Intermediate Accounting Case

In: Business and Management

Submitted By embrooke22
Words 332
Pages 2
Emily Schnarr
Honors Component
Accounting 303
Chapter 3

Accounting, Analysis, and Principles

Accounting:

1) Depreciation Expense $9,500
Accumulated Depreciation 9,500 2) Interest Expense 8,250
Interest Payable 8,250 3) Unearned Service Revenue 10,000
Service Revenue 10,000 4) Advertising Expense 2,500
Prepaid Advertising 2,500 5) Salaries and Wages Expense 3,500
Salaries and Wages Payable 3,500

Analysis:

Revenues Ticket Revenues $360,000 Expenses Salaries and Wages 67,600 Advertising 18,680 Interest 1,400 87,680 Net Income before Adjustments $272,320

Revenues Ticket Revenues $360,000 Expenses Salaries and Wages 71,100 Advertising 21,180 Interest 9,650 101,930 Net Income after Adjustments $258,070

Amato’s bankers should wait for Amato to adjust their accounts before deciding on the loan renewal for a couple of reasons. If Amato were to show the bankers their pre-adjusted revenues, expenses, and net income, the expenses would be understated by about $14,250, making their net income seem higher than it actually should be.

If Amato adjusted their accounts and properly showed all revenues and expenses, their net income would be accurately reported. The bank could then make a better and more feasible decision on whether or not to renew the loan and how much the loan should be. If they had not waited for the adjusted net income, they could have decided to go ahead with the loan renewal since they saw such low expenses and high enough net income to be able to handle a bigger loan. This could have caused issues when it came to Amato actually having the money to repay the loan and not default.

Principle:

Although Amato's bankers are willing to wait for the adjustment process to be completed before they receive financial information, they…...

Similar Documents

Intermediate Accounting

...LP3.2 Assignment: Case Study  Directions Access the financial statements of Proctor & Gamble in Appendix 5B in the textbook to answer the questions found in Chapter 4’s Using Your Judgment-Financial Reporting Problem. Follow the instructions indicated in the case study. Provide answers for parts a-e. Submit this assignment to your instructor via the dropbox “LP3.2 Assignment: Case Study.” This assignment is worth 20 points and will be graded according to the following scoring guide. Rating Scale x Criteria = Total Points Scoring Guide (20 Points) | Rating Scale | 4 | Work meets or exceeds criterion at a high level of competence. | 3 | Work reflects an understanding of criterion with minor misunderstandings/misconceptions. | 2 | Criterion partially met, but one or more important concepts/skills are missing or flawed. | 1 | Work reflects an attempt to meet criterion, but significant misunderstandings/misconceptions are apparent. | 0 | Criterion not met or work is absent. | Criteria | 1. | Identified the type of use of income statement format used by P&G. | 2. | Stated P&G's primary revenue sources. | 3. | Computed P&G's gross profit for 2007-2009 and explained trends to gross profit and financial ratios. | 4. | Provided distinction between operating and non-operating revenue. | 5. | Utilized appropriate grammar, punctuation, and spelling. | Financial Reporting Problem Proctor & Gamble a) What type of income statement......

Words: 484 - Pages: 2

Intermediate Accounting I Paper

...Accounting Policies for Reporting Income Strayer University Intermediate Accounting 1 – ACC 303 February 6, 2012 Professor Elizabeth Hewitt Accounting Policies for Reporting Income Examining accounting standards and policies information from various sources such as FASB Accounting Standards Codification (Financial Accounting Standards Board), AICPA (American Institute of CPA’s) and FASAB (Federal Accounting Standards Advisory Board) I can give a overview of how these items are defined in various resources. The FASB Accounting Standards Codification is the single source of authoritative nongovernmental U.S. generally accepted accounting principles. Looking at the online FASB site it offers the most GAAP generally accepted accounting principles. The site is set up so that you can access the topics you’re looking for in a sort of drill down menu type of search. The site is somewhat user friendly in that it offers a tutorial on how to use the site. It also offers several useful functions such as cross-referencing and join-sections. The AICPA sets ethical standards for the accounting profession and U.S. auditing standards for audits of private companies, non-profit organizations and federal, state and local governments. This resource offers tabs with drop down menus; one of which is marked Research under this tab you can find Standards that will take you to the Standard page offering a list of topics on Professional Accountant Standards such as ‘Audit and Attest......

