... . . . . . . . . . . . . . . . . $15,100 Cash balance per books . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 Outstanding checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800 Deposit in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,450 Interest earned (on bank account) . . . . . . . . . . . . . . . . . . 52 Bank service charges (miscellaneous expense) . . . . . . . . 15 Reported on the bank statement is a canceled check that the company failed to record. (Information from the bank reconciliation allows you to determine the amount of this check, which is a payment on an account payable.) b. An examination of customers’ accounts shows that accounts totaling $679 should be written off as uncollectible. Using an aging of receivables, the company determines that the ending balance of the Allowance for Doubtful Accounts should be $700. c. A truck is purchased and placed in service on January 1, 2011. Its cost is being depreciated with the straight-line method using the following facts and estimates. Original cost . . . . . . . . . . . . . . . . $32,000 Expected salvage value . . . . . . . . . . 8,000 Useful life (years) . . . . . . . . . . . . . . . . . 4 d. Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2009. They are being depreciated with the straight-line method using these facts and...
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...Problem 10.4 | | Bank reconciliation | | | | | | | | | | CAVANAGH’S CHARTER TOURS Required: A. Set up cash receipts and cash payments journals with totals shown, and enter the necessary adjustments, and complete the journals for June. B. Post the journals in requirement A to the general ledger Cash at Bank account and balance the account. C. Prepare a bank reconciliation statement at 30 June. D. What is the amount of cash that should be reported on the 30 June balance sheet? A. | Cash Receipts Journal | | | Cash Payments Journal | Date | Particulars | Cash at Bank | | Date | Particulars | Cash at Bank | Jun 30 | Progress, total | $22 898 | | Jun 30 | Progress, total | $24 576 | | Vinko Ltd | | | | Bank fees | 32 | | (dishon. cheque) | (327) | | | Adj. to Chq. 842 Error | 9 | | Electronic transfer | 680 | | | | | | Interest revenue | 54 | | | | | | | $23 305 | | | | $24 617 | | | | | | | | B. Cash at Bank | 1/6 | Balance b./d | $6 300 | 30/6 | CPJ | $24 617 | 30/6 | CRJ | 23 305 | | ...
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...Financial Reporting and Analysis ChapterÊ12ÊSolutions Income Tax Reporting Exercises Exercises 1. Determining current taxes payable (AICPA adapted) The amount of current income tax liability that would be reported on Ross Co.’s December 31, 1998, balance sheet is determined as follows: Net income before depreciation expense and income taxes $100,000 Depreciation expense (for tax purposes) (20,000) Taxable income 80,000 Tax rate 30% Current income tax liability $24,000 2. Determining deferred tax liability (AICPA adapted) To determine the deferred income tax liability reported on the December 31, 1999, balance sheet requires a calculation of the cumulative temporary (timing) differences that give rise to future taxable amounts as of that date. Gross margin temporary differences are as follows: (Book purposes) (Tax purposes) Temporary Differences Year Accrual Method Installment Method (Future Taxable Amount) 1998 $800,000 $300,000 $500,000 1999 1,300,000 700,000 600,000 Total temporary differences as of 12/31/99 $1,100,000 Tax rate in effect when differences will reverse 25% Deferred tax liability on 12/31/99 $275,000 3. Determining deferred tax liability (AICPA adapted) Tow’s deferred tax liability for December 31, 1998, is computed as follows: | |Reversal of | ...
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...Dell’s Accounting Policies for Revenues, Expenses and Net Income: Dell includes both GAAP and non-GAAP financial measures in its 10k reports. The company claims that excluding certain items GAAP gives managers a better grasp on the financial performance of the company. Dell excludes severance and facility actions, and acquisition related costs from its GAAP financial measures, and also the amortization of intangible assets. Dell acknowledges that its non-GAAP financial measures may not be comparable with other companies that are using their own non-GAAP reporting standards. Dell is increasingly relying on international markets (notably Asia) for its revenue generation. Total net revenue from the US in dropped 5% from 2011 to $30.4 billion in 2012. Meanwhile, revenue from the international market increased 12% from 2011 to 2012. Dell continues to expand in these areas as growth in the US and Western European markets continue to decline. Dell distinguishes its revenues between Product Revenues and Service Revenues. According to GAAP, total operating expenses for Dell increased 18% to 19.4 billion. This is mainly due to what Dell reports as severance costs, acquisitions, and facility costs. Dell differentiates its expenses between Selling, General, and Administrative Expenses, and Research & Development and Engineering Expenses. Net income increased 33% to 3.5 billion on a GAAP basis. Dell attributes this mainly to increases in operating income and a lower effective...
