Category: Accounting

Deferred Assets and Liabilities

Deferred Assets and Liabilities
Deferred Assets and Liabilities

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Deferred Assets and Liabilities

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Overview

Complete a four-part assessment in which you will compute values, prepare journal entries, and provide written explanations.

Note: An accounting cycle requires specific steps that need to be executed in a sequence. The assessments in this course are presented in sequence and must be completed in order.
Companies must present financial information to the investment community that provides a clear picture of present and potential tax obligations and tax benefits.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

Competency 1: Define financial accounting conventions to support practice as a professional in the field.

*Apply tax rates to temporary differences.

*Analyze carryback and carryforward issues.

* Competency 3: Evaluate economic resources for an enterprise.

* Apply procedures for a capital lease.* Apply procedures for a sales-type lease.

Deferred Assets and Liabilities

Context

Companies spend a considerable amount of time and effort to minimize their income tax payments—and with good reason. Income taxes are major costs of doing business for most business organizations, regardless of the form of ownership.

Leasing of an asset has been around for many years, especially in the private sector. Individuals have utilized this form of asset acquisition for the purchase of realty, personal property, and even services. It has allowed them to acquire assets for little or no money down, use the asset for a determinable period of time, and then simply return the asset and terminate the lease agreement.

Today, leasing of capital assets is the fastest growing form of capital investment for corporations. It allows businesses to acquire large high-dollar assets with little or no responsibility for their maintenance and allows them to trade those assets in for newer models at the end of the lease. Consequently, accounting procedures for handling these transactions has undergone significant change over the last 25 years.

Questions to Consider

As you prepare to complete this assessment, you may want to think about other related issues to deepen your understanding or broaden your viewpoint. You are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of your professional community. Note that these questions are for your own development and exploration and do not need to be completed or submitted as part of your assessment.

* What are the guidelines for determining the most advantageous type of lease for an asset?* What is the advantage of an operating lease versus a capital lease?* What is the difference between a financial lease and a capital lease?
Resources

Deferred Assets and Liabilities

FACTORS THAT IMPACT TAXES

  • Economic factors: Microeconomic factors (e.g., elasticity, type of entity)Macroeconomic factors (e.g., inflation, political systems)
  • Social factors:Demographics (e.g., aging population, birth rates)Standard of living (e.g., crime rates, education)Savings rates (e.g., incentives, cost of living)
  • Political factors:Government revenue (e.g., income tax, sales tax)Type of tax (e.g., progressive, regressive)Income redistribution (e.g., political system, types)
  • Legal/regulatory factors:Justification for tax system (e.g., tax avoidance, tax evasion)Types of entities (e.g., partnership, corporation)Economic (e.g., employees vs. subcontractors, insurance deduction)
  • Emerging trend factors:Economic (e.g., command vs. market economies, trade agreements)Technology (e.g., information access, compliance)Intangible taxation (e.g., changing laws, changing regulations)

CREDITS

Subject Matter Expert:Timothy Price

Interactive Design:Tara Schiller

Instructional Designer: JodiRae Foss

Project Manager:Lon Wiessenberger

  • Laux, R. C. (2013). The association between deferred tax assets and liabilities and future tax payments. The Accounting Review, 88(4), 1357–1383. Liabilities/Equities – Chapter 13.* This chapter reviews accounting for leases.
  • Harrington, C., Smith, W., & Trippeer, D. (2012). Deferred tax assets and liabilities: Tax benefits, obligations and corporate debt policy. Journal of Finance and Accountancy, 1–18. Retrieved from http://www.aabri.com/manuscripts/121240.pdf
  • Spiceland, J. D., Sepe, J. F., Nelson, M. W., & Thomas, W. B. (2016). Intermediate Accounting (8th ed.). New York, NY: McGraw-Hill Education.Chapter 15, “Leases,” pages 852–931.This chapter focuses on issues related to liabilities arising in connection with leases, and in particular those that produce such debtor/creditor relationships, referred to as capital leases. Pay particular attention to leases that do not produce a debtor/creditor relationship, but instead are accounted for as rental agreements.
  • Chapter 16, “Accounting for Income Taxes,” pages 932–995.This chapter presents accounting issues that focus on accounting and reporting for the effects of income taxes, particularly defining and illustrating temporary differences which are the basis for recognizing deferred tax assets and deferred tax liabilities.

Deferred Assets and Liabilities

Assessment Instructions

Note: Do not proceed with this assessment until you have reviewed faculty feedback on Assessment 4.
This assessment has four parts. The Assessment 5 Data Sheet contains the necessary information for all four parts. Record your answers in the Assessment 5 Template. Submit the completed template for this assessment. Both documents are linked in the Resources under the Required Resources heading.

Imagine your boss has handed you four client files to complete by EOD (end of day.) However, several of the clients require written explanations of your reasoning.

Part 1: Temporary Differences
Use the information for Part 1 in the Assessment 5 Data Sheet to complete the following:

  • Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2015, 2016, and 2017.
  • Assuming there were no temporary differences prior to 2015, indicate how deferred taxes will be reported on the 2017 balance sheet. Sharp’s product warranty is for 12 months.
  • Explain your reasoning. Use the blank area in the template following the journal entries to make your notes.
  • Prepare the income tax expense section of the income statement for 2017, beginning with the line “Pretax financial income.”
  • Where appropriate, show all calculations leading to the final solution.

Part 2: Carryback and Carryforward
Use the information in Part 2 of the Assessment 5 Data Sheet to complete the following:

  • Prepare the journal entries for the years 2015 to 2019 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Bryan Clark Company uses the carryback provision.
  • All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.
  • Where appropriate, show all calculations leading to the final solution.