Words: 770 - Pages: 4

Intermediate Accounting

...Decreasing current net income. d 31. Single-step income statement advantage. b 32. Single-step income statement. d 33. Methods of preparing income statements. a 34. Income statement presentation. b 35. Event with no income statement effect. c S36. Net income effect. Multiple Choice—Conceptual (cont.) Answer No. Description b P37. Selling expenses. b P38. Reporting merchandise inventory. a 39. Definition of an extraordinary item. d 40. Classification of an extraordinary item. d 41. Identification of an extraordinary item. a 42. Identification of an extraordinary item. d 43. Identification of an extraordinary item. a 44. Presentation of unusual or infrequent items. d 45. Identification of a change in accounting principle. d 46. Classification of extraordinary items. c 47. EPS disclosures on income statement. c 48. Reporting discontinued operations. c S49. Reporting unusual or infrequent items. d 50. Intraperiod tax allocation. d 51. Purpose of intraperiod tax allocation. c 52. Intraperiod tax allocation. d 53. Reporting items net of tax. d 54. Reporting items at gross amount. c 55. Earnings per share disclosure. d 56. EPS disclosures on income statement. d 57. EPS disclosures on income statement. c S58. Earnings per share disclosure. d P59. Reporting correction of an error. c 60. Retained earnings statement. d 61. Prior period adjustment. d 62. Identification of a prior period adjustment. b 63. Reporting......

Words: 4342 - Pages: 18

Intermediate Accounting

...Check Figures to accompany INTERMEDIATE ACCOUNTING Seventh Edition Spiceland, Sepe and Nelson Chapter 1 BE 1-1 Net income, $208,000 BE 1-2 1. Liabilities BE 1-3 2. The economic entity assumption BE 1-4 1.The matching principle BE 1-5 3. Disagree, matching principle E1-1 Req. 1, Net operating cash flow, Yr. 2, $50,000 Req. 2, Net income, Year 1, $25,000 E1-2 Req. 1, Net income, Year 2, $190,000 E1-5 3. Auditors E1-6 5. Comprehensive income E1-7 8. f E1-8 4. Timeliness E1-9 7. b E1-10 6. The going concern assumption E1-11 2. The periodicity assumption E1-12 1. Disagree, Monetary unit assumption E1-13 4. Agree, Matching principle E1-14 3. g. Matching principle Chapter 2 BE 2-1 4. –180,000, accounts receivable BE 2-2 2. Dr. Salaries expense, $40,000 BE 2-3 Accounts payable balance, $42,000 BE 2-4 2. Dr. Note receivable, $10,000 BE 2-5 1. Dr. Insurance expense, $3,000 BE 2-7 2. Cr. Prepaid advertising, $1,000 BE 2-9 Total operating expenses, $107,000 BE 2-10 Total assets, $91,000 BE 2-11 Cr. Retained earnings, $35,000 BE 2-12 Net income, $143,000 E2-1 6. + $6,000, Prepaid insurance E2-2 3. Dr. Inventory, $90,000 E2-3 Total debits, $471,000 E2-4 2. Cr. Cash, $40,000 E2-5 6. b E2-6 9. I E2-8 4. Dr. Interest expense, $4,000 E2-9 6. Cr. Supplies, $5,250 E2-11 Net income, $101,000 E2-12 Cr. Retained earnings, $177,000 E2-13 Cr. Retained earnings, $66,000 E2-14 Req. 3, Accrued wages,......

