Weirich Casesolutions Essay Example

Weirich Casesolutions Paper Julie now wonders how to disclose this prior period adjustment in its current years Statement of Cash Flows, Case 12 Solution: Problem Identification: How should a company disclose prior period adjustments in its Statements of Cash V-lows? Keywords: prior period adjustments; retained earnings; Statement of Cash Flows. Conclusion: Per ASS 250-10-50-9, Julie should disclose the effect of a prior period adjustment (for a single periods financial statement) as an adjustment in the opening balance in retained earnings-? plus make adequate footnote disclosures of the reasons for and effect of the adjustment. Moreover, per 230-10-50-3, Julie should also disclose information about investing and financing activities that did not result in cash receipts for the current period. Thus, Julie should also disclose the differences in the account balances of the two consecutive balance sheets both in the statement of cash flows and in an appropriate footnote. Case 13: The Heather Companys fiscal year ends on June 30. Its employees (With at least three months Of experience) are entitled to 12 paid sick days annually for each calenderer beginning on January I. An employee not taking his/her earned sick days would receive moment thereon on December 31 of that year. How should Heather record and measure such a liability as Of June 30th? Case 13 Solution: Problem Identification: Should Heather recognize any liability for the above potential contingency, and, if so, how should it measure and record it? Keywords: Contingency; compensated absence; matching concept. We will write a custom essay sample on Weirich Casesolutions specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Weirich Casesolutions specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Weirich Casesolutions specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Conclusion: Per ASS 710-10-25-1 , if : (a) the employees have worked the required time periods to earn the compensated sick pay; (b) these rights are vested; (c) payment of compensation is probable; and (d) the amount can be reasonably estimated, he liability exists, These conclusions follow reasonable and probable criteria to SEAS No. 5, pars. 5 and 22, which also require measuring the past History to employees using these benefits (e. G. , also consider employee turnover). In this above, relatively simple example, an employee who used tour days of vacation would be entitled to eight more-?i. E. , the balance that Heather must accrue, However, if, the employer plan were based upon an accrual concept, it would pro rate the uneaten days for the remainder of yean Case 14: Alex Corporation is planning this year to present comparative income statements but only the rent years balance sheet. James Johnston, president of Alex Corporation requests your advice as to whether comparative cash flow statements for both the current and prior periods are necessary considering only the current years balance sheet is presented. Are there any authoritative pronouncements that address this issue that you could present to Mr.. Johnston? Case 14 Solution: Problem Identification: The issue is whether comparative cash flow statements are necessary when comparative income statements are presented, but only a single year balance sheet is also presented. Key Words: imperative statements, cash flow statements Conclusion: ASS 230-1 C. 1 5-3 states that a business enterprise that reports both financial position and results of operations shall also provide a statement of cash flows for each period for which results of operations are provided. Therefore, comparative cash flow statements need also be presented, Case 15: A new client for your firm is Sam Jones who is preparing personal financial statements for a bank loan, Mr.. Jones is attempting to list his social security benefits to be received based on his future elite expectancy as an asset on his financial statements, Mr.. Jones states that such benefits meet the definition of an asset. Would you agree to allow the social security benefits to be listed as an asset? Case IS; Solution Problem identification: The issue is feather social security benefits to be received based on ones future life expectancy should be considered an asset on personal financial statements. Key Words: assets, personal financial statements Conclusion: ASS 274-10-35-11 states that unforgettable rights to receive future sums must meet certain criteria to qualify as an asset One criteria states that the rights must not be contingent on the individuals life expectancy or the currency of a particular event, such as disability or death. Since social security benefits are contingent on ones life expectancy, such benefits do not qualify to be listed as assets on ones personal financial statements. Case 16: Albright Inc. Has recently issued a stock dividend to its existing stockholders. As a result of the issuance of the stock dividend the market price of the stock declined 25%. Albright has requested your assistance as to treating this stock dividend as a stock split. Would this be acceptable under GAP? Case 16: Solution Problem identification: The issue for this case is whether a 10% stock dividend hat reduces the market price of the stock can be accounted for as a stock split. Key Words: Stock dividends, stock splits Conclusion: ASS 505-20-25-1 through 25-3 state that to treat the 10% stock dividend as a stock split, Albright would need to demonstrate that the additional shares issued is large enough to materially influence the unit market price of the stock. Case 17: Horizons Inc. Has agreed to sell an investment in a subsidiary that has been accounted for on the equity method of accounting to a minority stockholder in exchange for the stockholders share in Horizons. Since the fair alee of the investment exceeds its book value, Horizons CEO is considering recognizing a gain on the exchange. However, the new SCOFF at Horizons is recommending to the board of directors that the excess from the exchange be accounted as a credit to equity. Horizons turns to you for advice! Case 17: Solution Problem identification: The problem under review in this case is whether a gain on a monetary exchange can be recorded. Key Words: Monetary exchange, monetary asset, or nonreciprocal transfer Conclusion: ASS 845-10-30-1 States that a transfer Of a monetary asset is a nonreciprocal ranges and should be recorded at the fair value of the asset transferred, and