Deferred Assets and Liabilities

Part 3: Lessee Entries: Capital Lease
Use the information in Part 3 of the Assessment 5 Data Sheet to complete the following:

  • Identify and explain the type of lease. Use the blank area in the template following the journal entries to make your notes.
  • Compute the present value of the minimum lease payments.
  • Prepare all necessary journal entries for Southern for this lease through January 1, 2016.
  • Where appropriate, show all calculations leading to the final solution.

Part 4: Lessee-Lessor Entries: Sales-Type Lease
Use the information in Part 4 of the Assessment 5 Data Sheet to complete the following:

  • Discuss the nature of this lease to Capital and Hinton. Use the blank area in the template following the journal entries to make your notes.
  • Calculate the amount of the annual rental payment.Prepare all the necessary journal entries for Hinton for 2015.
  • Prepare all the necessary journal entries for Capital for 2015.
  • Where appropriate, show all calculations leading to the final solution.

Deferred Assets and Liabilities

Assessment Data Sheet

Part 1: Temporary Differences

Sharp Company has two temporary differences between its income tax expense and income taxes payable. The information is shown below.

 201520162017
Pretax financial income$420,000$455,000$472,500
Excess depreciation expense on tax return(15,000)(20,000)(5,000)
Excess warranty expense in financial income10,0005,0004,000
Taxable income$415,000$440,000$471,500

The income tax rate for all years is 40%.

Part 2: Carryback and Carryforward

The pretax financial income (or loss) figures for Bryan Clark Company are as follows.

2013$ 80,000
2014  125,000
2015    40,000
2016   (80,000)
2017 (190,000)
2018     60,000
2019     50,000

Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2013 and 2014 and a 40% tax rate for the remaining years.

Part 3: Lessee Entries: Capital Lease

On January 1, 2015, Southern, Inc. signed a 10-year non-cancelable lease for a machine. The terms of the lease called for Southern to make annual payments of $17,336 at the beginning of each year, starting January 1, 2015. The machine has an estimated useful life of 12 years.

The machine reverts back to the lessor at the end of the lease term. Southern uses the straight-line method of depreciation for all of its plant assets. Southern’s incremental borrowing rate is 6%, and the Lessor’s implicit rate is unknown.

Part 4: Lessee-Lessor Entries: Sales-Type Lease

On January 1, 2015, Capital Corp. leased equipment to Hinton Corporation. The following information pertains to this lease.

  1. The term of the noncancelable lease is 12 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease.
  2. Equal rental payments are due on January 1 of each year, beginning in 2015.
  3. The fair value of the equipment on January 1, 2015, is $225,000, and its cost is $180,000.
  4. The equipment has an economic life of 16 years. Hinton depreciates all of its equipment on a straight-line basis.
  5. Capital set the annual rental to ensure an 11% rate of return. Hinton’s incremental borrowing rate is 12%, and the implicit rate of the lessor is unknown.
  6. Collectability of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by the lessor.

Below is a partial answer to the above homework questions by one of our writers. If you are interested in a custom non plagiarized top quality answer, click order now to place your order.

Deferred Assets and Liabilities

Part 1: Temporary Differences

DateAccount Title Debit Credit
 Section 1: Journal entries  
2015Income tax expense168,000 
 Deferred tax asset (10,000 x 40%)4,000 
 Deferred tax liability (15,000 x 40%) 6,000
 Income tax payable (415,000 x 40%) 166,000
    
2016Income tax expense182,000 
 Deferred tax asset (5,000 x 40%)2,000 
 Deferred tax liability (20,000 x 40%) 8,000
 Income tax payable (440,000 x 40%) 176,000
    
2017Income tax expense189,000 
 Deferred tax asset (4,000 x 40%)1,600 
 Deferred tax liability (5,000 x 40%) 2,000
 Income tax payable (471,500 x 40%) 188,600
    
 Section 2: Balance sheet entries  
 Current asset  
 Deferred tax asset (4000+2000+1600)7,600 
    
 Long-term liability  
 Deferred tax liability (6000+8000+2000)16,000 
    
 Section 3: Income tax expense  
 Pretax income472,500 
Less:Income tax expenses188,600 
 Net deferred tax400 
 Net income post tax283,500 
Explanation:

2015

Deferred tax asset = 10,000 x 40% = 4000
Deferred tax liability 15,000 x 40% = 6000
Income tax payable 415,000 x 40% = 166,000

2016

Income tax expense
Deferred tax asset 5,000 x 40% = 2000
Deferred tax liability 20,000 x 40% = 8000
Income tax payable 440,000 x 40% = 176,000
 

2017

Deferred tax asset = 4,000 x 40% = 1600
Deferred tax liability = 5,000 x 40% = 2000
Income tax payable = 471,500 x 40% = 188,600

Part 2: Carryback and Carryforward

 DateAccount Title Debit Credit
12015Income Tax Expense$16,000 
2 Income Tax Payable $16,000
32016Income Tax Refund Receivable$36,000 
4 Benefit Due to Loss Carryback $36,000
52017Income Tax Refund Receivable$16,000 
6 Benefit Due to Loss Carryback $16,000
7 Deferred Tax Asset$60,000 
8 Benefit Due to Loss Carryforward $60,000
92018Income Tax Expense$24,000 
10 Deferred Tax Asset $24,000
112019Income Tax Expense$20,000 
12 Deferred Tax Asset $20,000

