ACCT550 All Weeks Discussions Latest 2020 August

ACCT550 Intermediate Accounting I

Week 1 Discussion

CASE DISCUSSION: IFRS1-5

This week’s case centers around our increasing dependency on international trade. As a result, there is a movement toward one set of international accounting standards that would increase trade globally and add to the transparency of financial reporting.

Please answer and discuss the questions below from Financial Reporting Case IFRS 1–5 (located in Chapter 1: Financial Accounting and Accounting Standards, IFRS Insignts, IFRS Concepts and Applications on page 35 of the textbook).

Financial Report Case IFRS1-5

The following comments were made at an Annual Conference of the Financial Executives Institute (FEI).

There is an irreversible movement toward the harmonization of financial reporting throughout the world. The international capital markets require an end to:

The confusion caused by international companies announcing different results depending on the set of accounting standards applied.

Companies in some countries obtaining unfair commercial advantages from the use of particular national accounting standards.

The complications in negotiating commercial arrangements for international joint ventures caused by different accounting requirements.

The inefficiency of international companies having to understand and use a myriad of different accounting standards depending on the countries in which they operate and the countries in which they raise capital and debt. Executive talent is wasted on keeping up to date with numerous sets of accounting standards and the never-ending changes to them.

The inefficiency of investment managers, bankers, and financial analysts as they seek to compare financial reporting drawn up in accordance with different sets of accounting standards.

 INSTRUCTIONS

What is the International Accounting Standards Board?

What stakeholders might benefit from the use of International Accounting Standards?

What do you believe are some of the major obstacles to convergence?

 

ACCT550 Intermediate Accounting I

Week 2 Discussion

CASE DISCUSSION: CA4-6

Please read CA 4-6 Ethics (Classification on Income Statement Items) (located in Chapter 4: Income Statement and Related Information, Other Reporting Issues, Concepts for Analysis on page 191 of the textbook). Please answer and discuss the questions below as required.

CA4-6 ETHICS (Classification of Income Statement Items)

As audit partner for Grupo and Rijo, you are in charge of reviewing the classification of unusual items that have occurred during the current year. The following material items have come to your attention.

A merchandising company incorrectly overstated its ending inventory 2 years ago. Inventory for all other periods is correctly computed.

An automobile dealer sells for $137,000 an extremely rare 1930 S type Invicta which it purchased for $21,000 10 years ago. The Invicta is the only such display item the dealer owns.

A drilling company during the current year extended the estimated useful life of certain drilling equipment from 9 to 15 years. As a result, depreciation for the current year was materially lowered.

A retail outlet changed its computation for bad debt expense from 1% to ½ of 1% of sales because of changes in its customer clientele.

A mining concern sells a foreign subsidiary engaged in uranium mining, although it (the seller) continues to engage in uranium mining in other countries.

A steel company changes from the average-cost method to the FIFO method for inventory costing purposes.

A construction company, at great expense, prepared a major proposal for a government loan. The loan is not approved.

A water pump manufacturer has had large losses resulting from a strike by its employees early in the year.

Depreciation for a prior period was incorrectly understated by $950,000. The error was discovered in the current year.

A large sheep rancher suffered a major loss because the state required that all sheep in the state be killed to halt the spread of a rare disease. Such a situation has not occurred in the state for 20 years.

A food distributor that sells wholesale to supermarket chains and to fast-food restaurants (two distinguishable classes of customers) decides to discontinue the division that sells to one of the two classes of customers. This represents a strategic shift in the company business.

INSTRUCTIONS

From the foregoing information, indicate in what section of the income statement or retained earnings statement these items should be classified. Provide a brief rationale for your position.

 

ACCT550 Intermediate Accounting I

Week 3 Discussion

CASE DISCUSSION: THE PROCTER & GAMBLE COMPANY (P & G)

Read the Financial Reporting Problem, The Procter & Gamble Company (P & G) (located in Chapter 5: Balance Sheet and Statement of Cash Flows, Using Rations to Analyze Performance, Using Your Judgement on pages 254 and 255 of the textbook) and answer the questions below.

Answer one question at a time. Let the remainder of the class answer another question and then comment on the answers given, expressing why the answer was either correct or not correct and why.

Financial Reporting Problem: The Proctor & Gamble Company (P & G)

The financial statements of P & G are presented in Appendix B: Specimen Financial Statements: The Proctor & Gamble Company (of the textbook).  The company’s complete annual report, including the notes to the financial statements, is available online.

