Week 1 Discussion 2

Week 1: U.S. GAAP - Discussion





 

This week's graded topics relate to the following Terminal Course Objectives (TCOs):

A

The student should be able to understand the theory, objectives and conceptual framework underlying financial statement reporting and be able to explain these concepts to other accountants, managers, and business people. The student will also need to understand the organizations (The Authority) that set accounting standards and how they develop the rules (Generally Accepted Accounting Principles – GAAP) that guide practitioners in the preparation of annual reports and financial statements


B

The student should be able to understand and explain to other accountants, managers, and business people the accounting process, as well as why and how a trial balance is used in the financial statement preparation process. Additionally, the student should understand and be able to:

  • Complete a multi-column worksheet with adjustments.
  • Prepare financial statements from the worksheet data.
  • Journalize and post the adjusting and closing entries.
  • Prepare a post-closing trial balance.
  • Prepare and post reversing entries.
  • Utilize special journals and subsidiary ledgers where appropriate.
  • Differentiate cash basis from accrual basis accounting.

  • Note! iconClick on the links in the "Topics" section to view the discussion topics. Then, click "Respond" to add your thoughts to the discussion thread.


    Topics

    Introduction (not graded, but required)
    Case Discussion (graded)
     Exercise Room (graded)
    Q & A Forum for your questions and comments (not graded)


    Exercise Room (graded)

    At the end of each chapter, there are self-study questions, questions, brief exercises, exercises, and problems. 

    Usually your homework assignments will be split between the exercises and the problems. For this specific graded threaded topic, however, I would like you to follow these directions in order to enhance your learning. 

    For the Brief Exercises only, I would like the first person into this thread to post his or her answers to Brief Exercise #1 from Chapter 2. The next person in will see that since Brief Exercise #1 has already been answered, and therefore should respond by posting his or her answers to Brief Exercise #2. If you go in and see that Brief Exercise #2 has already been answered, then it would be your turn to respond to Brief Exercise #3. And so on. 

    Once all of the Brief Exercises from Chapter 2 have been answered, the next person would be working with Brief Exercise #1 from Chapter 3. 

    Please do not answer these out of order. Try your best to respond to the very next item in consecutive order. I think you get the drill. This will enable you to see all of the answers to all of the Brief Exercises by the end of each week. Remember that I will post all of the answers at the end of the week. 

    One recommendation: Once you see that it's your turn to respond to, say, Brief Exercise #3, you might just type in a message like "This is Name, and I'll be answering Brief Exercise #3." This will reserve your space, just in case two students happen to be responding at exactly the same time. Then, after you post this "reservation" response, you should go right back in and "edit" your initial response, so you then can type in your real answer on top of your first reservation comment. 

    As a courtesy to others, please only reserve your spot for a short period of time. A one-day period (24 hours) would be appropriate. 

    Problems can be broken down into multiple posts. For instance, if a problem (designated by the P), has three parts, you could answer part A. This would count as a post. Others could also answer parts B and C for additional posts as well. 

    Note: Do not answer the assignments that are homework since the answers have already been provided. The assignments not to answer in the exercise room this week are: 

    Chapter 1: CA 1-1, CA 1-7, CA 1-9 

    Chapter 2: E 2-5, E 2-6, E 2-7, E 2-8, CA 2-2 

    Chapter 3: E 3-1, E 3-5, E 3-6, E 3-12, E 3-13, E 3-18, P 3-1, P 3-2, P 3-9 




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    CollapseMark as UnreadWelcome to week 1 exercise room!Professor Wilson Email this Author12/14/2011 5:58:30 PM
    At the end of each chapter, there are self-study questions, questions, brief exercises, exercises, and problems. 

    Usually your homework assignments will be split between the exercises and the problems. For this specific graded threaded topic, however, I would like you to follow these directions in order to enhance your learning. 

    For the Brief Exercises only, I would like the first person into this thread to post his or her answers to Brief Exercise #1 from Chapter 2. The next person in will see that since Brief Exercise #1 has already been answered, and therefore should respond by posting his or her answers to Brief Exercise #2. If you go in and see that Brief Exercise #2 has already been answered, then it would be your turn to respond to Brief Exercise #3. And so on. 

    Once all of the Brief Exercises from Chapter 2 have been answered, the next person would be working with Brief Exercise #1 from Chapter 3. 

    Please do not answer these out of order. Try your best to respond to the very next item in consecutive order. I think you get the drill. This will enable you to see all of the answers to all of the Brief Exercises by the end of each week. Remember that I will post all of the answers at the end of the week. 

    One recommendation: Once you see that it's your turn to respond to, say, Brief Exercise #3, you might just type in a message like "This is Name, and I'll be answering Brief Exercise #3." This will reserve your space, just in case two students happen to be responding at exactly the same time. Then, after you post this "reservation" response, you should go right back in and "edit" your initial response, so you then can type in your real answer on top of your first reservation comment. 

    As a courtesy to others, please only reserve your spot for a short period of time. A one-day period (24 hours) would be appropriate. 

    Problems can be broken down into multiple posts. For instance, if a problem (designated by the P), has three parts, you could answer part A. This would count as a post. Others could also answer parts B and C for additional posts as well. 

