Isaac Inc. Began Operations In January 2013 For Certain Reas

isaac Inc Began Operations In January 2013 For Certain Of Its Prop

Analyze the following scenarios and questions related to accounting and financial reporting based on the provided information:

Paper For Above instruction

1. Isaac Inc. started operations in January 2013. For certain property sales, it recognizes income in the sale period for financial reporting, but for tax purposes, income is recognized when cash is collected from installment payments. In 2013, sales of this type amounted to $600 million, with scheduled collections over the year. Assuming a 30% income tax rate and no other differences between financial and tax income, determine the deferred tax liability Isaac reports at year-end 2013, ignoring operating expenses.

2. Beresford Inc., in its first year (2012), purchased investment securities. Details regarding these securities are provided. Since fluctuations in fair value are not considered permanent, determine the total investment securities amount Beresford reports on its balance sheet at December 31, 2012.

3. Hutton Construction specializes in long-term construction projects, using the percentage-of-completion method based on cost-to-cost progress. The project began at the start of 2014 with a contract price of $4,000,000 and estimated total costs of $3,000,000. By year-end, billings are $2,230,000, and costs incurred are $1,755,000, with updated forecasts indicating total costs of $3,000,000. Costs include stored materials not yet installed costing $105,000, which should be excluded. Calculate (a) the percentage of completion at year-end 2014, (b) gross profit reported at year-end 2014, and (c) the journal entry to record 2014 income or loss.

4. Given financial data on a company at December 31, compute the following ratios: acid-test ratio, receivables turnover, inventory turnover, profit margin, return on equity, and book value per share. Use the provided balance sheets, income statement data, and stock info for calculations.

5. Prepare a cash flow statement and a cash reconciliation statement using the provided balance sheets and income statement for a company with specified assets, liabilities, equity, and income details.

6. An analyst reports key figures for U Inc. including net income, depreciation, interest, taxes paid, stock sales, dividends, and equipment sale. Using the indirect method, determine the net cash flow from operating activities for 2013.

7. Discuss how dividend receipts affect the investment account under the fair value and equity methods.

8. For long-term investments in stocks, identify how received dividends are recorded under fair value and equity methods.

9. When Koehn Corporation receives dividends from Sells Company, determine whether it's a reduction of investment or income recognition under the equity method.

10. Under the equity method, specify when share of earnings is recognized in relation to the investee’s financial statements.

11. For Judd, Inc., owning 35% of Cosby Corporation, analyze the effect of wrongly using the fair value method instead of the equity method on investment, net income, and retained earnings.

12. Regarding Dublin Co.'s investment in Club Co., evaluate which value (cost, carrying amount, fair value) is appropriate for reporting at year-end based on fair value principles.

13. Explain conditions under which revenue from sales with a right of return is recognized, noting which condition is not among the six specified by FASB.

14. When selecting a revenue recognition method for long-term construction, identify the principal consideration factors, and state which method is preferable when estimates are dependable.

15. Clarify when the percentage-of-completion method is necessary and what prerequisites must be met for its use.

16. Describe the preferable revenue recognition method when work and costs can be reliably estimated for long-term contracts.

17. Explain how balances of progress billings and construction-in-progress are presented in financial statements prior to contract completion.

18. Compute the gross profit recognized during the initial year of a construction contract accounting under the percentage-of-completion method.

19. Clarify how unbilled revenues should be disclosed on the balance sheet when using the percentage-of-completion method.

20. Discuss the main disadvantage of the percentage-of-completion approach for long-term contracts.

21. Identify which plant asset information should be included in the accounting policies summary, focusing on depreciation method and asset composition.

22. For Farr, Inc., explain the criteria under which segment information should be reported, considering profit and revenue thresholds.

23. Based on data for Unruh Corp., determine the number of reportable segments in their 2013 segment reporting.

24. For Nixon Corp.’s divisions, determine the revenue threshold for segment reporting based on unaffiliated sales, and identify the relevant amount.

25. Decide whether advertising costs can be accrued or deferred in interim financial statements and specify if recognition is appropriate.

26. In Mayo Corp., determine the total expense to report in the interim income statement for the first six months, given estimates for depreciation and bonuses.

27. For Fina Corp., compute the expected income impact from a hurricane loss and insurance expense for the first quarter.

28. Explain the suitable treatment of extraordinary items in interim reports, per accounting standards.

29. Describe the type of audit opinion issued if an auditor's conclusion contains manageable exceptions that do not invalidate the entire financial statement.

30. Summarize the focus of the MD&A section in a company's annual report, highlighting key areas it should cover.

31. Explain how amortization of patents is reported under the direct method of cash flows.

32. State which cash flow statement component is least useful for creditors and investors when assessing certain financial aspects.

33. Calculate the ending cash balance given net cash flows from operations, investing, and financing activities, along with a beginning balance.

34. Clarify whether short-term investments like commercial paper and certificates of deposit are classified as cash equivalents.

35. Describe characteristics that cash equivalents generally share and identify the exception based on maturity or risk.

36. When purchasing a security classified as a cash equivalent, determine the reporting of the cash outflow on the statement of cash flows.

37. In preparing a cash flow statement (direct method), explain how accrued payroll expense affects cash flows from operating activities.

38. For salary expense and changes in salaries payable, calculate the cash paid for salaries during the period.

39. In a direct method cash flow statement, identify which transactions would increase cash flows from operating activities.

40. Recognize which transaction or payment is classified as an operating activity in the statement of cash flows.

References

• Financial Accounting Standards Board (FASB). (2014). Accounting Standards Codification (ASC).
• Canadian Institute of Chartered Accountants (CICA). (2013). Handbook of Canadian Accounting Standards.
• Healy, P. M., & Palepu, K. G. (2012). Business Analysis & Valuation: Using Financial Statements. Cengage Learning.
• Leonard, L., & David, F. (2017). Financial Statement Analysis and Valuation. Wiley.
• Wahlen, J., Baginski, S., & Bradshaw, M. (2014). Financial Reporting, Financial Statement Analysis, and Valuation. Cengage Learning.
• Schrader, L. (2013). Fundamentals of Financial Accounting. Pearson.
• Revsine, L., Collins, D., Johnson, W., & Mittelstaedt, F. (2015). Financial Reporting & Analysis. Pearson.
• Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2014). Financial Statement Analysis. McGraw-Hill Education.
• Dechow, P., & Dichev, I. (2002). The Quality of Accruals and Earnings: The Role of Accruals in Earnings Management. The Accounting Review.
• Stubbs, C. (2014). Auditing and Assurance Services. Pearson.