sOLUTIONS hwch1%262

sOLUTIONS hwch1%262 - Chapter 02 - Review of the Accounting...

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Unformatted text preview: Chapter 02 - Review of the Accounting Process Exercise 1-1 Requirement 1 Pete, Pete, and Roy Operating Cash Flow Year 1 Year 2 Cash collected $160,000 $190,000 Cash disbursements: Salaries (90,000) (100,000) Utilities (30,000) (40,000) Purchase of insurance policy (60,000 )- 0- Net operating cash flow $(20,000 ) $ 50,000 Requirement 2 Pete, Pete, and Roy Income Statements Year 1 Year 2 Revenues $170,000 $220,000 Expenses: Salaries (90,000) (100,000) Utilities (35,000) (35,000) Insurance (20,000 ) (20,000 ) Net Income $ 25,000 $ 65,000 Requirement 3 Year 1 : Amount billed to customers $170,000 Less: Cash collected (160,000 ) Ending accounts receivable $ 10,000 Year 2: Beginning accounts receivable $ 10,000 Plus: Amounts billed to customers 220,000 $230,000 Less: Cash collected (190,000 ) Ending accounts receivable $ 40,000 2-1 Chapter 02 - Review of the Accounting Process Exercise 1-2 Requirement 1 Year 2 Year 3 Revenues $350,000 $450,000 Expenses: Rent ($80,000 ÷ 2) (40,000) (40,000) Salaries (140,000) (160,000) Travel and entertainment (30,000) (40,000) Advertising (25,000 ) (20,000 ) * Net Income $115,000 $190,000 Requirement 2 Amount owed at the end of year one $ 5,000 Advertising costs incurred in year two 25,000 30,000 Amount paid in year two (15,000 ) Liability at the end of year two 15,000 Less cash paid in year three (35,000 ) Advertising expense in year three $20,000 * 2-2 Chapter 02 - Review of the Accounting Process Exercise 1-3 Requirement 1 FASB ASC 820: “Fair Value Measurements and Disclosures” Requirement 2 The specific citation that describes the information that companies must disclose about the use of fair value to measure assets and liabilities for recurring measurements is FASB ASC 820–10–50–2: “Fair Value Measurements and Disclosures-Overall- Disclosures.” Requirement 3 The disclosure requirements are: a. The fair value measurements at the reporting date 2-3 Chapter 02 - Review of the Accounting Process b. The level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using any of the following: 1. Quoted market prices in active markets for identical assets or liabilities (Level 1). 2. Significant other observable inputs (Level 2). 3. Significant unobservable inputs (Level 3). c. For fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to any of the following: 1. Total gains and losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities)....
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This note was uploaded on 04/04/2011 for the course ACC 615 taught by Professor Semir during the Spring '11 term at Pace.

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sOLUTIONS hwch1%262 - Chapter 02 - Review of the Accounting...

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