    Note: Do not answer the assignments that are homework since the answers have already been provided. The assignments not to answer in the exercise room this week are: 

    Chapter 1: CA 1-1, CA 1-7, CA 1-9 

    Chapter 2: E 2-5, E 2-6, E 2-7, E 2-8, CA 2-2 

    Chapter 3: E 3-1, E 3-5, E 3-6, E 3-12, E 3-13, E 3-18, P 3-1, P 3-2, P 3-9 

    Prof Wilson 







    CollapseMark as UnreadRE: Welcome to week 1 exercise room!Steven Borrego Email this Author1/1/2012 10:17:09 AM
    Modified:1/2/2012 7:55 PM
    BE2-1

    Consistency is "when a company applies the same accounting treatment to similar events, from period to period. It does not mean that a company cannot switch accounting methods, however it must first demonstrate that the new accounting method is preferred and explain the justification in the financial statements for that period."
    A) yes, this change requires recognition. The company is switching from weighted-average to FIFO. 
    B) yes, this change requires recognition. A major change occurs differing from prior years.
    C) No, the useful life  of PPE will not matter towards consistency.
    D) No, if the company is using the same inventory valuation it used for prior years then it is still consistent. 



    CollapseMark as UnreadRE: Welcome to week 1 exercise room!Professor Wilson Email this Author1/2/2012 6:02:21 PM
    Steven,

    Thanks for posting - please identify problem completed for my and other student's knowledge.

    Prof Wilson



    CollapseMark as UnreadRE: Welcome to week 1 exercise room!Steven Borrego Email this Author1/2/2012 8:00:59 PM
    BE 2-1



    CollapseMark as UnreadRE: Welcome to week 1 exercise room!Marva Wade Email this Author1/2/2012 7:15:59 AM
    Modified:1/2/2012 7:48 AM
    Chapter 2 Brief Exercise 1

     

    Completeness

    (a)    Quality of information that permits users to identify similarities in and differences between two sets of economic phenomena.

     

    Timeliness

    (b)   Having information available to users before it loses its capacity to influence decisions.

     

     

    Predictive value

    (c)    Information about an economic phenomenon that has value as an input to the processes used by capital providers to form their own expectations about the future.

     

    Relevance

    (d)   Information that is capable of making a difference in the decisions of users in their capacity as capital providers.

     

    Neutrality

    (e)   Absence of bias intended to attain a predetermined result or to induce a particular behavior.




    CollapseMark as UnreadRE: Exercise RoomVladimir Peralte Email this Author1/2/2012 9:23:18 AM
    Modified:1/3/2012 4:40 PM
    BE 2-9 

    If the going concern assumption is not made in accounting, discuss the differences in the amounts shown in the financial statements for the following items.  
    a) Land // Going Concern assumption means the company will have a long life  

    b) Unamortized bond premium // Monetary unit is when the common denominator by which economic activity is conducted, and the monetary unit provides an appropriate basis for measurement and analysis.  

    c) Depreciation expense on equipment  //Periodicity is when economic activities of the company can be divided into artificial time periods.
      
    d) Merchandise inventory  // Periodicity is when economic activities of the company can be divided into artificial time periods. 

    e) Prepaid insurance // Economic entity is the activity of a company can be kept separate and distinct from its owners and any other business unit. 




    CollapseMark as UnreadAIS sytemsCourtney Smith Email this Author1/2/2012 1:17:53 PM
    I have worked in the Accounting field for about 10 years now, and I have experience with multiple systems for small to large companies.  In my current company we used Quickbooks starting out, and actually got stuck using it for way too long as our company grew.  We out grew quickbooks and the controls in place within that system were not sufficient for our company.  We had over 37,000 accts amongst 20 different entities.  We have recently converted to Microsoft Dynamics GP over the last couple of months and we are still currently trying to balance every account from the conversion before we close the books for year end.  This was a huge task, but the security, controls, and reporting capabilities are exactly what we needed.  Learning a new system is very hard, but once you do you are finally able to take advantage of making more processes more efficient by the capabilities of the new system.



    CollapseMark as UnreadRE: Brief Excercise # 2-4Courtney Smith Email this Author1/2/2012 1:26:11 PM
    Modified:1/2/2012 1:35 PM

    BE2-4 Identify which qualitative characteristic of accounting information is best described in each item below. (Do not use relevance and faithful representation.)

    • (a) The annual reports of Best Buy Co. are audited by certified public accountants.
                           Answer: Verifiability
    • (b) Black & Decker and Cannondale Corporation both use the FIFO cost flow assumption.
                           Answer: Understandability
    • (c) Starbucks Corporation has used straight-line depreciation since it began operations.
                           Answer:  Consistency/Comparability
    • (d) Motorola issues its quarterly reports immediately after each quarter ends.
                          Answer: Timeliness



    CollapseMark as ReadRE: Brief Excercise # 2-4Larry Linthicum Email this Author1/5/2012 4:51:45 AM
    It is interesting that Motorola would issue their quarterly reports immediately after quarter end, wonder if they are using estimates for the last month of the quarter?  I work for a publicly traded company and have to report it results quarterly but that is not publicly issued til at the end of the third week as it has to go thru some audit verification before being issued. 



