However, if we look at the balance sheets of both companies, we can see that the current ratio of Eads Heater, Inc. higher than Eads Heater, Inc., which means Glenwood can meet its obligations faster than Eads.
Case Study 2 Totz and Doodlez
Doodlez and Totz have revenues above 10 percent; therefore, they must be declared separately in the income statement. The $1.7 million gain should be reported under nonoperating income on the income statement.
Case Study 3
Financial Statement of Rocky Chocolate Mountain Factory
Case Study 4
Fraudulent Activities and Implementation of Internal Controls
Physical Audit: A physical inventory count should be done periodically to ensure that sales and ending inventory match the total inventory. Segregation of duties: Only one employee should be authorized to return during a shift. Physical Audit: At the end of an employee's shift, money must be physically counted.
Segregation of duties: There should be more than one person handling complaints and customer service. Access control: Each employee's code to the register should be changed periodically to ensure they are kept unique and secret. Approval Authority: Transactions of a large dollar amount or transactions that require a large amount of cash change to be returned to the customer must have manager approval before taking place.
Segregation of duties: Reporting and filing work should be separated to reduce the possibility of fraud.
Case Study 5
Inventory Assessment
Raw materials: The costs that are expected to be involved in Raw Materials Inventory are the historical costs of the inventory at the moment of purchase and transactions cost. Work in Process Inventory includes such costs as labor costs, material costs and overhead costs during the manufacturing process. Finished Goods Inventory consists of the costs from Work In Process including the costs of storing finished goods.
Inventories that include material, labor and manufacturing overhead costs are recorded net of an estimated provision for obsolete or unliquidated inventory. The Allowance for Obsolete or Unmarketable Inventory account is an account against the inventory balance. The amount of obsolete inventory is attributed to each of the three types of inventory:.
The cost of finished goods transferred from work in progress in the current year is $568,735. c. The cost of raw materials transferred from work in progress in the current year is $442,068d. The cost of raw materials purchased in the current year is $438,561.
Case Study 6
WorldCom Capitalized Costs and Earnings
There are two ways to deal with costs, and the question is whether the costs should be capitalized or borne as expenses. For example, the interest costs for the construction of a building are capitalized during the construction period, meaning that the interest costs are part of the cost of an asset. However, once the construction period is over, any interest costs incurred are considered an expense. Typically, company management decides whether to capitalize costs because the effects of capitalizing costs have a major impact on financial statements such as the balance sheet and the income statement.
A capitalized cost will affect net profit because a company that has decided to capitalize the cost will have higher profitability in the early years, but over time the profitability will be lower than if the company had charged the cost. Line costs in WorldCom's statements were considered assets when they were actually fees paid to other providers who owned lines that WorldCom did not have access to and had to pay a fee to use. WorldCom converted these costs into assets, when they do not belong in this group in any way because they have no future economic value, which proves that the line costs should be expensed.
Material construction costs appear in the asset section of PPE on the balance sheet because they were capitalized.
Case Study 7
Targa Company: Employee Benefits
The total amount expected to be incurred in connection with the activity, the amount accrued in the period, and the cumulative amount accrued to date. A reconciliation of the opening and closing obligation balances, showing separately changes during the period attributable to costs incurred and charged, costs paid or otherwise settled, and any adjustments to the obligation, with an explanation of the reason (and why. For each reportable segment, as defined in Subtopic 280-10, the total amount of costs expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date, after deduction of any adjustments to the obligation with an explanation of the reason(s) why.
If a liability for costs associated with the activity is not recognized because the fair value cannot be reasonably estimated, this fact and the reasons therefor. There is a scheme for one-off severance payments for employees on the date on which the redundancy plan meets all the following criteria and to whom it has been communicated. The plan shall establish the terms of the benefit arrangement, including the benefits that employees will receive upon termination of employment (including but not limited to cash payments), in sufficient detail to enable employees to determine the type and amount of determine the compensation they will receive if they are involuntarily terminated.
