FINANCIAL ACCOUNTING AND REPORTING I
Professor: Dr. Marcus Kirk
GER 321, T 2:00 3:00
(or by appointment)
Section 04AB: TR 9:35 11:30 (Per 3 & 4)
Section 04AA: TR 11:45 1:40 (Per 5
Cash and Receivables
(for Tues Feb 5 and Thur 12)
Show up on time (Tues, Feb 10)
Look at all questions
Plan your attack (not necessarily in order)
Do what you know first
Maximize your points
Be aware of time
Chap 1 & 2
103. Why are the depreciation and patent amortization listed as deferred tax liabilities?
104. Estimate the effective tax rate for Black Inc. in 2011. Why is it different than the 35%
federal statutory rate?
105. Several years ago, Western Electric Corp.
92. On January 1, 2011, Bubba Construction decided to change from the completed contract
method of accounting for long-term construction contracts to the percentage-of-completion
method. The company will continue to use the completed contract method for t
Conceptual Framework Development
The FASB has issued seven Statements of Financial Accounting Concepts (SFAC) for
SFAC No.1 - Objectives of Financial Reporting.
SFAC No.2 - Qualitative Characteristics of Accounting Informat
Cash equivalents would include investments in marketable equity securities as long as management intends
to sell the securities in the next three months.
AACSB: Reflective Thinking
AICPA BB: Critical
Depreciation, Impairments, and Depletion
(for Tues 31 and Thur 2)
After studying this chapter, you should be able to:
Explain the concept of depreciation.
Identify the factors involved in the
Cash and Receivables
(for Tues 18 and Thur 20)
Identify items considered cash.
Indicate how to report cash and related items.
Define receivables and identify the different types of receivables.
Explain accounting issues rel
(for Tues 12 and Thur 14)
Describe and apply the lower-of-cost-or-net realizable value rule.
Explain when companies value inventories at net realizable value.
Explain when companies use
CHAPTER 18 Revenue Recognition SOLUTIONS TO CODIFICATION EXERCISES CE181 Master Glossary (a) Under the costrecovery method, no profit is recognized until cash payments by the buyer, including principal and interest on debt due to the seller and on existin
94. Albatross Company purchased a piece of machinery for $60,000 on January 1, 2009, and
has been depreciating the machine using the sum-of-the-years'-digits method based on a
five-year estimated useful life and no salvage value. On January 1, 2011, Albat
71. Moonland Company's income statement contained the following errors:
Ending inventory, December 31, 2011, understated by $6,000
Depreciation expense for 2011 overstated by $1,000
What is the effect of the errors on 2011 net income before taxes?
96. Pinnacle Corporation has been using the straight-line depreciation method to depreciate
some office equipment that was acquired at the beginning of 2008. At the beginning of 2011,
Pinnacle decided to change to the sum-of-the-years'-digits method. The
86. At the end of the current year, a company failed to accrue interest of $500,000 on its
investments in municipal bonds. Its tax rate is 30%. As a result of this error, net income is:
B. Understated by $350,000.
C. Understated by $500,000
90. Which of the accounting changes listed below is more associated with financial statements
prepared in accordance with U.S. GAAP than with International Financial Reporting
A. Change in reporting entity.
B. Change to the LIFO method from the
82. A company failed to report the $600,000 additional liability for its underfunded pension
plan. Its tax rate is 30%. As result of this error, retained earnings would be:
B. Overstated by $600,000.
C. Overstated by $420,000.
78. A company failed to record unrealized gains of $20 million on its trading security
investments. Its tax rate is 30%. As a result of this error, total shareholders' equity would be:
A. Understated by $14 million.
B. Understated by $7 million.
64. Washburn Co. spent $10 million to purchase a new patented technology, debiting an
intangible asset and crediting cash. Washburn uses SYD depreciation for its depreciable assets
and plans to amortize the intangible asset on a straight-line basis.
74. Due to an error in computing depreciation expense, Prewitt Corporation overstated
accumulated depreciation by $20 million as of December 31, 2011. Prewitt has a tax rate of
30%. Prewitt's retained earnings as of December 31, 2011, would be:
100. B Co. reported a deferred tax liability of $24 million for the year ended December 31,
2010, related to a temporary difference of $60 million. The tax rate was 40%. The temporary
difference is expected to reverse in 2012 at which time the deferred ta
117. Branch Industries changes from declining balance depreciation to straight-line
depreciation for existing assets. Describe in detail the way Branch would account for the
118. We record and report most changes in accounting principle retrospect
111. There is not always a clear-cut distinction between a change in estimate and a change in
principle or a simultaneous change in estimate and change in principle. How are such situations
112. How may accounting changes detract from accou
115. A company changes depreciation methods. Briefly describe the steps the company should
take to report this accounting change in its current comparative financial statements.
116. On December 1, 2011, LCD Distributing Company ("LCD or "Company") issued
108. Lindy Company's auditor discovered two errors. No errors were corrected during 2010.
The errors are described as follows:
(1.) Merchandise costing $4,000 was sold to a customer for $9,000 on December 31, 2010, but
it was recorded as a sale on January
106. Max Industries changed its method of accounting for bad debts from the direct write-off
method to the allowance method on January 1, 2011 because uncollectible accounts are
material to the financial statements. The company's accountant determined tha
102. Jackson Company uses the percentage of sales method to estimate bad debts. Information
relating to bad debts since the company's inception is as follows:
On January 1, 2011, Jackson decided to change their bad debt estimate from 3% of sales to 2%
104. Mattson Company receives royalties on a patent it developed several years ago. Royalties
are 5% of net sales, receivable on September 30 for sales from January through June and
receivable on March 31 for sales from July through December. The patent r
98. Green Co. constructed a machine at a total cost of $70 million. Construction was completed
at the end of 2007 and the machine was placed in service at the beginning of 2008. The machine
was being depreciated over a 10-year life using the sum-of-the-ye