    CollapseMark as UnreadRE: Brief Excercise # 2-4Lucille Mcelroy Email this Author1/4/2012 3:56:16 AM
    Modified:1/4/2012 3:59 AM
    Hello Courtney,

    I think b. Black and Decker and Cannondale Corp both use the FIFO cost flow assumption is Comparability rather than Understandability is the answer.



    CollapseMark as ReadRE: Brief Excercise # 2-4Michael Ornelas Email this Author1/4/2012 9:07:26 PM
    Do you think it is comparability because the data would be compared from one financial reporting period to the next?



    CollapseMark as UnreadRE: Brief Excercise # 2-4Steven Borrego Email this Author1/2/2012 7:58:32 PM
    Modified:1/2/2012 8:01 PM
    When reviewing Courtney's post for BE2-4. From the book (not e-book) this is BE2-2. Please advise professor. The picture of the book on the syllabus is different from the picture of the e-book. 



    CollapseMark as UnreadRE: Brief Excercise # 2-4Professor Wilson Email this Author1/3/2012 5:45:35 AM
    Steven,

    Is your hard copy the 14th edition? ebook edition is 14th edition and that is what is being used for the course this term.

    Prof Wilson



    CollapseMark as UnreadRE: Brief Excercise # 2-4Steven Borrego Email this Author1/3/2012 11:53:02 AM
    Modified:1/3/2012 5:58 PM
    I reviewed my book and realize it is the 13th addition...



    CollapseMark as UnreadRE: Brief Excercise # 2-4Steven Borrego Email this Author1/2/2012 8:02:20 PM
    Modified:1/2/2012 8:06 PM
    Hard Book BE2-5

    a) This is the Accrual Principle
    b) This is the matching principle
    c) This is the disclosure principle 
    d) This is the Cost principle. 





    CollapseMark as ReadRE: I will post to brief exercise BE2-6Larry Linthicum Email this Author1/2/2012 4:45:09 PM
    Modified:1/2/2012 6:03 PM

    This is for BE 2-6

        a) Retained earnings - this is part of the investment by owners element of the financial statement

        (b) Sales - This is located in the revenue element of the financial statement

        (c) Additional paid-in capital - This is part of the investement by owners element of the financial statements

        (d) Inventory - This is part of the assets element of the financial statement

        (e) Depreciation - This is part of the liabilities element of the financial statement

        (f) Loss on sale of equipment - this is part of the losses element of the financial statement

        (g) Interest payable - this part falls into the liabilities element of the financial statement

        (h) Dividends - this part falls under the equity element of the financial statement

        (i) Gain on sale of investment - this is part of the gains element of the financial statement

        (j) Issuance of common stock - this is part of distribution by owners element of the financial statement




    CollapseMark as UnreadRE: I will post to brief exercise BE2-6Lashone Hollis Email this Author1/3/2012 8:47:13 PM
    For each item below, indicate to which category of elements of financial statements it belongs.

    A. Retained Earnings -  comprehensive income

    B. Sales - revenues

    C. Additional Paid In Capital - investments by owners

    D. Inventory - assets

    E. Depreciation - expenses

    F. Loss on sale of Equipment - losses

    G. Interest Payable - liabilities 

    H. Dividends - Distributions to owners

    I Gain on Sale of Equipment - Gains

    J. Issuance of Common Stock - Investments by owners




    CollapseMark as ReadAIS exposureSandra Hajaree Email this Author1/2/2012 5:50:32 PM
    I have been in internal auditing for about five years and have been doing Sarbanes-Oxley cycle testing as well as financial and procurement audits.  We are currently in the middle of implementing a new finance and supply chain ERP system from Oracle.  We will be converting from about 30 legacy systems. I am looking froward to this new system because it will be bringing uniformity in our financials. We would have one GL and a single procurement system.  In the past we have to work with a different system for each of our subsidiary companies. This will be a conversion to one system and would definitely make my work a lot easier.  



    CollapseMark as ReadRE: I will answer BE2-7Norma Henry Email this Author1/2/2012 6:00:42 PM
    Modified:1/2/2012 6:51 PM

    BE2-7 Identify which basic assumption of accounting is best described in each item below.

    • (a) The economic activities of FedEx Corporation are divided into 12-month periods for the purpose of issuing annual reports. Periodicity
    • (b) Solectron Corporation, Inc. does not adjust amounts in its financial statements for the effects of inflation. Monetary Unit
    • (c) Walgreen Co. reports current and noncurrent classifications in its balance sheet.  Going Concern
    • (d) The economic activities of General Electric and its subsidiaries are merged for accounting and reporting purposes. Economic Entity



    CollapseMark as UnreadTO CLASS - PLEASE READ - TO CLASSProfessor Wilson Email this Author1/2/2012 6:04:30 PM
    TO CLASS - PLEASE READ - TO CLASS, 

    As a reminder, please see instructions below for exercise room thread: 

    At the end of each chapter, there are self-study questions, questions, brief exercises, exercises, and problems. 