Calculations

1. Income tax expense

40,000 x 40%

= $16,000

3. Income tax refund receivable

80,000 x 45%

= $36,000

5. Income tax refund receivable

40,000 x 40%

= $16,000

7. Deferred Tax Asset

[(190,000 – 40,000) x 40%]

= $60,000

9. Income Tax Expense

(60,000 x 40%)

= $24,000

11. Income Tax Expense

50,000*40%

= $20,000

Part 3: Lessee Entries: Capital Lease

DateAccount Title Debit Credit
Jan 2015Leased equipment$135,250 
 Lease liability $135,250
    
Jan 2015Lease liability$17,336 
 Cash $17,336
    
Jan 2015Depreciation$13,525 
 Accumulated depreciation $13,525
    
Jan 2016Lease liability$10,261 
 Interest expense$7,075 
 Cash $17,336
Explanation:

The lease can be considered a capital lease. This is because the lease life exceeds 75% of the asset’s life. According to FASB, a capital lease may meet either of the following criteria:

  1. The lease life is more than 75% of asset’s life.
  2. Ownership transfer is done at the end of the lease
  3. Present value is higher than 90% of the asset’s fair value
  4. The leasee has an option to buy the lease asset below market value once the lease has expired.

Given that the lease life exceeds 75% of asset’s life, it is considered a capital lease. The calculations are provided as below.

10/12 x 100 = 83.3%

Equipment is capitalized at the minimum of fair value and present value of the lease payments. However, there is no fair value given and thus present value of minimum lease payments is used.

Depreciation calculation:

= Capitalized amount / Life of project

= 135,250 / 10

= $13,525

Part 4: Lessee-Lessor Entries: Sales-Type Lease

DateAccount Title Debit Credit
 Lessor Accounts  
 Lease receivables225,000 
 Equipment 225,000
    
 Installment received  
 Cash31,224 
 Lease receivable 31,224
    
   
 Hilton’s Accounts  
 Leased asset equipment225,000 
 Lease liability 225,000
    
 Depreciation14,062.5 
 Accumulated depreciation 14,062.5
Explanation:    

No interest factor is considered because payment for the lease is made on 1st January. This means that interest has not accumulated.

The type of lease in this case is a capital lease. This is because the lease term is equivalent to 75% of its economic life or more. To calculate 75% of the lease term, the following calculation is done.

12/16 x 100 = 75%

Given that the lease period is 12 years while economic life is 16 years, it means that the lease period is 75%……..

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Accounting for Equity Investments

Accounting for Equity Investments
Accounting for Equity Investments

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Accounting for Equity Investments- Assessment 1 

Overview –

Complete three exercises in consolidating the financial statements of a subsidiary and parent company. Consolidated financial statements of a subsidiary and parent company are becoming more typical in today’s business world.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:-

Competency 1: Consolidate financial statement information. Prepare all necessary journal entries for an equity investment. Prepare a consolidated balance sheet for an equity investment. Determine consolidated asset balances for an equity investment. Analyze equity investment accounting methods. Determine retained earnings balances for an equity investment.

Context–

By now, you are probably asking yourself how there can be additional accounting topics that have not been covered in the courses that preceded this one. Those previous courses answered most of the questions facing an individual seeking a career in the accounting field; however, there still remain many unanswered questions.

Financial reporting for business combinations has experienced many changes over the past several years. In December 2007, the Federal Accounting Standards Board (FASB) issued several statements that significantly affected financial reporting for business combinations.

The procedures used to consolidate financial information generated by the separate companies in a business combination are affected by both the passage of time and the method applied by the parent in accounting for the subsidiary; thus, no single consolidation process that is applicable to all business combinations can be identified. Several factors serve to complicate the consolidation process when it occurs subsequent to the date of acquisition.

In all combinations, within its own internal records the acquiring company will use a specific method to account for the investment in the acquired company. For combinations being consolidated after the acquisition date, certain procedures are required.

Question to Consider

To deepen your understanding, you are encouraged to consider the questions below concerning the equity method of accounting for investments and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

  • What methods are available to account for investments by one company in another?
  • How are costs matched against revenues from these investments?
  • What does the Financial Accounting Standards Board (FASB) have to say about accounting for investments?
  • Why use the equity method versus the fair-value method to account for said investments?
  • Although the equity method is a generally accepted accounting principle (GAAP), recognition of equity income has many critics. –
  • What problems could opponents of the equity method identify?
  • Which managerial incentives could influence a firm’s percentage ownership interest in another firm?

Resources –

The following resources are required to complete the assessment.

– Accounting for Equity Investments Excel Workbook. 

Resources

– Carmichael, D. R., & Graham, L. (2012). Accountants’ handbook, volume 1: Financial accounting and general topics (12th ed.). Hoboken, NJ: John Wiley & Sons.

  • – Chapter 8, “Accounting for Business Combinations.”
  • Chapter 9, “Consolidation, Translation, and the Equity Method.” 

Flood, J. M. (2014). Wiley GAAP 2014: Interpretation and application of generally accepted accounting principles (12th ed.). Hoboken, NJ: John Wiley & Sons. 

  • Chapter 2, “ASC 205 Presentation of Financial Statements.”
  • Chapter 20, “ASC 323 Investments—Equity Method and Joint Ventures.
  • “Chapter 45, “ASC 805 Business Combinations.”
  • Chapter 47, “ASC 810 Consolidations.” 

Hoyle, J. B., Schaefer, T., & Doupnik, T. (2014). Fundamentals of advanced accounting (6th ed.). New York, NY: McGraw-Hill Education.