that a gain or loss should be recognized on the disposition Of the asset. ADVANCED ACCOUNTING ; cases Case 1: Rosier Corporation has 70% of the outstanding voting stock of Smith Corporation and of the voting stock of Tommy Corporation. Smith also just spent $10,000 to acquire 20% of Tommys voting stock. Smith has issued irrevocable letters of credit to guarantee Totems notes payable. In the current year, Tommy lost $100,000, How should the parties report the above arrangements in its consolidated financial statements? Case 1 Solution: robber Identification: How should guarantees among related (but not fully owned) parties be disclosed in both their consolidated and separate financial statements? Keywords: Control; consolidated financial statements; related part/ transactions: gain and loss contingencies. Conclusion: First, Smiths share of Tommys net losses (20% of $100,000 520,000) exceeds its cost basis of Tommy ($10,000). Per 430-30-25-1, entities should normally not recognize gain contingencies. Thus, the guarantee should not be recognized in Rookies or Totems financial statements-?other than through disclosures in the footnotes. Similarly, per 810-10-45-7, in the unusual case in which losses applicable to the minority interest in a subsidiary exceed the minority interest in the equity capital, such excess should be charged against the majority interest. Per ASS 810-10-45-21, losses excess, and any further losses, shall be attributed to those interests even if that attribution results in a deficit noncontributing interest balance. Case 2: Joe Brock owns 10,000 of the 60,000 outstanding shares of Big Corporation; Leslie Ross own 20,000 shares; Mark Jones and his twin brother Sam each own 5. 000 shares; and about 300 other shareholders own the remaining 0,000 shares-?with no one other shareholder owning more than 1,000 shares. According to the provisions of SEAS 94, since Leslie owns half of the outstanding shares, he, in general, controls Big Corporation and, thus, should consolidate his interest with that of the corporation, However, Joe Brock is unhappy with Marks management decisions and plans to challenge his authority. What factors arise in considering if a minority investor can maintain such control or even prevent others from exercising such control? Case 2 Solution: problem Identification: Can corporate control rest with others besides the sorority owner? What factors should we examine to make such a determination? Should we separately analyze situations where the minority shareholder seeks actual control, or (merely) wishes to Veto another party (e. G. , majority shareholder) from exercising this control? Key. fords: Consolidated financial statements; consolidation (of majority owned subsidiaries); contingencies; related parties; accounting changes. Conclusion: Per ASS 810-10-25-1 through 25-14, deciding if a minority shareholder can overcome the presumption that the majority shareholder maintains this control depends on many facts and judgments. First, can the minority shareholder participate, veto, or cause certain operating ordinary operating (e. G. , Which bank to hold corporate assets) (i. E. , which it calls protective rights) and long-term (e. G. , who sets top managements salary and Which tender Offer to acquire the company to accept) (i. E. , Which it calls participating rights) management decisions to occur. Other factors include restating prior years financial statements if control passes to the minority shareholder; and does the minority shareholder control technology or customers of crucial interest to the company. Case 3: The Treasury Department of Drop Motors invests excess funds daily (e. G. , in foreign currencies). It, thus, earns profits and losses, which are included in the companys consolidated financial statements. Should Drop consider its Treasury operations as a (distinct) segment in preparing its external financial statements? Case 3 Solution: problem Identification: Should corporate divisions that generate revenues and expenses qualify as an operating segment tort financial statement purposes? Keywords: Segment; operating division. Conclusion: Per ASS 280-10-50-1 all operating segments can be reported parallel if they meet the guidelines: it generates revenues and expenses that a corporate decision-maker reviews, and has discrete financial information available. However, management should also believe that such additional information can contribute to outside readers and users better understanding the enterprises operations. Case 4: The Built-well Construction Company is building a hospital for a third party. As such it borrows substantial funds from a foreign bank and repays the required interest costs as scheduled. Bulletin also incurs some foreign currency truncation gains and losses on these transactions. Bulletin properly amortizes the interest costs over the life Of the construction project, but would now also like to amortize the associated foreign currency transaction gains and losses as well. Can Bulletin amortize such costs? Case 4 Problem Identification: Should a construction company amortize or expense the gains and losses of foreign currency transaction gains and losses expended while a building was under construction? Keywords: Foreign currency translation; capitalization (of interest costs). Conclusion: Although Bulletin apparently correctly amortized interest costs during construction-?per the provisions of ASS 35, it cannot amortize such foreign currency transaction gains and losses. Per ASS 830-20-35-1, increases or decreases in expected functional currency cash flows become foreign currency transaction gains or losses, i. E. , period costs. Case 5: Tony Computer Services Corporation trades 50% of its common stock for the rights to certain computer programs of the Janet Corporation. Janet previously expensed such costs of developing these computer programs. Tony concurrently sold the other interest in its stock to the Jennet Company for Tony later acquired another the rights to the udder Computer Companys computer programs in exchange for stock valued at $1 Tony, thus, debited Investments in Subsidiaries and credited Earnings for $1. 5 million to reflect this latest transaction. How should Tonys consolidated financial statement reflect the value of the expensed computer programs? Case 5 Problem Identification: Should Tony recognize the value of the acquired computer programs, or should these results be consolidated, i. E. , eliminated?