    Usually your homework assignments will be split between the exercises and the problems. For this specific graded threaded topic, however, I would like you to follow these directions in order to enhance your learning. 

    For the Brief Exercises only, I would like the first person into this thread to post his or her answers to Brief Exercise #1 from Chapter 2. The next person in will see that since Brief Exercise #1 has already been answered, and therefore should respond by posting his or her answers to Brief Exercise #2. If you go in and see that Brief Exercise #2 has already been answered, then it would be your turn to respond to Brief Exercise #3. And so on. 

    Once all of the Brief Exercises from Chapter 2 have been answered, the next person would be working with Brief Exercise #1 from Chapter 3. 

    Please do not answer these out of order. Try your best to respond to the very next item in consecutive order. I think you get the drill. This will enable you to see all of the answers to all of the Brief Exercises by the end of each week. Remember that I will post all of the answers at the end of the week. 

    One recommendation: Once you see that it's your turn to respond to, say, Brief Exercise #3, you might just type in a message like "This is Name, and I'll be answering Brief Exercise #3." This will reserve your space, just in case two students happen to be responding at exactly the same time. Then, after you post this "reservation" response, you should go right back in and "edit" your initial response, so you then can type in your real answer on top of your first reservation comment. 

    As a courtesy to others, please only reserve your spot for a short period of time. A one-day period (24 hours) would be appropriate. 

    Problems can be broken down into multiple posts. For instance, if a problem (designated by the P), has three parts, you could answer part A. This would count as a post. Others could also answer parts B and C for additional posts as well. 

    Brief exercises and exercises (designated as BE and E) SHOULD NOT be broken up into multiple postings. These should be answered in one posting. 

    Note: Do not answer the assignments that are homework since the answers have already been provided. The assignments not to answer in the exercise room this week are: 

    Chapter 1: CA 1-1, CA 1-7, CA 1-9 

    Chapter 2: E 2-5, E 2-6, E 2-7, E 2-8, CA 2-2 

    Chapter 3: E 3-1, E 3-5, E 3-6, E 3-12, E 3-13, E 3-18, P 3-1, P 3-2, P 3-9 





    CollapseMark as UnreadRE: TO CLASS - PLEASE READ - TO CLASSSandra Hajaree Email this Author1/2/2012 6:15:42 PM
    Modified:1/2/2012 6:41 PM
    I will answer BE 2-8.
    BE2-8 Identify which basic principle of accounting is best described in each item below.
    • (a) Norfolk Southern Corporation reports revenue in its income statement when it is earned instead of when the cash is collected. -  This is the Accrual Principle.
    • (b) Yahoo, Inc. recognizes depreciation expense for a machine over the 2-year period during which that machine helps the company earn revenue. - This is the Matching Principle. 
    • (c) Oracle Corporation reports information about pending lawsuits in the notes to its financial statements. - This is the Disclosure Principle. 
    • (d) Eastman Kodak Company reports land on its balance sheet at the amount paid to acquire it, even though the estimated fair value is greater. - This is the Cost Principle.



    CollapseMark as ReadRE: I will answer BE 3-1Heidi Daley Email this Author1/2/2012 8:51:22 PM
    Modified:1/2/2012 9:01 PM
    BE 3-1

    BE3-1 Transactions for Mehta Company for the month of May are presented below. Prepare journal entries for each of these transactions. (You may omit explanations.)

    May

    1

    B.D. Mehta invests $4,000 cash in exchange for common stock in a small welding corporation.

     

    3

    Buys equipment on account for $1,100.

     

    13

    Pays $400 to landlord for May rent.

     

    21

    Bills Noble Corp. $500 for welding work done.

    1-MayCash $        4,000
         Common Stock $        4,000
    3-MayEquipment $        1,100
         Cash $        1,100
    13-MayRent Expense $           400
         Cash $           400
    21-MayWelding Expense $           500
         Accounts Payable $           500




    CollapseMark as UnreadBE2-2Lashone Hollis Email this Author1/2/2012 10:07:32 PM
    I think this exercise was skipped over So I want tot take it.
    a) Faithful representation- Quality of information that assures users that information represents the economic phenomena that it purports to represent.

    b) Confirmatory value- Information about an economic phenomenon that corrects past or present presentations based on previous evaluations.

    c) Free from error- The extent to which information is accurate in representing the economic substance of a transaction.

    d) Completeness- Includes all the information that is necessary for a faithful representation of the economic phenomena that it purports to represent.

    e) Understandability- Quality of information that allows users to comprehend its meaning.





    CollapseMark as ReadThis is Chiquittah and i will respond to CA2-2Chiquittah Clayton Email this Author1/2/2012 11:17:02 PM

    (a) Identify and discuss the benefits that can be expected to be derived from the FASB's conceptual framework study.

    conceptual framework establishes the concepts that underlie financial reporting. A conceptual framework is a coherent system of concepts that flow from an objective. The objective identifies the purpose of financial reporting. The other concepts provide guidance on (1) identifying the boundaries of financial reporting; (2) selecting the transactions, other events, and circumstances to be represented; (3) how they should be recognized and measured; and (4) how they should be summarized and reported.