  • Chapter 1, “The Equity Method of Accounting for Investments.”
  • Chapter 2, “Consolidation of Financial Information.”
  • Chapter 3, “Consolidations – Subsequent to the Date of Acquisition.” 

Hoyle, J. B., Schaefer, T., & Doupnik, T. (2014). Fundamentals of advanced accounting (6th ed.). New York, NY: McGraw-Hill Education.

  • Chapter 1, “The Equity Method of Accounting for Investments.”
  • Chapter 2, “Consolidation of Financial Information.”
  • Chapter 3, “Consolidations – Subsequent to the Date of Acquisition.”Complete Exercises 1, 2, and 3 in the Accounting for Equity Investments Excel Workbook, linked in the Required Resources for this assessment.

All financial information and applicable instructions are provided in each exercise worksheet. 

Exercise 1: Journal Entries Prepare all necessary journal entries for an equity investment. 

Exercise 2: Consolidated Balance Sheet Prepare a consolidated balance sheet for an equity investment.

 Exercise 3: Consolidated Balances Determine consolidated asset balances for an equity investment. Analyze equity investment accounting methods. Determine retained earnings balances for an equity investment.

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Government Accounting Assessment

Government Accounting
Government Accounting

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Government Accounting

Order Instructions:

Overview

Complete two exercises in government accounting.

Governmental accounting has come under close scrutiny lately. Taxpayers are more concerned than ever about how their tax dollars are being spent by different government entities.
By successfully completing this assessment, you will demonstrate your proficiency in the following course

Competencies and assessment criteria:

Competency 4:

  • Analyze accounting issues related to government.
  • Record basic journal entries for fund financial statements.
  • Record basic journal entries for government-wide financial statements.
  • Differentiate between encumbrances and expenditures.
  • Differentiate between government activities and business-type activities.
  • Determine the consequences of certain transactions for state and local governments.

Context

Just as for-profit businesses must prepare financial statements for their stakeholders, state and local government entities must also assemble their financial data and report the results to their constituents. But because the readers of government financial statements have a wide variety of information needs, no single set of statements seems capable of satisfying all of the users. Accountability of government officials and control over public spending have always been essential elements of government accounting. The Governmental Accounting Standards Board (GASB) is charged with setting authoritative accounting standards for state and local government units.

In addition to the issues you examined in the previous assessment, there remains a number of other asset issues to deal with when governmental accounting procedures are involved. The first such issue involves obtaining assets through lease arrangements. Government accounting applies the same criteria for identifying a capital lease as a for-profit organization.

Some other issues include the following:

  • Solid waste landfills creating large potential debts for a government because of closure and postclosure costs.
  • Future compensated employee absences because of holidays, sick leave, and vacations.
  • A state or local government obtaining a work of art or historical treasure.

Questions to Consider

To deepen your understanding, you are encouraged to consider the questions below concerning the principles and practices that underlie state and local government accounting, and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

  • Who uses the financial data produced by state and local government units?
  • How does fund accounting differ from financial accounting?
  • When does a government recognize revenues, expenses, and expenditures?
  • Why are two sets of financial statements necessary

For the following question, refer to the city of Sacramento’s Comprehensive Annual Financial Reports, linked in the Suggested Resources under the Internet Resources heading.

How does the audit opinion given to this city by its independent auditors differ from the audit opinion that might be rendered on the financial statements for a for-profit business?

Resources
Required Resources

The following resources are required to complete the assessment.

Government Accounting Excel Workbook.

Internet Resources

Access the following resources by clicking the links provided. Please note that URLs change frequently. Permissions for the following links have been either granted or deemed appropriate for educational use at the time of course publication.
City of Sacramento. (n.d.). Financial reporting. Retrieved from http://portal.cityofsacramento.org/Finance/Accounting/Reporting

National Center for Education Statistics. (2003). Financial accounting for local and state school systems: Chapter 4: Governmental accounting. Retrieved from https://nces.ed.gov/pubs2004/h2r2/ch_4.asp

Hoyle, J. B., Schaefer, T., & Doupnik, T. (2014). Fundamentals of advanced accounting (6th ed.). New York, NY: McGraw-Hill Education.
Chapter 11, “Accounting for State and Local Governments, Part I.”
Chapter 12, “Accounting for State and Local Governments, Part II.”

Assessment Instructions

Complete Exercises 1 and 2 in the Government Accounting Excel Workbook, linked in the Required Resources for this assessment. All financial information and applicable instructions are provided on each exercise worksheet.

Exercise 1: Fund-Based and Government-Wide Journal Entries
Record basic journal entries for fund-based and government-wide financial statements.

Exercise 2: City Operations Transactions
Differentiate between encumbrances and expenditures.Differentiate between government activities and business-type activities.
Determine the consequences of certain transactions for state and local governments.

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Foreign currency Transactions

Foreign currency Transactions
Foreign currency Transactions

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Foreign currency Transactions

Complete two exercises in accounting for foreign currency transactions and translating financial statements from a foreign currency into U.S. dollars.

With the expansion of U.S. business interests in foreign countries, the need to use and understand foreign currency transaction actions has become commonplace in accounting.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 2: Evaluate the influence of global money markets on financial statements.
    • Journalize foreign currency borrowing transactions.
    • Determine the effective cost of borrowing.
    • Prepare financial statements in LCU units.
    • Translate financial statement amounts to U.S. dollars.
    • Compute translation adjustments.

Context

In today’s global economy, many companies transact business in currencies other than their reporting currency. Merchandise may be imported or exported with prices stated in a foreign currency. For reporting purposes, foreign currency balances must be stated in terms of the company’s reporting currency by multiplying it by an exchange rate.

