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Problem
1. Valuation of Derivatives. Financial reporting classifies derivatives as (a) speculative investments, (b) fair value hedges, or (c) cash flow hedges. However, firms revalue all derivatives to market value each period regardless of the firm's reason for acquiring the derivatives. In addition to increasing or decreasing the derivative asset or liability, the revaluation amount either affects net income immediately or it affects other comprehensive income immediately and net income later. For each type of derivative, describe where firms report the revaluation amount on the financial statements.
2. Equity Method for Minority, Active Investments. U.S. GAAP requires firms to account for equity investments in which ownership is between 20% and 50% using the equity method. Ace Corporation owns 35% of Spear Corporation during 2014. Spear Corporation reported net income of $100.4 million for 2014 and declared and paid dividends of $25 million during the year. Support your answers with calculations.
Calculate the equity income that Ace Corporation reports in 2014 related to its ownership in Spear Corporation.
3. Revenue Recognition. Revenues are at the core of a firm's ability to grow and prosper; thus, they are central to the analysis of a firm's profitability. Although the time-of-sale method is the most common technique employed to recognize revenues, in some instances, a strong argument can be made for recognizing revenue before the product has been completed and delivered. Discuss circumstances in which this scenario is appropriate.
compute the number of orders placed in the month of january and cash collected in the month of april as details
Under variable costing, which of the following costs would be included in finished goods inventory?
How did the COMCO failure happen when the company was externally audited and how did the COMCO failure happen when the company appeared to comply with regulatory reporting requirements?
You purchased a zero coupon bond one year ago for $109.83. The market interest rate is now 9 percent. If the bond had 25 years to maturity when you originally purchased it, what was your total return for the past year?
Regling Company provides its employees vacation benefits and a defined benefit pension plan. Employees earned vacation pay of $35,000 for the period. The pension formula calculated a pension cost of $201,250. Only $175,000 was contributed to the pens..
An accountant believes that a company’s cash flow problems are due to outstanding accounts receivable. She claims that 70% of the current accounts receivable are over 3 months old. A sample of 120 accounts receivable revealed 78 over 3 months old.
Elephant Services leased an asset to Northridge Corporation on January 1, 2015. The cost of the asset to Elephant was $25,000. Compute the annual rental lease payments.
Below is the activity in Salem Inc's Work In Process and Finished Goods accounts (could be incomplete) for the month of January: What is the cost of goods sold for Salem for January ?
the rowdy fun is a limited partnership and was formed on june 1 2005 by thomas kyle its general partner and two other
ten interrelated components that are most directly related to measuring the performance and financial status of an
Selane Eatery operates a catering service specializing in business luncheons for large corporations. Selane requires customers to place their orders 2 weeks in advance of the scheduled events. Selane bills its customers on the tenth day of the month ..
The allocation base determines whether a cost is classified as direct or indirect.The same cost cannot be classified as both direct and indirect.Relevant costs can include direct and indirect costs.
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