    The first benefit that can be expected to be derived from the FASB's conceptual framework study is more useful and consistent pronouncements and a coherent set of standards should result. Without guidance provided by a soundly developed framework, standard-setting ends up being based on individual concepts developed by each member of the standard-setting body. The second benefit of conceptual framework, the profession should be able to more quickly solve new and emerging practical problems by referring to an existing framework of basic theory

    (b) What is the most important quality for accounting information as idenified in the conceptual framework? Explain why it is the most important. 

    The objective of financial reporting is the foundation of the conceptual framework. The objective of general-purpose financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling, or holding equity and debt instruments, and providing or settling loans and other forms of credit. Information that is decision-useful to capital providers may also be useful to other users of financial reporting, who are not capital providers.

    (c) Statement of Financial Accounting Concepts No. 8  describes a number of key characteristics or qualities for accounting information. Briefly discuss the importance of any three of these qualities for financial reporting purposes.
    The qualitative characteristics of accounting information are (1) comparability; (2) verifiability; (3) timeliness; and (4) understandability. Comparability enables users to identify the real similarities and differences in economic events between companies. Verifiability occurs when independent measurers, using the same methods, obtain similar results. Timeliness means having information available to decision-makers before it loses its capacity to influence decisions. And understandability, is the quality of information that lets reasonably informed users see its significance. Understandability is enhanced when information is classified, characterized, and presented clearly and concisely.




    CollapseMark as UnreadTO CLASS - PLEASE READ - TO CLASSProfessor Wilson Email this Author1/3/2012 5:46:32 AM
    TO CLASS - PLEASE READ - TO CLASS 

    As a reminder, if you have already posted an answer to one problem this week, please allow other students in the class to post a problem. This thread requires that you post one quality answer for a problem each week. Posting answers to numerous problems doesn't allow other students who post later in the week to post a problem. This is large class and on a few occassions this term, we have run out of problems to post. 

    To summarize, if you have posted a problem with quality answer (doesn't need to be 100% correct I just want to see you made good attempt to answer), you are not requried to post additional problems. 

    Let me know if you have any questions. Prof Wilson 





    CollapseMark as ReadRE: TO CLASS - PLEASE READ - TO CLASSSandra Hajaree Email this Author1/4/2012 7:52:05 PM
    Professor, I answered BE 2-8.  Does this mean I do not have to answer another exercise question this week?  What happens to the required 3 postings for this?



    CollapseMark as ReadRE: TO CLASS - PLEASE READ - TO CLASSProfessor Wilson Email this Author1/5/2012 6:32:06 AM
    Sandra,

    As discussed in class announcements and syllabus, you are required to make 1 quality post to exercise room posting an answer to homework problem. You are also required to make 3 quality post to case discussion thread. So, in total, you are required to make 4 posts per week. 

    Prof Wilson 




    CollapseMark as ReadRE: TO CLASS - PLEASE READ - TO CLASSMarva Wade Email this Author1/4/2012 10:50:20 AM
    Professor,

    Are you saying that we do not need to post three times in this threaded discussion area?

    Marva Wade



    CollapseMark as ReadRE: TO CLASS - PLEASE READ - TO CLASSProfessor Wilson Email this Author1/5/2012 6:31:42 AM
    Marva,

    As discussed in class announcements and syllabus, you are required to make 1 quality post to exercise room posting an answer to homework problem. You are also required to make 3 quality post to case discussion thread. So, in total, you are required to make 4 posts per week. 

    Prof Wilson



    CollapseMark as ReadRE: TO CLASS - PLEASE READ - TO CLASSMarva Wade Email this Author1/5/2012 6:44:22 PM
    Thanks Professor



    CollapseMark as Readthis is christine and i will respond to E 3-1Christine Cathcart Email this Author1/3/2012 6:22:50 AM
    I will respond to E3-1



    CollapseMark as UnreadRE: CA 1-2Lucille Mcelroy Email this Author1/3/2012 8:13:57 AM
    Modified:1/3/2012 8:16 AM

    CA1-2 (GAAP and Standard-Setting) Presented below are four statements which you are to identify as true or false. If false, explain why the statement is false.

    • 1. The objective of financial statements emphasizes a stewardship approach for reporting financial information.
    • True
    • 2. The purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners’ or stockholders’ equity.
    • False, the objective of financial reporting is to provide useful information to the primary users of the information
    • 3. Because they are generally shorter, FASB interpretations are subject to less due process, compared to FASB standards.
    • False.  Subject to the same due process.
    • 4. The objective of financial reporting uses an entity rather than a proprietary approach in determining what information to report.
    • True

    Reference:  http://www.fasb.org/index.shtml
    http://www.iasb.org/NR/rdonlyres/464C50D6-00FD-4BE7-A6FF-1BEAD353CD97/0/conceptual_framework_exposure_draft.pdf




    CollapseMark as ReadRE: E 3-5Orpha Davis Email this Author1/3/2012 8:20:18 AM
    Modified:1/3/2012 7:21 PM
    I believe E 3-5 is homework therefore i will not post it in this discussion thread

      
           
















        
        
       
        
         
        
       
       
        
       
        
       
       
      
      
      



    CollapseMark as ReadBE2-9Patricia Hamlet Email this Author1/3/2012 3:48:20 PM

    BE2-9

    1. The purchase of 1,000 shares of Sastre Company should be reported at level 3 of  the fair value hierarchy.

    2. The purchase of 2,000 shares of GE Stock should be reported at level 1 of the fair value hierarchy.

    3.  The investment of $10,000 in local development authority bonds should be reported at level 2 of the 

         of the fair value hierarchy.