To address this issue, accountants face two questions in restating foreign currency balances:

  • What is the appropriate exchange rate for restating foreign currency balances?
  • And how does one account for changes in the exchange rate?

For this reason, companies often engage in foreign currency hedging activities to avoid the adverse impact of exchange rate changes. Accountants must then determine how to properly account for these hedging activities.

Because many companies have significant financial involvement in foreign countries, the process by which foreign currency financial statements are translated into U.S. dollars has special accounting importance. The two major issues related to the translation process are:

  • Which method to use.
  • Where to report the resulting translation adjustment in the consolidated financial statements.

Translation methods differ on the basis of which accounts are translated at the current exchange rate and which are translated at historical rates. Accounts translated at the current exchange rate are exposed to translation adjustment. Different translation methods give rise to different concepts of balance sheet exposure.

Question to Consider

To deepen your understanding, you are encouraged to consider the questions below concerning foreign currency transactions and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

  • What are the reporting issues when a company transacts business in foreign countries?
  • How does a company become exposed to foreign exchange risk?
  • What is hedge accounting, and how is it applied?
  • Why would a company prefer a foreign currency option over a forward contract in hedging a foreign currency firm commitment?
  • Why would a company prefer a forward contract over an option in hedging a foreign currency asset or liability?
  • What is a translation adjustment, and how is it computed?
  • What role do exchange rates play in the translation process?
  • How does a remeasurement differ from a translation?
  • What methods should be used to translate financial statements?

Resources

Required Resources

The following resources are required to complete the assessment.

Library Resources

Flood, J. M. (2014). Wiley GAAP 2014: Interpretation and application of generally accepted accounting principles (12th ed.). Hoboken, NJ: John Wiley & Sons.

  • Chapter 51, “ASC 830 Foreign Currency Matters.”
Internet Resources

Access the following resources by clicking the links provided. Please note that URLs change frequently. Permissions for the following links have been either granted or deemed appropriate for educational use at the time of course publication.

Hoyle, J. B., Schaefer, T., & Doupnik, T. (2014). Fundamentals of advanced accounting (6th ed.). New York, NY: McGraw-Hill Education.

  • Chapter 7, “Foreign Currency Transactions and Hedging Foreign Exchange Risk.”
  • Chapter 8, “Translation of Foreign Currency Financial Statements.”

Assessment Instructions

Complete Exercises 1 and 2 in the Foreign Currency Excel Workbook, linked in the Required Resources for this assessment. All financial information and applicable instructions are provided on each exercise worksheet.

Exercise 1: Foreign Currency Borrowing

  • Journalize foreign currency borrowing transactions.
  • Determine the effective cost of borrowing.

Exercise 2: Financial Statement Translation

  • Prepare financial statements in LCU units.
  • Translate financial statement amounts to U.S. dollars.
  • Compute translation adjustments.

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Partnerships Assessment

Partnerships
Partnerships

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Partnerships

Order Instructions

Complete two exercises in accounting for the equity of a pass-through entity, such as an LLC, limited partnership, or general partnership structure.

Partnerships are a common and popular form of business structure.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 3: Evaluate partnership accounting issues.
    • Calculate needed partner investment.
    • Calculate goodwill resulting from admission of a new partner.
    • Calculate bonus resulting from admission of a new partner.
    • Calculate partnership capital balances.
    • Prepare a partnership liquidation schedule.

Context

The partnership form of business ownership is popular for many reasons, including the ease of creation and the avoidance of the double taxation inherent in corporate ownership. However, the unlimited liability normally restricts the growth potential for most partnerships. As a result, most partnerships remain small in relation to their larger corporate brothers.

During the formation and operation stages of a partnership’s life, several issues require closer study, because of their impact on the financial status of individual partners. Initially, there is the issue of allocating the initial contributions of each partner in relation to their ownership and liability share. During ongoing operations, the issue of allocating annual income and losses sustained by the business must be handled. Lastly, the issues of taking on new partners and the withdrawal of current partners will affect the financial stability of the partnership.

Although a business unit can exist indefinitely through the periodic admission of new partners, termination of business activities and liquidation of property can take place for a number of reasons. Several important financial issues surface during these times in the life of a partnership.

Questions to consider

erested friend, or a member of the business community.

  • How are partner contributions valued and recorded?
  • How is annual income allocated among individual capital accounts?
  • What restructuring takes place when new partners enter and existing partners leave?
  • Under what circumstances would a partnership be liquidated?
  • How should an accountant report liquidation of a partnership?
  • How are assets distributed during liquidation?

Consider the following case:

A client of the CPA firm of Smith and Wesson is a medical practice of seven local doctors. One doctor has been sued for several million dollars as the result of a recent operation. Because of what appears to be this doctor’s poor judgment, a patient died. Although that doctor was solely involved with the patient in question, the lawsuit names the entire practice as a defendant. Originally, four of these doctors formed this business as a general partnership. However, five years ago, the partners converted the business to a limited liability partnership based on the laws of the state in which they operate.

  • What liability do the other six partners in this medical practice have in connection with this lawsuit?
  • What factors are important in determining the exact liability, if any, of these six doctors?

Resources

Required Resources

The following resources are required to complete the assessment.

Resources

Hoyle, J. B., Schaefer, T., & Doupnik, T. (2014). Fundamentals of advanced accounting (6th ed.). New York, NY: McGraw-Hill Education.

  • Chapter 9, “Partnerships: Formation and Operation.”
  • Chapter 10, “Partnerships: Termination and Liquidation.”