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...company had rented premises.) The building cost $384,000, has an estimated 20-year useful life, and an estimated residual value of $34,000. Annual amortization of $17,500 has not been recorded. Dec. 31 | Amortization Expense | | 17,500 | | | Accumulated Amortization - building, Building | | | 17,500 | | | | | | b) The Office Supplies account showed an opening balance of $895 on January 1, 2006. During the year, the owner used Office Supplies (asset account) to record the purchase of $985 of supplies. The year-end physical count of office supplies inventory only showed $705 of unused supplies on hand. Per the Dec. 31/06 trial balance the Office Supplies account balance is $1,880. DecDec. 31. 31 | Office Supplies Expense | | 1,175 | | | Office Supplies (asset) | | | 1,175 | | $895 + 985 = 1,880 – 705 = 1,175 | | | | c) The Prepaid Insurance account showed an opening balance on January 1st, 2006 of $400 representing the 4 months remaining on a 1-year insurance policy which originally cost $1,200. At the expiration of this policy on April 30, 2006, the owner paid $2,880 for another 2 years of coverage. The owner debited Prepaid Insurance for $2,880 to record the purchase of this renewal policy. Dec. 31 | Insurance Expense | | 1,360 | | | ...
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...DEDUCTIONS (For Companies) Employment Allowed Expenses o Retrenchment payments to employees (incl. payment in-lieu of notice/leave, outplacement support) o Gratuity payments to retrenched employees for past services o Employees’ income tax liability o Apartment rental paid for expatriates & family o Relocation expenses & home leave passage paid for expatriates & family o Overseas pensions or provident funds, provided as part of employment contract or by rule of provident funds Disallowed Expenses o Provision for unutlised leave o Excess employer statutory CPF contributions, & voluntary CPF for foreigners (employment pass) o Reimbursements to staff for own private cars usage for business o Premium on staff medical insurance policy is part of total medical expenses that cap to 1 or 2% of total remuneration. If exceeds, not deductible Bad Debt Allowed Expenses o Write back of specific provision for doubtful trade debts o Trade debtors liquidated Disallowed Expenses o Bad debts write-off trade debt taken over from another company o Bad debts write-off for loans to ex-director or ex-employees o Bad debts write-off simply because too small o Increase in general provision for bad debts Foreign exchange (ref to Lecture note) Allowed Expenses o Exchange loss on settlement of balance on inventory purchase o Exchange loss on translation of trade debts Legal/Professional Disallowed Expenses o Legal fee to appeal against tax assessments ...
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...Credit | Cash | 11,000.00 | | Accounts receivable | 20,000.00 | | Office supplies | 8,600.00 | | Prepaid Rent | 1,600.00 | | Unexpired Insurance | 3,350.00 | | Equipment | 60,000.00 | | Accumulated Depreciation: Equip | | 28,000.00 | Accounts Payable | | 5,000.00 | Interest payable | | 400 | Unearned Advertising fee | | 7,200.00 | Notes Payable | | 8,000.00 | Salaries payable | | - | Capital Stock | | 30,000.00 | Retained Earnings | | 10,000.00 | Dividends | 4,000.00 | | Advertising Revenue | | 64,000.00 | Salaries Expense | 30,000.00 | | Insurance Expense | 650 | | Rent Expense | 800 | | Depreciation Expense | 5,500.00 | | Office supplies Expense | 7,000.00 | | Interest Expense | 100 | | Totals | Rs. 152,600.00 | Rs. 152,600.00 | Other data. 1. Office supplies on hand at November 31 totals Rs. 6,000. 2. Accrued but unrecorded and uncollected Advertising revenue totals Rs. 3,000 at the end of November. 3. The equipment is being depreciated over an estimated useful life of 10years. 4. The company prepaid its six-month rent agreement on September 1, 2011. 5. Unearned advertising fee of Rs. 3,200 was earned at the end of the month. 6. Salaries of Rs. 2,000 are accrued at November 30, 2011. 7. Insurance for six-months was paid in advance on October 1, 2011. 8. On July 1, 2011 company...
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...Role: • An accounting advisor engaged by a lawyer to help with concerns about an earnout arrangement (payment for the purchase of a business based on performance after the sale has closed). Key users: • Ms. Kellett and Mr. Jones are the only relevant users. Ms. Kellett will use the report to assist her in assessing the earnout agreement. Key facts: • Earnout arrangement being proposed for sale of company. • Selling price will depend on earnings after the sale closes and buyer (role is working for the seller) will prepare the financial statements. • Ms. Kellett and Mr. Jones are unsophisticated financial statement users. • Financial statements have a number of “soft spots” that could lead to Mr. Jones being disadvantaged by the earnout arrangement. Constraints: • The purchaser has suggested the earnout state that the financial statements be prepared using GAAP consistently applied. A clean audit opinion would also be required. Tighter constraints are required because GAAP still provides significant leeway to the new owners that will allow them to disadvantage Mr. Jones. Objectives: • Identify soft spots in the financial statements and propose ways to protect Mr. Jones from not receiving fair compensation for his business Issues: • Possible non-arm’s length transactions. • Inuvik will be a major supplier to other companies that the buyer owns. • This is a reasonable strategy for the buyer but it creates risks for Mr. Jones because transactions between Inuvik and the other...