Words: 7295 - Pages: 30

Intermediate Accounting

...condition, situation, or set of circumstances involving uncertainty as to possible gain (gain contingency) or loss (loss contingency) to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.” Liabilities are contingent on one or more future events to confirm the potential loss, payee, date payable or even existence of the loss. FASB identifies three categories to define the likelihood of losses that include probable, reasonably possible and remote. Liabilities that are probable and can be reasonably estimated should be accrued including pending litigation. The company should disclose the information that it has about the case including the probability of a favorable outcome and similarities to other cases. Kieso, Weygandt, & Warfield. (2012). Intermediate Accounting. 14th ed. Hoboken, NJ: John, Wiley & Sons. (a) Warranty costs are expensed as incurred under the cash-basis method. The costs are charged in the period in which the seller or manufacturer complies with the warranty. No liability is recorded for the future warranty costs and charges are not recorded at the time of sale. This method is normally used when the costs are immaterial or the warranty covers a short period. The cash-basis must be used when a liability is not probable or cannot be reasonably estimated. However, if it is probable that a warranty will occur and the costs can be reasonably estimated, the accrual method must be used. The......

Words: 298 - Pages: 2

Intermediate Accounting

...1 12 19 20 20 22 22 Part II Item 5. Item Item Item Item Item Item Item 6. 7. 7A. 8. 9. 9A. 9B. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 28 28 65 66 128 128 128 Part III Item 10. Item 11. Item 12. Item 13. Item 14. Part IV Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...

Words: 87245 - Pages: 349

Intermediate Accounting

...INTERMEDIATE (FINANCIAL) ACCOUNTING I SUBCLASS KLM CASE ANALYSIS QUESTIONS CASE 1 – REVENUE RECOGNITION AND EARNINGS MANAGEMENT INTERMEDIATE (FINANCIAL) ACCOUNTING I SUBCLASS KLM CASE ANALYSIS QUESTIONS CASE 2 – REVENUE RECOGNITION FOR A CONSTRUCTION PROJECT HKU Technology Inc. (Hereafter, HKU Tech) is a large construction contracting firm that serves a variety of industrial customers that purchase machinery and equipment from HKU Tech. HKU Tech’s business primarily involves the design and manufacture of large, industrial machinery and tooling that is used by its customers in manufacturing parts and components for fighter jets, transport planes, and other aerospace-related machinery and equipment. All of HKU Tech’s construction contracts involve the design, development, and manufacture of machines that are unique and customized to the specifications of its customers. HKU Tech negotiates all its contracts with its customers on either a fixed-price or cost-plus basis. HKU Tech has developed an accounting policy to recognize revenue related to its customized construction contracts, which is outlined as follows: The Company performs under a variety of contracts, some of which provide for reimbursement of cost plus fees, and others that are fixed-price-type contracts. Revenues and fees on these contracts are primarily recognized on a contract-by-contract basis using the percentage-ofcompletion method of accounting, which is most often based on contract costs incurred to date......

Words: 1474 - Pages: 6

Intermediate Accounting

...FASB Accounting Standards Codification Case This case consists of a series of questions. For each question, your mission is to locate the paragraph in the FASB Accounting Standards Codification (ASC) that answers the question. Please CUT AND PASTE the paragraph from the standards into this document for each question and provide a full reference, including the topic, subtopic, section, and paragraph (e.g. “ASC 605-15-25-1”, or “ASC Master Glossary” for definitions). Submit a hard copy of your answers by Wednesday, October 30th 9:00 am. The FASB Codification database is available at: http://aaahq.org/ascLogin.cfm Student Access Username: AAA51226 Password: KMFpjSW 1.   To gain familiarity with the content and organization of the FASB’s Accounting Standard Codification (ASC), use the general topics presented below and determine where the following accounting terms would be located. Topical Categories:         Section # General Principles ................................... 100 Presentation .............................................. 200 Assets........................................................... 300 Liabilities...................................................... 400 Equity........................................................... 500 Revenue........................................................ 600 Expenses..................................................... 700 Broad Terms............................................... 800 Industry.................