Assessment Instructions

Complete Exercises 1 and 2 in the Partnerships Excel Workbook, linked in the Required Resources for this assessment. All financial information and applicable instructions are provided on each exercise worksheet.

Exercise 1: Partnership Operations

  • Calculate partnership capital balances.
  • Calculate needed partner investment.
  • Calculate goodwill resulting from admission of a new partner.
  • Calculate bonus resulting from admission of a new partner.

Exercise 2: Partnership Liquidation Schedule

  • Prepare a partnership liquidation schedule.

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Biblical Concepts of Finance and Accounting

Biblical Concepts of Finance and Accounting
Biblical Concepts of Finance and Accounting

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Biblical Concepts of Finance and Accounting

Order Instructions:

You will write an word essay in current APA format that focuses on how biblical concepts are related to the fields of accounting and finance. The essay must incorporate a thoughtful analysis (considering assumptions, analyzing implications, comparing/contrasting concepts) of accounting, finance, and your faith. The paper must include at least 3 peer-reviewed references in addition to the Bible and course textbook

Biblical Concepts of Finance and Accounting

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Biblical Concepts of Finance and Accounting

While the notion of a connection between religion and core concepts of finance and accounting may seem far-fetched initially, a deeper analysis and look into the religious laws and standings offers a different perspective. From such research and analysis of relevant sources, concepts such as savings, budgeting, maintenance of records, debt management, financial planning, and the importance of labor and productivity are clearly visible from a biblical perspective. This paper looks into the connection between various biblical concepts and their connection to finance and accounting.

A culture of savings

Saving is the concept and act of putting a share of income aside on purpose as a means of deferred spending. The financial reason behind the concept of spending is usually a means of reduction of costs, the creation of future cash flow, or a form of insurance. The concept of saving is fundamental in the areas of personal finance as well as business accounting. In personal finance, for example, the ability of an individual or a family to set some money aside each year during their active work age allows them to pursue a number of options in the future.

Such options include the ability to fund education for their offspring, capital for a business venture, and consumption during retirement. On the other hand, in business accounting, savings is predominantly in the reduction of costs such as costs of production, sales, and recurrent expenditures in a bid to improve the profit margin.

Biblical Concepts of Finance and Accounting

The concept of savings, as observed, is important in both personal finance and corporate accounting and finance procedures. In addition, several scriptures relate this concept to biblical teachings of savings. In Proverbs 21: 20, the bible states that “The wise store up choice food and olive oil, but fools gulp theirs down.” (Biblica, Inc., 2011) This is indicative of the wisdom of saving up for future uncertainties. The absence of such a saving culture is likened to a fool who eats up all their produce after a bountiful harvest.

In addition, Proverbs 22: 3 states, “The prudent see danger and take refuge, but the simple keep going and pay the penalty.” This implies the need for insurance and retirement plans in tandem with earlier examples as well as those provided by Rodgers and Gago (2006, pp. 129 – 131 ). Additional scriptures indicating the importance of saving include Genesis 41: 35, Proverbs 30: 24 – 25, and 2nd Corinthians 12: 14.

Debt Management

The ability to manage debt effectively is integral to personal and corporate finance and accounting. In personal finance, the wisdom to choose which form of debt is useful is critical to maintaining a level of financial wellness. Expanding on the example of the family used in the previous section, if the choice to spend the portion of income dedicated to irrelevant and depreciating purchases rather than an interest generating savings plan, the family would be in debt for a long period.

In the corporate context, a company that relies on borrowings to start and keep it afloat will always be in a losing battle and in a position of servitude (Despain, 2017, p. 409). Another key concept within the realm of debt management is cosigning, since the need to cosign implies a lack of trust between the lender and the borrower, thereby requiring a third party…..

Biblical Concepts of Finance and Accounting

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Consolidations Assessment

Consolidations
Consolidations

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Consolidations

Overview

Complete two exercises in accounting for outside ownership (noncontrolling interest) and eliminating intercompany transactions, resulting in unrealized gains and losses.

When one company acquires control of a subsidiary company, the ownership interest of the parent may be less than 100 percent.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 1: Consolidate financial statement information.
  •   Calculate intra-entity transfer account balances.
  • Competency 2: Evaluate the influence of global money markets on financial statements.
  • Determine consolidated balances.

Context

A parent company need not acquire 100 percent of a subsidiary’s stock to form a business combination. Only control over the decision-making process is necessary—a level that has historically been achieved by obtaining a majority of the voting shares. Ownership of any subsidiary stock that is retained by outside, unrelated parties is collectively referred to as noncontrolling interest.

A consolidation takes on an added degree of complexity when a noncontrolling interest is present. The noncontrolling interest represents a group of subsidiary owners, and their equity is recognized by the parent in its consolidated financial statements. Valuation of subsidiary assets and liabilities poses a problem when a noncontrolling interest is present and follows the acquisition method. There are any number of challenges facing accountants with respect to noncontrolling interest issues. Central to these issues is the financial statement presentation for both entities.

In Assessment 1, you analyzed the deferral and subsequent recognition of gains created by inventory transfers between two affiliated companies in connection with equity method accounting. In that case, intra-entity profits are not realized until the earning process culminates in a sale to an unrelated party. A parallel logic can be applied to transactions between companies within a business combination. Such sales within a single economic entity create neither profits nor losses.

The opportunity for such direct acquisition, especially of inventory, is often the underlying motive for the creation of the business combination. Because the transaction was not made with an outside, unrelated party, the sales and purchases created by the transfer must be accounted for by accountants with each entity. This is true regardless of the asset, be it inventory, land, or depreciable assets.