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...definition and classification of current liabilities. Accounts and notes payable; dividends payable. Short-term obligations expected to be refinanced. Deposits and advance payments. Compensated absences. Collections for third parties. Contingent liabilities (General). Guaranties and warranties. Premiums and awards offered to customers. Self-insurance, litigation, claims, and assessments, asset retirement obligations. Presentation and analysis. Questions 1, 2, 3, 4, 5, 6, 8 7, 11, 29 9, 10 12 13, 14, 15 16 17, 18, 19, 20, 22 21, 23 24, 25 26, 27, 28 1, 2, 3 4 5 8 6, 7 10, 11 13, 14 15 12 5, 6, 16 7, 8, 9, 16 13, 16 10, 11, 16 12, 15, 16 14 3, 4 10, 11, 13 5, 6, 7, 12, 15 8, 9, 12, 15 2, 10, 11, 13 9 14, 15 6, 7 5, 6, 7 7, 8 Brief Exercises Exercises 1, 16 Problems 1, 2 Concepts for Analysis 1 2. 3. 4. 5. 6. 7. 8. 9. 10. 2, 16 3, 4 1, 2 1, 2 3, 4 2 11. 29, 30, 31 9, 16 17, 18, 19 20, 21, 22 3 *12. Bonus payments. *This material is covered in an Appendix to the chapter. 13-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. 3. 4. 5. Describe the nature, type, and valuation of current liabilities. Explain the classification issues of short-term debt expected to be refinanced. Identify types of employee-related liabilities. Identify the criteria used to account for and disclose gain and loss contingencies. Explain the accounting for different types of loss contingencies. Indicate how to present and analyze liabilities and...
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...classification of current liabilities. Accounts and notes payable; dividends payable. Short-term obligations expected to be refinanced. Deposits and advance payments. Compensated absences. Collections for third parties. Contingent liabilities (General). Guaranties and warranties. Premiums and awards offered to customers. Self-insurance, litigation, claims, and assessments, asset retirement obligations. Presentation and analysis. Questions 1, 2, 3, 4, 6, 8 7, 11 9, 10 12, 5 13, 14, 15 16 17, 18, 19, 20, 22 21, 23 24, 25 26, 27, 28 1, 2, 3 4 5 8, 9 6, 7 10, 11 13, 14 15 12 5, 6, 16 7, 8, 9, 16 13, 16 10, 11, 16 12, 15, 16 14 3, 4 10, 11, 13 5, 6, 7, 12, 14 8, 9, 12, 14 2, 10, 11, 13 9 6, 7 5, 6, 7 7, 8 Brief Exercises Exercises 1, 16 Problems 1, 2 Concepts for Analysis 1 2. 3. 4. 5. 6. 7. 8. 9. 10. 2, 16 3, 4 1, 2 1, 2 3, 4 2 11. 29, 30, 31 17, 18, 19 3 Copyright © 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only) 13-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. 3. 4. 5. Describe the nature, type, and valuation of current liabilities. Explain the classification issues of short-term debt expected to be refinanced. Identify types of employee-related liabilities. Identify the criteria used to account for and disclose gain and loss contingencies. Explain the accounting for different types of loss contingencies. Indicate how to present and analyze liabilities...
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...INDEPENDENT AUDITOR’S REPORT Board of Directors, Stockholders, Owners, and/or Management of Keystone Computers & Networks, Inc We have audited the accompanying balance sheet of Keystone Computers & Networks, Inc. (the “Company”) as of December 31, 20XX and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The major audit issue involved will be determining that the client has properly categorized costs between research and development (those costs involved in establishing technological feasibility) and those costs that should be capitalized. The auditors will have to determine at what point the software product reached the point of technological feasibility. We conducted our audit in accordance with auditing standards generally accepted in (the country where the report is issued). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit...