Words: 2093 - Pages: 9

Intermediate Accounting Chapter 2

... 5. 6. Conceptual framework–general. Objectives of financial reporting. Qualitative characteristics of accounting. Elements of financial statements. Basic assumptions. Basic principles: a. Measurement. b. Revenue recognition. c. Expense recognition. d. Full disclosure. Accounting principles–comprehensive. Constraints. Assumptions, principles, and constraints. 28, 29, 30 10 11 Questions 1, 7 2 3, 4, 5, 6, 8 9, 10, 11 12, 13, 14 15, 16, 17, 18 19, 20, 21, 22, 23 24 25, 26, 27 1, 2, 3, 4 6, 11, 13 5, 7 8, 9, 12 8 8, 12, 8, 12 1, 2 2, 3, 4 5 6, 7 6, 7 7 6, 7 6, 7, 8 9, 10 3, 6, 7 6, 7 12 5, 6 5, 6 5, 6, 7, 8, 9, 11 11 Brief Exercises Exercises Concepts for Analysis 1, 2 3 4, 10 7. 8. 9. Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only) 2-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. 3. 4. 5. 6. 7. 8. Describe the usefulness of a conceptual framework. Describe the FASB’s efforts to construct a conceptual framework. Understand the objectives of financial reporting. Identify the qualitative characteristics of accounting information. Define the basic elements of financial statements. Describe the basic assumptions of accounting. Explain the application of the basic principles of accounting. Describe the impact that constraints have on reporting accounting information. 1, 2, 3, 4, 5 6, 13 7, 11, 12 8, 9, 11, 12 10, 12 1, 2 2, 3, 4 5 6, 7 6, 7, 8, 9, 10 3, 6...

Words: 18492 - Pages: 74

Intermediate Accounting

...Company Name: GCL-Poly Energy Holdings Limited Stock Code: 3800 To: Albert From: XXX Date: 28/10/2014 Subject: The accounting requirements for leases BACKGROUND | As per our discussion, I have reviewed the consolidated financial statement of the GCL-Poly Energy Holdings Limited for the last year ended 31 December, 2013. For your reference, I would like to answer your question to facilitate your decision of lending the money as an investment that why the leased assets do should be recorded as the company’s assets under the accounting standard even the assets are not under the name of GCL. As per the financial statements, we can extract the following details: Obligation under finance lease – due within one year $654,197 Obligation under finance lease – due after one year $1,416,322 Explanation of accounting treatments In accordance to the IAS 17: Leases, it defines a finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. This means that even if the titles of the assets are not transferred, if the lessee bears the responsibility to the assets’ risks and rewards such as the repairs and maintenances, depreciation and any related expenses, together with the lease term covering the major useful lives of the assets, the company should reflect the assets under the non-current assets. This is more likely to reflect the true and fair financial......

Words: 952 - Pages: 4

Intermediate Accounting 2 Midterm

...INTERMEDIATE ACCOUNTING 2 of 3 MIDTERM EXAM Pick 7 problems that you will do. Each problem is worth 14 points. Please put your answer in the space provided, any back up can be attached at the end of the exam as long as it is clearly labeled . Your work can be done by hand as long as it is legible. Select the 7 problems you are completing: 1, 4, 5, 9, 10, 11, 12 Problem 1—Accounts and Notes Payable. Described below are certain transactions of Larson Company for 2010: 1. On May 10, the company purchased goods from Fry Company for $60,000, terms 2/10, n/30. Purchases and accounts payable are recorded at net amounts. The invoice was paid on May 18. 2. On June 1, the company purchased equipment for $90,000 from Raney Company, paying $25,000 in cash and giving a one-year, 10% note for the balance. 3. On September 30, the company discounted at 10% its $150,000, one-year zero-interest-bearing note at First State Bank. Instructions (a) Prepare the journal entries necessary to record the transactions above using appropriate dates. Date | Account Name | Debit | Credit | 05-10 | Purchases | 49,000 | | | Accounts Payable | | 49,000 | | To record purchased goods at net amounts. | | | 05-18 | Accounts Payable | 49,000 | | | Cash | | 49,000 | | To record payment of invoice. | | | 06-01 | Equipment | 90,000 | | | Cash | | 25,000 | | Note Payable | | 65,000 | | To record purchase of equipment. | |...

Words: 1854 - Pages: 8

Intermediate Accounting Ii

... SCHAUM’S OUTLINE OF THEORY AND PROBLEMS OF INTERMEDIATE ACCOUNTING II Second Edition BARUCH ENGLARD, M.S., M.B.A., CPA Associate Professor of Accounting The College of Staten Island The City University of New York SCHAUM’S OUTLINE SERIES New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto Copyright © 2007, 1992 by The McGraw-Hill Companies, Inc. All rights reserved. Manufactured in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. 0-07-151048-6 The material in this eBook also appears in the print version of this title: 0-07-146974-5. All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit of the trademark owner, with no intention of infringement of the trademark. Where such designations appear in this book, they have been printed with initial caps. McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. For more information, please contact George Hoare, Special Sales, at george_hoare@mcgraw-hill.com or (212) 904-4069. TERMS...