Question to Consider

To deepen your understanding, you are encouraged to consider the questions below concerning consolidations and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

  • What accounting and reporting are appropriate for a noncontrolling interest?
  • How are additional stock purchases by a parent corporation in its subsidiary consolidated?
  • How are subsidiary revenues and expenses reported on a consolidated income statement when the parent gains control during the current accounting period?
  • What are the accounting and reporting effects, if the parent buys or sells shares of a subsidiary?
  • What are the accounting and reporting effects of intra-entity asset transfers?
  • What are the balance sheet effects of intra-entity transactions when a noncontrolling interest is present?
  • Why would a corporation choose one type of interest over the other when purchasing a stake in another corporation?
  • What are the advantages and disadvantages of each interest type for the acquiring and subsidiary corporation?

Consider the following case:

In 2001, PepsiCo and the Quaker Oats Company reached an agreement to become one company. Refer to the associated New York Times article and the SEC document linked in the Suggested Resources under the Internet Resources heading when considering the following:.

  • What type of marriage does this represent?
  • Who are the winners and losers?
  • Could this marriage happen today?

Push-down accounting is a method of accounting in which the financial statements of a subsidiary are presented to reflect the costs incurred by the parent company in buying the subsidiary, instead of the subsidiary’s historical costs. The purchase costs of the parent company are shown in the subsidiary’s statements. Although the use of push-down accounting for external reporting is limited, this method has gained favor for internal reporting purposes.

  • Why has push-down accounting gained popularity for internal reporting purposes?

Resources

Click the links provided to view the following resource:

Suggested Resources

                Carmichael, D. R., & Graham, L. (2012). Accountants’ handbook, volume 1: Financial accounting and general topics (12th ed.). Hoboken, NJ: John Wiley & Sons.

  • Chapter 20, “Partnerships and Joint Ventures.”
Internet Resources

Access the following resources by clicking the links provided. Please note that URLs change frequently. Permissions for the following links have been either granted or deemed appropriate for educational use at the time of course publication.

Book

Hoyle, J. B., Schaefer, T., & Doupnik, T. (2014). Fundamentals of advanced accounting (6th ed.). New York, NY: McGraw-Hill Education. 

  • Chapter 4, “Consolidated Financial Statements and Outside Ownership.”
  • Chapter 5, “Consolidated Financial Statements – Intra-Entity Asset Transactions.”

Assessment Instructions

Complete Exercises 1 and 2 in the Consolidations Excel Workbook, linked in the Required Resources for this assessment. All financial information and applicable instructions are provided on each exercise worksheet

Exercise 1: Consolidated Balances

  • Determine consolidated balances.

Exercise 2: Financial Statement Balance Adjustments

  • Calculate intra-entity transfer account balances.

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Cost Accounting Basics and Components

Cost Accounting Basics and Components
Cost Accounting Basics and Components

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Cost Accounting Basics and Components

ORDER INSTRUCTIONS

Overview

Complete a 4-part assessment in which you prepare and make decisions using statements for cost of goods manufactured (COGM) and cost of goods sold (COGS); record and make journal entries for scrapping unusable materials; compute and prepare payroll journal entries in a cost accounting system; and determine factory overhead and adjustments.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

Competency 1: Operate product-based cost accounting systems.

  • Prepare a statement of cost of goods manufactured.
  • Prepare the cost of good section of an income statement.
  • Record journal entries for scrapping unusable materials.
  • Compute payroll earnings from general ledger and other records.
  • Prepare a journal entry that distributes total earnings.
  • Determine the prorated amount of over-applied factory overhead.
  • Prepare the journal entry to close a credit balance in under- and over-applied factory overhead.

Cost Accounting Basics and Components

Context

Accounting information systems within large corporations consist of two major subsystems: a financial accounting system and a cost accounting system. One of the main distinctions between the two systems is the target audience for the information.

Financial accounting information is primarily for external users of financial information, including investors, creditors, and government agencies.

Cost accounting information is aimed primarily at internal users and provides information that is useful to managers for planning and controlling costs, making continuous improvements, and decision making.

Before beginning this assessment, take time to review the following topics:

  • Cost of goods manufactured.
  • Cost of goods sold.
  • Scrap materials.
  • Payroll earnings and taxes.
  • Computing under- and over-applied overhead.

Cost Accounting Basics and Components

Question to Consider

To deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

  • What circumstances created the need for the Sarbanes-Oxley Act? What is the impact of this Act for organizational leaders such as the Chief Executive Officer (CEO) and Chief Financial Officer (CFO)?
  • There are many approaches to the payroll record design. What are the types of employee data found in the payroll record for manufacturing companies? What about services companies?
  • What are the advantages and disadvantages underlying the high-low method of analyzing semi-variable costs?

Cost Accounting Basics and Components

Resources

The following resources are required to complete the assessment.

Library Resources

VanDerbeck, E. J. (2013). Principles of cost accounting (16th ed.). Mason, OH: South-Western Cengage Learning.

  • Chapters 1, 2, 3, and 4.
  • Wild, J. J., Shaw, K. W., & Chiappetta, B. (2011). Financial and managerial accounting: Information for decisions (4th ed.). New York, NY: McGraw-Hill.

Cost Accounting Basics and Components

Assessment Instructions

Use the Assessment 1 Template, linked in the Resources, to complete the following four parts. Each part is a different tab in the template.

