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Enron Corporation's 2001 third-quarter 10-Q report disclosed the following transaction with LJM2, a nonconsolidated special purpose entity (SPE) that was formed by Enron:
In June 2000, LJM2 purchased dark fiber optic cable from Enron for a purchase price of $100 million. LJM2 paid Enron $30 million in cash and the balance in an interest bearing note for $70 million. Enron recognized $67 million in pretax earnings in 2000 related to the asset sale. Pursuant to a marketing agreement with LJM2, Enron was compensated for marketing the fiber to others and providing operation and maintenance services to LJM2 with respect to the fiber. LJM2 sold a portion of the fiber to industry participants for $40 million, which resulted in Enron recognizing agency fee revenue of $20.3 million.
As investigations later discovered Enron controlled LJM2 in many ways.
The FASB ASC now requires the consolidation of SPEs (variable interest entities) that are essentially controlled by their primary beneficiary.
By selling goods to SPEs that it controlled but did not consolidate, did Enron overstate its earnings? What effect does consolidation have on the financial reporting for transactions between a firm and its controlled entities?
Describe in your own words what "segregation of duties" is in an AIS context. Explain how MYOB can assist in the implementation of separation of duties
Bonds uses a discount rate of 11 percent and wants projects to have a payback period of no longer than five years. Present value tables or a financial calculator are required.
The SEC has always wanted and expected more information and disclosure in the financial statements.
Permanent differences in taxable income and pretax accounting income that will not be offset by corresponding differences or "reverse" in future periods are called:
The enacted tax rate increased to 30 percent in Year 2 compared to an enacted rate of 20 percent in the prior year. At December 31, Year 2, the company would record a deferred tax expense of:
Michelle ran her own accountancy business. During the year she was persuaded to change premises which she ran her business from, and which she rented.
Because of Wyatt's loyalty, Julie would like him to have shares in the corporation. What are the relevant tax issues?
Prepare a revised aging schedule showing ages of the accounts receivable after the write-offs. Be very careful with your dates. [Hint: Be sure to reflect the write-offs taken in E above, in the correct age category].
Dove Corporation had purchased the land as an investment three years ago for $375,000, and the land was distributed subject to a $270,000 liability. Alexandra took the land subject to the $270,000 liability. What is Alexandra's basis in the land?
Comment on the appropriateness of this viewpoint. Prepare a report outlining the need for regulation in accounting and why a free market for accounting information is not ideal.
prepare a cash receipts journal based on the information given below and post it to the accounts receivable subsidiary
Assuming that you are single and receive no deduction or any other credits, Mr. Wilson has asked you to calculate the total you will pay in income, Social Security, and Medicare taxes for a salary of $94,000.
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