    CollapseMark as ReadRE: CA 1-1Albert Kaizou Email this Author1/3/2012 6:19:00 PM
    Modified:1/3/2012 7:13 PM




    CollapseMark as ReadRE: Erica - Will post on BE2-9Erica Winters Email this Author1/3/2012 7:26:23 PM
    Modified:1/3/2012 7:27 PM
    BE2-9 has been addressed. will move on to BE2-10



    CollapseMark as ReadRE: BE2-10Erica Winters Email this Author1/3/2012 7:28:30 PM
    Modified:1/3/2012 7:47 PM

    BE2-10:

    Accounting Constraints:

    Cost Constraint: the cost-benefit relationship of providing information.  Benefit of using the information must outweigh the costs of providing the information.

    Industry Practices: the nature of business in some industries calls for a deviation from basic theory. 

    a.)        Greco’s Farms, Inc reports agricultural crops on its balance sheet at fair value: this is an illustration of industry practice.

    b.)      Rafael Corp. disclosed fair value information on its loans because it already gathers this information internally: illustration of cost constraint.
      
    c.)       Willis Co. does not disclose any information in the notes to the financial statements unless the value of the information to financial statement users exceeds the expense of gathering it: illustration of a cost constraint. 

    d.) A broker-dealer records all assets and liabilities at fair value: illustration of industry practice.   

     




    CollapseMark as UnreadRE: BE2-10Lashone Hollis Email this Author1/5/2012 1:27:40 PM
    BE2-10   What accounting constraint is illustrated by the items below?


    (a) Industry Practices

    (b) Cost Constraint

    (c) Cost Constraint

    (d) Industry Practices.




    CollapseMark as ReadRE: This is Orpha and I will be answering BE 2-3Orpha Davis Email this Author1/3/2012 7:37:02 PM
    Modified:1/3/2012 8:02 PM

    BE2-3 was overlooked therefore I answered it.

    BE2-3
     Discuss whether the changes described in each of the cases below require recognition in the CPA’s audit report as to consistency. (Assume that the amounts are material.)

    (a)The company changed its inventory method to FIFO from weighted-average, which had been used in prior years.
    Yes, this change in the inventory method should be noted in the CPA's audit report because it's a relevant information that has a great material impact on the financial.

    (b)The company disposed of one of the two subsidiaries that had been included in its consolidated statements for prior years.
    Yes, it should be noted that the numbers in prior years included the two now disposed subsidiaries.  It's very important that it's stated to show years over years comparison to show if the disposed subsidiaries were providing net gain or loss. 

    (c)The estimated remaining useful life of plant property was reduced because of obsolescence.
    Yes, it's also necessary to include it in the audit report .

    (d)The company is using an inventory valuation method that is different from those used by all other companies in its industry.
    Yes, given that the inventory valuation method is different from the industry.  

    In general, the audit report should be transparency to the users.  All the above information have great financial impact therefore should be disclosed to the users.






    CollapseMark as ReadRE: CA1-4Albert Kaizou Email this Author1/3/2012 7:49:12 PM
    Modified:1/3/2012 8:03 PM
    (a)    Differentiate between financial accounting and managerial accounting
    Financial accounting has to do with preparation of financial reports for both internal and external parties such as creditors, managers, investors and government, while managerial accounting has to do with identifying, measuring, analyzing, and communicating financial information needed by management to plan, control, and evaluate a company’s operation.

    (b)    One part of financial accounting involves the preparation of financial statements. What are the financial statements most frequently provided?
    balance sheet, income statement, statement of cash flows, and statement of owners’ or stockholders’ equity

    (c)    What is the difference between financial statements and financial reporting?
    Financial statement is the means which company communicate financial information to outsiders. These statements are quantified in money terms.
    Financial reporting are communicated mostly in words in the form of letters, schedules, news release, forecasts, and social or environmental impact statements.









    CollapseMark as Unreadbe2-5Lashone Hollis Email this Author1/3/2012 8:52:00 PM

    a. Bad debt is an estimate amount which is based on historical collection amounts. It can be adjusted based on reasonable grounds and to create positive earnings is not one. Even though the adjustment is only 3% of income, it is still material.

     b. Not disclosing the un- netted amount of the loss is material. It gives users of the financial statements, investors, a false impression of how the company is performing with investments.  If it does net then there should be a note in the statements.

     c. This amount is immaterial. This has been a practice the company has followed for years. It would have no influence on the financials.





