum lease payments.
A sales lease is the same as a direct finance lease, with the exception of the manufacturer's gross profit. Consider the following hypothetical lease for a Build-A-Bear Workshop retail location: The lease term is five years, $100,000 of rent is due on the last day of each year at the end of the lease, and ownership of the location is not even an option to transfer to Build-A-Bear favorable purchase., the expected lifetime of the location is 25 years. Consider Build-A-Bear Workshop's operating lease payments and the information in Note 10, Liabilities and Contingencies.
The present value of the expected rents would be treated as a "right to use the leased asset". A corresponding capital rental obligation would be recorded, which would represent an obligation arising from the acquisition of a right-of-use asset.
