The appendices at the end of each case consist mainly of financial statements and notes to the financial statements. The introductions at the beginning of each case highlight what I learned specifically from each individual case study.
Home Heaters Inc
The fourth difference in Glenwood's and Eads' accounting methods is their choice to capitalize their leases. Because Glenwood's pretax income is greater than Eads', Glenwood's income tax expense is greater than Eads'.
Molson Coors Brewing Company
Comprehensive income combines net income and unrealized items not included in the income statement, such as a valuation gain/loss on available-for-sale securities. The total income amount for 2013 is $760.2 million ($765.4 million including minority interests), and the net income amount for 2013 is as well.
Pearson
Doubtful Accounts Account 26 (Balance Sheet Account) (To record bad debt expense for Doubtful Accounts Account 20 (Balance Sheet Account). Sales Returns Account 425 (Balance Sheet Account) (To record estimated sales revenues for 2009)... 2) Sales Returns Allowance 443 (balance sheet account).
Intermediate Textbook Problem 6-2 Solution
What is the amount of payments that Ned Winslow must make at the end of each of 8 years to accumulate a fund of $90,000 by the end of the eighth year if the fund earns 8% interest, compounded annually. The 90,000 is the future value of the annuity, and the payments are made at the end of the year, so it is an ordinary annuity. The 500,000 is the future value of the annuity, and the payments are made on his birthdays (the beginning of a term), so it is due annuity.
Using the formula future value = present value (future value lump sum factor), combine the future value (47,347) and the present value (20,000) and an interest rate of 9%. To calculate the future value of the individual sum factor of the number of periods/years, divide the future value by the present value, which gives you 2.36735. Since she is in line 10, it will take her 10 years to build up enough.
What interest rate will she need to earn annually to accumulate enough to pay off the debt. Using the formula present value = future value (factor of the individual sum of the present values), you relate the present value (19,553) and the future value (27,600) and 4 years.
Palfinger
This amount is €61,444, taken from the column of acquisition costs total for additions in 2007 in Appendix B. This amount is €733, taken from the column of acquisition costs total government contributions 2007 in Appendix B. This amount is €12,557. taken from the total column of the cumulative depreciation table for depreciation in 2007 in Appendix B.
The net book value of tangible fixed assets that Palfinger disposed of in the 2007 financial year. Consider the profit or loss on the sale, as well as the total depreciation on the equipment. Because the equipment was only used for one year, the net book value would be €8,793.
Since the equipment was only used for one year, the net book value would be €6,404. Compare the total two-year income statement impact of the equipment under the two depreciation policies.
Volvo
This case focused mainly on research and development costs and the different ways of reporting them financially. Depending on the standards used, US GAAP or IFRS, research and development costs can either be expensed or partially expensed. Because Volvo is a Swedish company, they chose to capitalize some research and development costs (or product and software development in their case) and convert them to intangible assets.
I learned the specifics of IAS 38 and what exactly can be capitalized in terms of research and development costs. I learned how to calculate total research and development costs, which include amounts expensed, capitalized, and amortized. This allowed me to see more clearly the advantages and disadvantages of capitalizing and amortizing research and development costs.
GAAP that requires all research and development costs to be expensed in the year they are incurred. Calculate the percentage of total research and development costs incurred to net sales from operations (called, net sales from products manufactured, for Navistar) for both firms.
Data Analytics IDEA
Since data analytics is the new trend in accounting and similar fields, it was certainly useful to quickly get acquainted with the different types of technology we might come into contact with in the future. I'm very interested in the more technological side of audits and accounting in general, so this case really appealed to me. Now that our school will be one of the first in the country to offer a Masters in Data Analytics, this case will be useful to look back on as this type of software is integrated into our curriculum.
It also keeps track of each step of the analysis process so that the user can easily recall the steps in the future. Discover finds trends and outliers in the user's data and is a good place to start if the user is unsure of where to begin their analysis. It is very easy to use and set up similar to Microsoft Office, as seen in the images below.