The actions required to complete the plan indicate that this is unlikely. significant changes will be made to the plan or that the plan will be withdrawn. must also account for non-retirement post-employment benefits provided as special termination benefits to employees and recognize it as a liability and a loss when employees accept the offer and the amount can be reasonably estimated.
Case Study 8
The objectives of this case study are to analyze the financial statements of Merck & Co and answer the following questions. Reconcile the number of shares outstanding at December 31, 2007, with the dollar value of the common shares reported on the balance sheet. To reconcile the number of shares issued, the dollar value of the common shares must be multiplied by the number of shares issued on December 31, 2007:.
It also proves a company's stability and financial strength when dividends are paid regularly. However, if dividends are paid regularly and suddenly something. happens that a company cannot pay its stakeholders, there may be a chance of a market "crazy", which can affect the market opinion of a company from positive to negative and make a company looks less attractive. After dividends are paid, the share price goes down because the market capitalization is reduced by the amount paid to the shareholder, and it all happens on the ex-dividend date.
Merck does not disclose treasury stock as an asset because treasury stock is not an asset; is a contra capital account.
Case Study 9
Xilinx, Inc.—Stock-Based Compensation
Employees with stock options can purchase stock at a discount or with a stated rating, usually within a year. In the early stages of a company, stock options are usually better for both the employees and the companies because they can be exercised at a low price. The Employee Stock Purchase Plan provides qualified employees with the opportunity to obtain a 24-month right to purchase shares of the Company's common stock at the end of each six-month exercise period, as set forth in the notes.
As the article states, stock options are dying out and the market is more friendly to restricted stock awards. Sometimes stock options are more powerful than restricted stock, as in the example from the article: If a company's stock goes up by about a third, the option grant can end up being worth twice as much as a restricted stock grant of the same size. The preference for stock options or RSUs depends on the situation; it is not easy to determine what is better for the employee unless all possible costs and benefits are calculated in a certain course of events.
Xilinx's statement does not prove the article's point that stock options are on the brink of extinction.
Case Study 10
Bier Haus – Revenue Recognition
The bartender then pours the beer into a large cup and hands it to the student. 1 Step 4: Allocate the transaction price to the performance obligations in the contract – An entity typically allocates the transaction price to each performance obligation based on the relative stand-alone sales prices. The student plans to use this mug daily for refills instead of using plastic cups.
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. The bartender then offers the student the large beer and a coupon for two pretzels (a typical business practice) for $7.
The obligation is fulfilled once the student gets the beer and the coupon, and bartender receives $7.
Case Study 11
ZAGG Inc.—Deferred Income Taxes
The big question that arises is why a company reports deferred income taxes as part of total income tax expense. Deferred income tax expense is the deferred portion of income tax that is reported on the income statement. A company reports their deferred income taxes as part of total income tax expense to make it more transparent and accurate.
If the tax expense is less than the current liability for income tax, it is a deferred tax asset. Using the information in the first table in Note 8, show the underlying entry recorded by ZAGG for the income tax provision in fiscal year 2012. Using the information in the third table in Note 8, break down the amount of “net deferred income taxes” recorded in income entry of the tax journal in part f.
This balance is shown in current DTT totaling $6,912 and in long-term deferred income tax equaling $6,596.
Case Study 12
Build-A-Bear Workshop - Leases
By leasing an asset, companies can get immediate access to the assets and pay them in monthly installments. Sale-type lease is a type of lease when the fair value of an asset differs from its carrying value, and there is a transfer of ownership rights at the end of the lease period. Each type of lease has different characteristics and therefore a different way to account for them.
If a company does not consider the type of lease, it would generate false information and misleading information, which would harm the financial world. Build-A-Bear Workshop would put the lease as an asset on their books and take full financial ownership of an asset. Under GAAP, Build-A-Bear Workshop does not have to report any depreciation expense or lease expense, and the lease will not be included in a capital asset of the business.
The key will help analyze the effect of capitalization of leases on the company's financial statements and results.