INSTRUCTIONS

Refer to P&G’s financial statements and the accompanying notes to answer the following questions.

What type of income statement format does P&G use? Indicate why this format might be used to present income statement information.

What are P&G’s primary revenue sources?

Compute P&G’s gross profit for each of the years 2012–2014. Explain why gross profit decreased in 2014.

Why does P&G make a distinction between operating and nonoperating revenue?

What financial ratios did P&G choose to report in its “Financial Summary” section covering the years 2009–2014?

 

ACCT550 Intermediate Accounting I

Week 4 Discussion

TIME VALUE OF MONEY

We all know that a dollar today is worth more than a dollar tomorrow. This is because in a situation of rising prices, the purchasing power of a dollar decreases as time passes. We need to know how much a dollar that we are going to receive in the future is actually worth today. This is known as present value of money.

Let’s start our discussion with the difference between present value and future value of money. Explain compounding and discounting of interest with suitable examples.

 

ACCT550 Intermediate Accounting I

Week 5 Discussion

INVENTORY ACCOUNTING AND REPORTING

Based on your readings from the textbook and your research, discuss how the inventory of a merchandising company differs from that of a manufacturing company. What are the two inventory control systems? Why is one better than the other? Explain with examples.

 

ACCT550 Intermediate Accounting I

Week 6 Discussion

INVENTORIES: ADDITIONAL VALUATION ISSUES

Last week we discussed different valuation methods and cost flow assumptions.  Of course we were making some basic assumptions, i.e., that the inventory was still worth at least what the company paid.  But what happens if the inventory is damaged or spoiled?  becomes obsolete?  Shouldn’t that affect the valuation?  

Research and discuss differences between GAAP and iGAAP in the ways impairment is handled.

 

ACCT550 Intermediate Accounting I

Week 7 Discussion

CURRENT EVENTS

Choose a tweet from the FASB Twitter Feed (@FAFNorwalk) integrated into the home page of this course, summarize the overarching topic of the tweet and related article or video, and connect it to a topic we’ve studied in class this week. If a classmate has chosen a feed in which you’re interested, agree with their summary and position by providing further supportive evidence from the book or online, or disagree and provide evidence that supports your position. Feel free to comment on current or recent tweets.

 

ACCT550 Intermediate Accounting I

Week 8 Discussion

CASE DISCUSSION: CA11-1

Please read case CA11-1 (Depreciation Basic Concepts) (located in Chapter 11: Depreciation, Impairments, and Depletion, Concepts for Analysis on page 596 of the textbook) and answer questions A, B, and C following in the case below.

CA11-1 (Depreciation Basic Concepts)

Burnitz Manufacturing Company was organized on January 1, 2017. During 2017, it has used in its reports to management the straight-line method of depreciating its plant assets.

On November 8, you are having a conference with Burnitz’s officers to discuss the depreciation method to be used for income tax and stockholder reporting. James Bryant, president of Burnitz, has suggested the use of a new method, which he feels is more suitable than the straight-line method for the needs of the company during the period of rapid expansion of production and capacity that he foresees. Following is an example in which the proposed method is applied to a fixed asset with an original cost of $248,000, an estimated useful life of 5 years, and a salvage value of approximately $8,000.

Year       Years of Life Used            Fraction Rate     Depreciation Expense    Accumulated Depreciation at End of Year                Book at End of Year

 1             1              1/15       $16,000 $16,000                $232,000

 2             2              2/15       $32,000 $48,000                $200,000

 3             3              3/15       $48,000 $96,000                $152,000

 4             4              4/15       $64,000 $160,000             $88,000

5              5              5/15       $80,000 $240,000             $8,000

The president favors the new method because he has heard that:

It will increase the funds recovered during the years near the end of the assets’ useful lives when maintenance and replacement disbursements are high.

It will result in increased write-offs in later years and thereby will reduce taxes.

Instructions

What is the purpose of accounting for depreciation?

Is the president’s proposal within the scope of generally accepted accounting principles? In making your decision, discuss the circumstances, if any, under which use of the method would be reasonable and those, if any, under which it would not be reasonable.

The president wants your advice on the following issues. (1) Do depreciation charges recover or create funds? Explain. and (2) Assume that the Internal Revenue Service accepts the proposed depreciation method in this case. If the proposed method were used for stockholder and tax reporting purposes, how would it affect the availability of cash flows generated by operations?