Words: 107484 - Pages: 430

Intermediate Accounting

...Exercises 1, 2, 3, 5 1, 5, 6 2 1 3 14, 15 24, 25 Kieso, Intermediate Accounting, 15/e, Solutions Manual 4 1 (For Instructor Use Only) 10-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives Questions Brief Exercises Concepts for Analysis Exercises Problems 1, 2, 3, 4, 5, 11, 12, 13 1, 2, 3, 4, 5, 6, 11 CA10-1 4, 5, 6, 11, 12 3 CA10-2 1. Describe property, plant, and equipment. 1 2. Identify the costs to include in initial valuation of property, plant, and equipment. 2, 3, 4, 5, 6, 21 3. Describe the accounting problems associated with self-constructed assets. 8 4. Describe the accounting problems associated with interest capitalization. 8, 9, 10, 11 2, 3, 4 5, 6, 7, 8, 9, 10 5, 6, 7 CA10-3 5. Understand accounting issues related to acquiring and valuing plant assets. 7, 12, 14, 16, 17, 19, 20, 22 5, 6, 7, 8, 9, 10, 11, 12 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 3, 4, 8, 9, 10, 11 CA10-4, CA10-6 6. Describe the accounting treatment for costs subsequent to acquisition. 6, 13, 15, 18 13 21, 22, 23 7. Describe the accounting treatment for the disposal of property, plant, and equipment. 7, 23 14, 15 24, 25 10-2 Copyright © 2013 John Wiley & Sons, Inc. 1 Kieso, Intermediate Accounting, 15/e, Solutions Manual CA10-5, CA10-6 2, 4 (For Instructor......

Words: 18805 - Pages: 76

Intermediate Accounting

...Financial Accounting Standards Board The Financial Accounting Standards Board (FASB) has been the assigned organization in a private sector for establishing standards. These standards are important to be useful because it allows investors to make informed decisions. Financial information must be reliable, consistent and transparent. Since 1973, FASB has been part of a structure that’s independent of all other business and professional organizations. The rest of the parts are Financial Accounting Foundation (FAF), Financial Accounting Standards Advisory Council (FASAC), Governmental Accounting Standards Board (GASB) and Governmental Accounting Standards Advisory Council (GASAC). The role of monitoring and controlling business reporting and accounting practices in a modern organization is to establish and improve standards of financial accounting. FASB has a board full of members that participate in accomplishing the mission. There are 7 board members as well as several staff members that help assist. The board members are: * Russell Golden is a chairman. He began in July of 2013. He served six years as a staff member (technical Director) for the FASB before he got appointed to the chairmen. His term will end in 2017, but then he can get an appointment to an additional 3 more years. He is also chaired in FASB’S emerging issues task force. * James Kroeker is the vice chairman. He was appointed in September 2013. He served as the deputy managing partner for......

Words: 2085 - Pages: 9

Intermediate Accounting

...following statements is not an objective of financial reporting? (Points: 5) Provide information that is useful in investment and credit decisions. Provide information about enterprise resources, claims to those resources, and changes to them. Provide the liquidation value of a company. Provide information that is useful in assessing cash flow prospects. 2. (TCO A) The Financial Accounting Standards Board employs a "due process" system which (Points: 5) has all CPAs in the United States vote on a new Statement. enables interested parties to express their views on issues under consideration. identifies the accounting issues that are the most important. requires that all accountants receive a copy of financial standards. 3. (TCO A) The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the (Points: 5) SEC AICPA IASB GASB 4. (TCO A) The cash method of accounting: (Points: 5) is used by most publicly-traded corporations for financial statement purposes. is not in accordance with the matching principle for most publicly-traded corporations. is often used on the income statement by large, publicly-held companies. All of the above is true. 5. (TCO A) Which of the following is an ingredient of relevance? (Points: 5) ......

Words: 831 - Pages: 4