IDEA can quickly run an analysis of this and create a visualization that clearly shows any deviations or trends in the tax data so that a company can easily make an informed decision. Write a few paragraphs to your future public accounting partner explaining why your team should invest in acquiring and training in this tool.
Rite Aid
Rite Aid likely separates secured and unsecured debt because of the risk and collateral associated with each type of debt. According to note 11, who provided the guarantee for some of Rite Aid's unsecured debt. Speculate on why Rite Aid has many different types of debt with a range of interest rates.
Rite Aid most likely needs different amounts of cash at different times, so they issue different types of debt at different times. Prepare the journal entry Rite Aid should have made when these notes were issued. Determine the total amount of interest expense recorded by Rite Aid on these notes for the year ended February 27, 2010.
Assume that Rite Aid issued these notes on June 30, 2009, and that the company pays interest on June 30 of each year. Based on the information above, prepare the journal entry Rite Aid would record on February 27, 2010, to account for interest expense on these notes.
Merck & Co
Understanding the inner workings of stock issuance and valuation is not only important in the accounting world, but also in the business world in general. You don't have to be an accountant to benefit from understanding shareholders' equity, because anyone can invest in the stock market, and knowing how your investment affects the company is always a smart idea. Merck is authorized to issue 5.4 billion shares of common stock, as found on their balance sheet in the stockholders' equity section.
Reconcile the number of shares outstanding at December 31, 2007, with the dollar value of the common shares reported on the balance sheet. The dollar value of common stock for 2007 is $29.8 million, which is the number of shares issued multiplied by the par value of one cent. Because dividends reduce retained earnings, paying dividends indicates that the company is confident that they will receive higher net income in the future to maintain or increase their retained earnings.
Because each share of stock represents ownership in the company, a company can buy back their own stock to regain their own ownership and voting rights of their company. This represents a financing cash outflow and can be seen on the statement of cash flows in the financing activities section.
State Street
Securities held for trading and securities available for sale are valued at fair market value, but gains and losses due to changes in their values flow through different financial statements. Available-for-sale securities are investments that are neither trading securities nor held-to-maturity 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 disclosures in Note 4. What is the amount of net unrealized gains or losses on available-for-sale securities held by State Street at December 31, 2012. the amount of net realized gains (losses) from the sale 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. Use the information above to determine the original cost of the available-for-sale securities sold in 2012.
ZAGG
We were specifically asked what distinguishes book income from taxable income, and I learned that book income is another term for pre-tax financial income, which determines income tax expense, and taxable income determines income tax payable. The effective tax rate is calculated by dividing the income tax expense reported on the income statement by the pre-tax financial. Future deductible amounts (in other words, there will be a benefit in the future but not currently) create deferred tax assets; future taxable amounts (in other words, there will be a liability or obligation to pay in the future but not currently) create deferred tax liabilities.
Explain in general terms why a company reports deferred income taxes as part of its total income tax expense. Companies also record deferred income taxes along with their current income taxes because it reconciles the journal entry difference between income tax expense and income taxes payable. Profit taxes are calculated by adding the current taxes payable to the deferred taxes payable.
Use the information in the first table in Note 8 to show the journal entry that ZAGG recorded for the income tax provision in fiscal year 2012. The effective tax rate is calculated by dividing the income tax expense reported in the income statement by the pretax financial income.
Apple
I also learned what a multi-element contract was and how it can be more difficult to record in the financial statements compared to simpler contracts. A known item is described in words and numbers, with the amount included in the statement. Do they appear to meet the revenue recognition criteria you described in part b, above?
What are multi-element contracts and why do they pose revenue recognition problems for companies? These pose problems for companies because it is difficult to allocate the price of the contract to each element/product/performance obligation in the contract. Managers most likely want to make selfish choices about revenue recognition because they are typically compensated based on the amount of revenue.
Earnings also affect stock prices, and companies want them to be valued higher on the stock market. There is only one performance obligation for a gift card, so all revenue would be allocated to that obligation.
