Victoria Dickinson in a series of twelve different case studies, covering numerous areas of financial reporting. This thesis is the compilation of the solutions to these case studies and has been verified in accordance with generally accepted accounting principles.
Totz, Inc
With regards to your sales presentation, because you have two different revenue streams; one deriving from manufacturing and retail, and the other deriving from
Presented as separate line items are cost of tangible goods sold and cost of services. This treatment as a separate line item also complies with the SEC, which requires SEC companies to list extraordinary gains and losses as separate line items.
Rocky Mountain Chocolate Factory, Inc
Rocky Mountain Chocolate Factory Unadjusted Trial Balance
28-Feb-10
Rocky Mountain Chocolate Factory, Inc
Income Statement
Balance Sheet 28-Feb-10
Balance Sheet 28-Feb-10
Statement of Retained Earnings For the Year Ended February 28, 2010
While employee autonomy is important, you or Lucy should check the validity of each transaction and reconcile the transactions. The raw material inventory consists of the cost of the material, as well as the shipping costs to the factory. Finished goods inventory consists of the cost of the materials, shipping costs to the factory, direct labor, and the overhead costs the factory has to prepare the goods for sale.
A possible explanation for the low work-in-process inventory is that the production process of this large manufacturing company is highly automated and efficient, and the low work-in-process inventory is the result of the production machines being stopped and the remaining unfinished inventory for that day the amount you see. We know that the opening balance of the offset account for 2012 is the ending balance of the previous year, 2011. Using the same process, we will add the closing balance of the offset account for 2012 back to the net amount shown on the balance sheet. arrive at a gross inventory of iii) Almost the entire reserve can be attributed to the stock of finished products.
Average inventory is simply the sum of the beginning and ending net inventory divided by two.
WorldCom, Inc
An asset is a property that has value and helps a company earn money to pay off any outstanding obligations. An expense is the price of something that only provides value for the current period, not the future. ii) Further to the above, costs should be included in costs when they provide an immediate benefit. After an asset is capitalized, it is depreciated annually for the remainder of its useful life.
The journal entry to record annual depreciation is a debit to "Depreciation Expense" and a credit to "Accumulated Depreciation." This entry increases expenses on the income statement and consequently decreases net income. These costs were incurred in the current period, with no expected future benefits, and therefore do not meet the definition of an asset. These costs appear on the balance sheet under either transmission or communication equipment, which are line items considered long-term property, plant and equipment; and appears in the statement of cash flows under
To calculate depreciation expense, we divide the capitalized amount by 22 (the midpoint of 4 and 40) and multiply this number by the fraction of the year for which the capitalized amount was on the balance sheet.
Targa Corporation
Accounting for Retraining and Relocation Costs FASB Codification 420-10-25-14 states
Other costs associated with an exit or disposal activity include, but are not limited to, costs to consolidate or close facilities and relocate employees.”. The liability will not be recognized until incurred, even if the cost is incremental to other operating costs and will be incurred as a direct result of a plan. A liability for other costs associated with an exit or disposal activity will be recognized in the period in which the liability is incurred (usually when goods or services associated with the activity are received).
In accordance with the above rule, the obligations in connection with relocation and retraining must not be registered as such until the employee has moved (responsibility for relocation/expense) and trained (responsibility for staff training/expense).
Merck & Co
- Consider Merck’s common shares
- Why do companies pay dividends on their common or ordinary shares? What normally happens to a company’s share price when dividends are paid?
- Consider Merck’s statement of cash flow and statement of retained earnings
- During 2007, Merck repurchased a number of its own common shares on the open market
Reconcile the number of shares outstanding at December 31, 2007, with the dollar value of the common shares reported on the balance sheet. What normally happens to a company's share price when dividends are paid? normally happens to a company's stock price when dividends are paid?. While it varies from case to case, many times the share price will fall because the declaration of dividends can indicate to the market that the company has limited growth opportunities, especially with a new company.
Companies buy back their own shares because they believe their shares are undervalued in the market. Management is generally optimistic about the company's future when they buy back stock, and they hope to realize a capital gain when the stock price rises. This means that Merck put its own shares on their books at the market value at which they bought back the shares.