  • Part 1: In the template, review the Central Manufacturing Company Statement for January. Based on the data provided in the template, prepare (a) the statement of cost of goods manufactured and (b) the cost of goods sold section of the income statement.
  • Part 2: Consider Central Manufacturing’s loss of materials scenario described in Part 2 of the template, and then follow the instructions to record the journal entries for scrapping the materials.
  • Part 3: Compute payroll earnings and prepare the related journal entry for the scenario detailed in Part 3 of the template.
  • Part 4: Use Part 4 of the template and the scenario included to (a) determine the prorated amount of over-applied factory overhead, and (b) prepare the related journal entry to close the credit balance in under- and over-applied factory overhead.

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Businesses and the Balanced Scorecard

Businesses and the Balanced Scorecard
Businesses and the Balanced Scorecard

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Businesses and the Balanced Scorecard

Compute activity-based costing rates for a law firm, and then write a 1–2-page analysis of the role of the balanced scorecard approach to performance management.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria • Competency 3: Operate service-based cost accounting systems.

Compute activity-based costing for a service business.o Compute budgeted overhead rates for cost pools.
• Competency 4: Apply cost analysis to assist management decision making.
o Analyze the impact of preparing a balanced scorecard on a business strategy plan.
o Compare and contrast three organizations’ use of the balanced scorecard approach.

Context

In contrast to a job-costing system that collects costs for each unit produced, process-costing systems accumulate costs in a department for an accounting period and spread them evenly, or average them, over all units produced in that accounting period. For example, a print shop collects costs for each order, a defense contractor collects costs for each contract, and a custom homebuilder collects costs for each home that is built.

Process costing is used when it is not possible or practical to identify costs with specific lots or batches of product. Process costing assumes that each unit produced is relatively uniform. If a product moves through various stages during its assembly or creation, it is likely that the costs were accumulated by the department and applied at the end of the assembly line. For example, it is probably not important for Intel to know whether the cost of the 10,001st microprocessor chip is different from chip number 10,002, particularly if the unit cost is calculated primarily to value inventory for external reporting purposes.

Businesses and the Balanced Scorecard

Resources

The following resources are required to complete the assessment.
• Assessment 5 Template.
• Cutler, T. R. (2010). The language of cost. Industrial Engineer, 42(9), 47–50.• Jagolinzer, P. (2000). Cost accounting: An introduction to cost management systems. Cincinnati, OH: South-Western College Publishing.• Kren, L. (2014). Tracking value created by efficiency improvements in a traditional overhead cost management system. Engineering Management Journal, 26(1), 3–7.

• Lee, R. T. (2013). Target: Carrying costs. Industrial Engineer, 45(8), 38–42.• Marshall, P. D., & Dombrowski, R. F. (2003, February/March). A small business review of accounting for primary products, byproducts and scrap. National Public Accountant, 10–13.
• Pachura, R. (1998). When is enough, enough?. IIE Solutions, 30(10), 33–35.• Rao, S. S. (1997). ABCs of cost control. Inc. Tech, 19(9), 79–81.• Rikhardsson, P. M. (2004). Accounting for the cost of occupational accidents. Corporate Social – Responsibility and Environmental Management, 11(2), 63–70.• The payroll handover. (1997, August). Management Today, 13.
VanDerbeck, E. J. (2013). Principles of cost accounting (16th ed.). Mason, OH: South-Western Cengage Learning.o Chapter 9.

Businesses and the Balanced Scorecard

Assessment Instructions 

For this assessment, complete the following two parts:

Part 1: Use the Assessment 5 Template (linked in the Resources) and the scenario it contains to compute activity-based costing rates for a law firm. Also compute the budgeted overhead rates for each of the three cost pools identified in the template.

Part 2: Consider what you know about cost accounting and service businesses as you write a 1–2-page analysis that addresses the following:
1. Analyze the reasons a company should bother with a balance scorecard approach to performance measurement when its primary goal is to earn a sufficient return on investment for its shareholder.
2. Search online for and examine organizations currently using the balance scorecard as part of their financial and strategic planning. Select three different companies or organizations, and compare and contrast their use of the balance scorecard approach.

Write your analysis in Microsoft Word. Use 12-point font, and double space. Follow APA style for citations and references.
Submit both the completed template and the Microsoft Word document for this assessment.

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Businesses and the Balanced Scorecard Essay

Balance score card is the current approach used by the management as thinking, it consists of both financial and non-financial indicators. Balance score card is based on three areas which are responsible for the success of the company (Shutibhinyo, 2013). The areas that balance score card do focus on; financial perspective, internal business perspective, learning and growth and customer perspective.

Financial perspective; this is a perspective that is modified the company performance by comparing market future price or value of the stock with the current value.  The second area that balance scorecard puts an emphasis on is the customer perspective; this is how company customers view the company (Shutibhinyo, 2013). Under this perspective, there are four areas that the company should consider. These include customer satisfaction, customer loyalty, and acquisition of customers and market share of the company.

The third perspective is the internal business perspective; this perspective gives an idea of how a company can stay ahead of its competitors by emerging the top in the market. A company has to review its internal structure to ensure that both customer’s demands and shareholder’s interests are considered in order for the company to reach the higher limits set by management.

The fourth and last perspective of balance scorecard is learning and growth perspective; a company must be innovative in order to achieve its growth desires. Company growth involves having competence staff and degree of uniqueness of the products that a company produces. Staffs should set their profession to match any technical changes for example change in tax laws. This is needed for full customer satisfaction and improve the corporate image (Shutibhinyo, 2013).

This approach is used by companies because it is based on both financial and non-financial performance. The approach focuses on maximizing the shareholders wealth and meeting consumer demands. Non-financial issues that balance score card address ii customer satisfaction, self-motivation, and innovation…..

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