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...Memorandum To: Ed Furticella From: Xu Huang Date: April 2, 2014 RE: Financial Shenanigans Assignments There are seven earnings manipulation techniques that companies may use to give investors the mistaken impression that its company is performing better than the underlying economic reality, include: recording revenue too soon; recording bogus revenue; boosting income using one-time or unsustainable activities; shifting current expenses to a later period; employing other techniques to hide expenses or losses; shifting current income to a later period and shifting future expenses to an earlier period. Recording Revenue Too Soon In order to shift revenue or gains in future-period to current period or to oversize bonuses and stock options, management may shift revenues or gains from future period to current period through recording revenue before completing any obligations under the contract; recording revenue far in excess of work completed on the contract; recording revenue before the buyer’s final acceptance of the product or recording revenue when the buyer’s payment remains uncertain or unnecessary. To mitigate the risk of such misrepresentation, investors should ware some warning signs of shenanigans: extended end date, sharp jump in accounts receivable, especially long-term and unbilled ones, using percentage-of-completion accounting or aggressive assumptions, inappropriately low discount rate, premature revenue recognition policy, Inappropriate use of mark-to-market...
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...error. Enhancing characteristics: Comparability, verifiability, Timeliness, and Understandability Cash Flow: From operations, Investing, and financing Indirect method-Adjust from NI. Direct method- Collections from customers, Payment to supplier, operating expenses, income tax. | IFRS | ASPE | Dividend paid and revenue | Consistent | Financing | Interest expense and revenue | Consistent | Operating | Revenue Recognition: CIP to cash, AR to Billings, COGS to Revenue (Difference is CIP), Cash to AR, at end close Billing and CIP Gross profit= (Total expected revenue – Total expected cost) * % of completion Net profit = % of revenue – Actual cost Accounts Receivable: Bad debts Expenses to AFDA Write off= AFDA to AR and then recover = AR to AFDA Inventory: FIFO-Periodic and perpetual: End Inventory * rate purchased Weighted Average Periodic: Cost of goods available for sale / # of units available for sale Weighted Average Perpetual: constantly average out Assets: Asset Retirement Obligation (ARO): Asset to ARO (PV), Interest to ARO. Then depreciation. Depreciation: Except DBM - (Asset- RV)* method depreciate. DBM depreciate on original price till it reaches RV Capitalize borrowing cost: Specific borrowing first, then general borrowing on weighted average [a/(a+b)*7%+b/(a+b)*8%]. Revaluation: Eliminate Accumulated Depreciation to Asset. Increase Asset to Revaluation surplus (OCI). Then Depreciate. If revaluation is <NBV then first offset the...
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...ACCT 2015 INTERMEDIATE FNANCIAL ACCOUNTING 11 Current Liabilities, Contingencies & Provisions Required Reading: Alfredson – Chap 5, Keiso – Chaps 13, IAS 37 Learning Objectives 1. CURRENT LIABILITIES: – Define and explain types of current liabilities. – Account for the major types 2. IAS 37 PROVISIONS & CONTINGENCIES – Define Provisions and answer the following questions: • • • Why do them When to provide How much to provide – Calculate and account for Restructuring Provisions – Define Contingent Assets & Liabilities and apply relevant measurement and recognition rules – Apply IAS 37 Disclosure Requirements CURRENT LIABILITIES LIABILITY – Claims against the business arising out of a past transaction that will cause an outflow of resources e.g. loans, notes payable • Long-Term Liability - Obligations that a company does not reasonably expect to liquidate within the normal operating cycle Current Liability - Obligations that a company reasonably expects to liquidate either through the use of current assets or the creation of other current liabilities. • 1 CURRENT LIABILITIES E13-2 (Accounts and Notes Payable) The following are selected 2007 transactions of Sean Astin Corporation. Sept. 1 - Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system. Oct. 1 - Issued a $50,000, 12-month, 8% note to Encino in payment of account. Oct. 1 - Borrowed $50,000 from the Shore Bank by signing...
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...Print An Overview of Financial Statements and the Environments of Financial Reporting Accounting: The Language of Business | Relationships Among Financial Statements | Classifications in a Balance Sheet | Income Statement, Statement of Retained Earnings, and Statement of Cash Flows | GAAP and Key Accounting Principles | Balancing the Accounting Equation Accounting: The Language of Business Back to Top Do Not Underestimate the Power of Accounting! I vividly recall my first experience driving in a foreign country. The road signs were written in the language of the local country which I was unable to read or understand. Even as an experienced driver not being able to read the road signs, limited my travel. Accounting is the language of business. One common business language guided by the rules established by the U.S. Securities and Exchange Commission (SEC) known Generally Accepted Accounting Principles (GAAP) gives financial investors the confidence needed to risk billions of dollars purchasing company stock. Accounting allows people from around the globe to understand the financial health of a given company. Without accounting as the language of business, capitalism and free markets in the United States could not thrive. Companies that list their stock on the stock exchange must prepare their financial statements according to generally accepted accounting principles. There are other authorities that issue guidelines such as Financial Accounting Standards Board (FASB). Management...
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