Treasury stock is not an asset because while Merck can earn future cash benefits from the resale of this stock, it cannot realize an economic gain (increase in net income) by investing in its own stock. I).
Xilinx, Inc
Using both as forms of compensation offers companies flexibility in how to pay their employees depending on the projected future market value of the company's stock. In biennial periods, Xilinx's employee stock purchase plan allows employees to purchase shares every six months for 85% of the market value of the stock at the beginning of the biennial period or at the end of each six-month increment, whichever is lower. Even employees with no investment experience can experience capital gains by immediately reselling shares in the market.
Xilinx calculates its stock-based compensation by recording the stock compensation in a paid-in equity account at the market value on the date the compensation is granted and expenses during the vesting period according to the services provided by the compensated employee. Because this transaction is recorded on the day of grant instead of the day the option is exercised, there is an understatement of taxable income on the income statement, resulting in a deferred tax asset. While you can include stock-based compensation expense in the net income of your financial statements, it cannot be included in taxable income until the options are exercised or expire.
This creates a tax benefit that will roll over to subsequent years where net income will be higher than taxable income, as the share-based compensation expense will then be included in taxable income.
Revenue Recognition
- Identify the contract with a customer
- Identify the performance obligations in the contract
- Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Recognize revenue when the entity satisfies a performance obligation
The performance obligation for the Bier Haus is to serve a cup of beer to the student. The performance obligation for the Bier Haus is to serve a cup of beer to the student in an Ole Miss thermal beer mug. The individual price for the thermal mug is $3, and the individual price for the beer is $5.
Revenue is recognized once the $7 is exchanged for the cup of beer and thermal mug. The performance obligation for the Bier Haus is to serve the university student a cup of beer and provide the student with a coupon that can be redeemed for two pretzels. The standalone price for the beer is $5, and the standalone price for the coupon is.
Revenue is recognized once the $7 is exchanged for the beer mug and coupon.
ZAGG Inc
A deferred tax asset occurs when a company’s taxable income is greater than its book income. This causes the company to pay higher taxes for that given year and less for the
A deferred tax liability occurs when a company's taxable income is less than its book income, and the company then owes tax in subsequent years. Both of these are caused due to differences in the financial accounting and tax accounting standards. Suppose a company calculates its book income using straight-line depreciation, while taxable income is determined using MACRS.
The difference in depreciation expense will create a difference in income, and the result is either a DTA or a DTL, depending on which method creates a higher taxable income. Deferred tax assessment is an account that reduces the amount of a company or entity's deferred tax assets because the company/business entity does not.
A deferred income tax valuation is an account that reduces the amount of a company or business entity’s deferred tax assets because the company/business entity does not
This number is represented in current assets for the current portion of 6,912, and in the non-current portion assets for the non-current portion of 6,596. This helps to represent to investors and creditors what the future tax effect on ZAGGS Inc will be. Users of financial statements care about deferred income tax assets and liabilities because, if they are large enough, future financial statements can be materially affected.
Build-A-Bear
Capital lease: lease in which all the ownership rights of the leased property are transferred to the lessee. Finance lease: lease where the asset is removed from the lessor's books and replaced with a receivable. Type of Lease: lease where the fair value of the leased property at the beginning of a lease differs from its carrying amount, involves real property, and there is a transfer of ownership to the lessee at the end of the lease term.
This lease is an operating lease because ownership does not transfer at the end of the lease, there is no bargain option, the lease term does not include 75% of the store's useful life, and the present value of the lease payments is not 90 . %. This effect does not jeopardize the quality of the company's financial reporting, but if the company had structured this lease as a capital lease, capital assets on the balance sheet and net income would both be higher. This is because, as seen in section F part V above, the current portion of the lease obligation is less than the cash outflow for the period.
Long-term debt to total assets would initially remain unchanged, as debt and assets grow by the same amount as capitalization, but would grow slowly, as capital lease amortization is slower than cash flow and depreciation.