    CollapseMark as UnreadBE 2-11Lucille Mcelroy Email this Author1/4/2012 4:02:32 AM

    BE2-11 If the going concern assumption is not made in accounting, discuss the differences in the amounts shown in the financial statements for the following items.

    (a) Land.

    (b) Unamortized bond premium.

    (c) Depreciation expense on equipment.

    (d) Merchandise inventory.

    (e) Prepaid insurance.

    (Intermediate Accounting, 14th Edition. John Wiley & Sons pp. 70 - 71). 

    <vbk:9781118233641#outline(2.11)>


    BRIEF EXERCISE 2-11

    (a)    Net realizable value.

    (b)    Would not be disclosed. Liabilities would be disclosed in the order to be paid.

    (c)    Would not be disclosed. Depreciation would be inappropriate if the going concern assumption no longer applies.

    (d)    Net realizable value.

    (e)    Net realizable value (i.e., redeemable value).





    CollapseMark as ReadRE: BE2-12Ashley Christensen Email this Author1/4/2012 7:29:50 PM
    Modified:1/5/2012 11:52 AM
    I will take on this problem:

    BE2-12 What accounting assumption, principle, or constraint would Target Corporation use in each of the situations below?

    • (a) Target was involved in litigation over the last year. This litigation is disclosed in the financial statements. Full Disclosure Principle. This principle calls for any significant financial facts that will affect or influence an informed reader of the financials.
    • (b) Target allocates the cost of its depreciable assets over the life it expects to receive revenue from these assets. Going Concern Assumption. I chose going concern assumption for this line because in order to depreciate the asset over its expected life, we would first need to assume that Target will remain in business over the course of the assets life. 
    • (c) Target records the purchase of a new Dell PC at its cash equivalent price. Measurement Principle - Historical Cost Principle - recording the purchase at what it costs Target.



    CollapseMark as ReadBE 2-13Nea Willcocks Email this Author1/4/2012 7:30:36 PM
    BE2-13 Explain how you would decide whether to record each of the following expenditures as an asset or an expense. Assume all items are material.

    (a) Legal fees paid in connection with the purchase of land are $1,500.
    Asset - because legal fees are included in the value of the land

    (b) Eduardo, Inc. paves the driveway leading to the office building at a cost of $21,000.
    Asset - because they are improving the property to raise its value

    (c)
     A meat market purchases a meat-grinding machine at a cost of $3,500.
    Asset - because they are purchasing equipment to be used for production

    (d)
     On June 30, Monroe and Meno, medical doctors, pay 6 months’ office rent to cover the month of July and the next 5 months.
    Asset - because this is a prepaid expense

    (e) Smith’s Hardware Company pays $9,000 in wages to laborers for construction on a building to be used in the business.
    Expense - because their wages are not included in the value of the building

    (f) Alvarez’s Florists pays wages of $2,100 for the month an employee who serves as driver of their delivery truck.
    Expense - because these wages are a regular expense and do not add any future value to the company.



    CollapseMark as ReadExercise Room BE 2-12Sean Smith Email this Author1/4/2012 8:22:31 PM
    What accounting assumptions, principles or constraints would Target Corporation use in the situations below?

    A)  Target was involved in litigation over the last year.  This litigation is disclosed in the financial statements.

    Target is using the full disclosure principle.  They are disclosing information that is critical to current stakeholders and potential investors.  

    B)  Target allocates the cost of its depreciable assets over the life it expects to receive revenue from these assets.

    Target is using a form of expense recognition.  They are using rational and systematic policies.  This assumption views the cost assumed as well as the benefits the company will acquire from it.  

    C)  Target records the purchase of a new Dell computer at its cash equivalent cost.

    Target is the fair value principle.  The fair value option reflects the cash equivalent cost better than that of historical costs.



    CollapseMark as ReadRE: BE3-1Lisa Barefoot Email this Author1/5/2012 11:59:06 AM
    Modified:1/7/2012 1:45 PM
    Transactions for Mehta Company for the month of May are presented below. Prepare journal entries for each of these transactions. (You may omit explanations.)


    DateAccount TitleRefDebitCredit
    1-MayCash4000
         Common Stock4000
    3-MayEquipment1100
         Accounts Payable1100
    13-MayRent Expense400
         Cash400
    21-MayAccounts Receivable500
         Service Revenue500





    CollapseMark as UnreadRE: BE3-2Lashone Hollis Email this Author1/5/2012 1:20:41 PM
    Modified:1/5/2012 1:24 PM
    BE3-2 Agazzi Repair Shop had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (Omit explanations.)
    Aug.2 Invested $12,000 cash and $2,500 of equipment in the business.
            7 Purchased supplies on account for $500. (Debit asset account.)
          12 Performed services for clients, for which $1,300 was collected in cash and $670 was billed to the clients.
          15 Paid August rent $600.
          19 Counted supplies and determined that only $270 of the supplies purchased on August 7 are still on hand.


    Aug.2                                                                        Dr                    Cr
    Cash                                                                    $12,000
    Equipment (PP&E)                                              $2,500 
    Equity                                                                                                   $14,500

    Aug.7
    Supplies (Asset)                                                       $500
    AccountsPayable                                                                                 $500

    Aug. 12
    Cash                                                                       $1,300
    Accounts Receivable                                               $670
    Revenue                                                                                                 $1,970

    Aug. 15
    Rent expense                                                           $600
    Cash                                                                                                     $600

    Aug. 19
    Supplies expense                                                   $230
    Supplies (Asset)                                                                                $230                                                            





    CollapseMark as ReadBE3-3Orpha Davis Email this Author1/5/2012 7:17:57 PM

    BE3-3 On July 1, 2012, Crowe Co. pays $15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31.

                                                                    Debit        Credit
    July 1     Prepaid Insurance                  15,000
                            Cash                                               15,000
                   (to record the 3-year paid insurance policy)

    Dec. 31    Insurance Expense              2,500
                                 Prepaid Insurance                      2,500
    (to record six months of insurance used July through Dec.)

     




    CollapseMark as ReadBE 3-4Melessa Bryant Email this Author1/6/2012 8:33:52 PM
    7/1    Cash 15,000
                      Unearned Service Revenue   15,000


    12/31     Unearned Service Revenue  2,500
                         Service Revenue                   2,500



    CollapseMark as ReadRE: BE 3-5Heidi Daley Email this Author1/6/2012 8:55:05 PM
    Modified:1/6/2012 8:58 PM
    I will be answering BE 3-5

    1-FebPrepaid Insurance   720,000
         Cash  720,000
    30-JunInsurance Expense  150,000
         Prepaid Insurance  150,000




    CollapseMark as ReadHelloCharlie Parker Email this Author1/6/2012 10:50:37 PM
    BE3-6

    November 1:
    dr. Bank $2400.00
    cr. Prepaid Rental Income $2400.00
    To record receipt of 3 months rent on storage space, paid in advance
    December 31:
    dr. Prepaid Rental Income $1439.34
    cr. Income from storage unit rental $1439.34



    CollapseMark as UnreadTO CLASS - POSTINGS FOR WEEK 1Professor Wilson Email this Author1/7/2012 7:15:52 AM
    TO CLASS - PLEASE READ - TO CLASS 

    As a reminder, if you have already posted an answer to one problem this week, please allow other students in the class to post a problem. This thread requires that you post one quality answer for a problem each week. Posting answers to numerous problems doesn't allow other students who post later in the week to post a problem. This is large class and on a few occassions this term, we have run out of problems to post. 

    To summarize, if you have posted a problem with quality answer (doesn't need to be 100% correct I just want to see you made good attempt to answer), you are not requried to post additional problems. 

    For those students who have not completed a problem for week 1 yet, please review problems posted and locate a problem that has not been yet posted. Based on my review there are quite a few BE (Brief Exercises) available in Ch 2 and Ch 3.

    Let me know if you have any questions. Prof Wilson 





    CollapseMark as UnreadBE 3-7Brittenye Simmons Email this Author1/7/2012 3:58:11 PM
    Adjusting Entries

    Dec. 31 Wednesday salary accurals

    DR.  Salaries & Wages Expense  4,800
         CR. Salaries & Wages Expense Payable  4,800

    Jan. 2 (Full 5 day week pay)

    DR. Salaries & Wages Expense Payable 4,800
    DR. Salaries & Wages Expense  3,200
    CR.  Cash 8,000



    CollapseMark as UnreadRE: BE 3-7Michael Ornelas Email this Author1/7/2012 8:15:27 PM
    BE 3-8

    December 31
    CR Interest receivable 300
      DR Interest owed  300



    CollapseMark as UnreadRE: BE 3-7Lucille Mcelroy Email this Author1/8/2012 4:10:30 AM
    Hello Michael and to the rest of classmates:

    Here's a suggestion.  If you post to a response to a new Brief Exercise, click the response button from the main question of the professor, if you would like to provide feedback on somebody else's post, you click respond on that student's or professor's discussion.  Just like a tree of hierarchy.  In that way, you can modify the Subject field to the brief exercise you are answering.

    With regards to BE 3-8.  Though when one enters a journal entry in Quickbooks, starting with credit will not matter, because it posts to the account.  However, for our class discussion purposes, I think starting with Debit will be better, don't you think so?  The note presented is a receivable.  Therefore, the matching account would be an interest revenue as opposed to "Interest owed."  Two journal entries are required.  I find cutting and pasting the problem from the ebook give guidance, and I hope you would find it too.

    BE3-8 Included in Gonzalez Company’s December 31 trial balance is a note receivable of $12,000. The note is a 4-month, 10% note dated October 1. Prepare Gonzalez’s December 31 adjusting entry to record $300 of accrued interest, and the February 1 journal entry to record receipt of $12,400 from the borrower.

    Dec 31       Interest Receivable                  300
                                    Interest Income                        300   
    To record adjusting entry to record accrued interest

    Feb   1 Cash 12,400
    Notes Receivable 12,000
    Interest Receivable       300
    Interest Revenue       100
    To record receipt from borrower.

    (Intermediate Accounting, 14th Edition. John Wiley & Sons p. 134). 

    <vbk:9781118233641#outline(3.25)>





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