Accounting Theory Case

Whether certain allocations of partnership income, gain, loss, deductions, and credits have substantial economic effect and whether that has any impact on the partners’ distributive shares.

As shareholders of VAFLA Corporation, an S corporation, the appellants claimed deductions to reflect the corporation’s operating losses. The commissioner disallowed deductions above the $10,000 bases from original investment. The appellants contend that the adjusted basis in their stock should be increased to reflect a $300,000 loan. The loan was obtained by VAFLA from bank and was guaranteed by the shareholder-guarantors. VAFLA made all of the loan payments, principals and interest to the bank and the appellants did not. Neither VAFLA nor the shareholder-guarantors treated the loan as constructive income taxable to the shareholder-guarantors.

10. Complete the following table to show how Six Flags’ 2008 balance sheet would change if it fully impaired its goodwill. Ignore income tax effects. Classify “Redeemable Minority Interest” and “Mandatorily Redeemable Preferred Stock” as liabilities.

“Recognition of an impairment loss and the recognition of a gain on the extinguishment of debt are separate events, and each event should be recognized in the period in which it occurs. The Board believes that the recognition of an impairment loss should be based on the measurement of the asset at its fair value and that the existence of nonrecourse debt should not influence that measurement.” (Statement 144, paragraph B34)

ASC 320-10-35-35: “In periods after the recognition of an other-than-temporary impairment loss for debt securities, an entity shall account for the other-than-temporarily impaired debt security as if the debt security had

Revenue recognition is one of the top causes for financial statement restatements. In addition, revenue recognition is an area commonly questioned by the Securities and Exchange Commission (SEC) staff in their review of public filings and resultant comment letter process. Furthermore, revenue recognition is often prey to financial fraud.

Date: Name: ID: Answer the following Questions: 1. Tower Inc. owns 30% of Yale Co. and applies the equity method. During the current year, Tower bought inventory costing $66,000 and then sold it to Yale for $120,000. At year-end, only $24,000 of merchandise was still being held by Yale. What amount of inter-company inventory profit must be deferred by Tower? A. $6,480 B. $3,240 C. $10,800 D. $16,200 E. $6,610 2. All of the following statements regarding the investment account using the equity method are true except A. The investment is recorded at cost B. Dividends received are reported as revenue C. Net income of investee increases the investment account D. Dividends received reduce the investment account E.

As part of the expansion plan, Wie will acquire some used equipment by signing a zero-interest-bearing note. The note has a maturity value of $50,000 and matures in 5 years. A reliable fair value measure for the equipment is not available, given the age and specialty nature of the equipment. As a result, Wie 's accounting staff is unable to

Wahoo Inc. is a C Corporation that filed for Chapter 11 bankruptcy protection in April 2015. Before filing bankruptcy, Wahoo has net operating loss (NOL) carryforwards of $65,000,000 in 2009, $45,000,000 in 2010, and $30,000,000 in 2011. The company worked out a re-organization plan and one of the note holders (a venture capital firm that financed the company) with a $105,000,000 note payable will receive new common stock and the old stocks will be cancelled. The Bankruptcy Court and the creditors’ committee have accepted the plan. The fair market value of Wahoo before the ownership change was $85,000,000. Wahoo’s selected assets from the balance sheet are as follows:

a. What is the authoritative guidance for asset impairment? Briefly discuss the scope of the standard (i.e., explain the types of transactions to which the standard applies)

Another important factor necessitating consideration is the effect the default will have on the nonrecourse debt. In our research we concluded the impact from the default does not influence the UFCF, the fair value, or the carrying value. According to FAS 144, the loss from impairment and the gain from the extinguishment of debt are two separate and distinct transactions. The Board continues to explain “the recognition of an impairment loss should be based on the measurement of the asset at its fair value and that the existence of nonrecourse debt should not influence that measurement.” Thus, the nonrecourse debt does not impact Smooth Sailing’s impairment loss calculations.

According to the fact of this case, Parent Co. (Parent) wholly owns Poor Son Co. (Poor Son) as a legal subsidiary, and both of them all nonpublic companies. However, in January 2007 Poor Son filed a voluntary bankruptcy under Chapter 11 of the U.S. bankruptcy code because of its inability of meet obligations as they became due. Then, Parent claimed the loss of control of Poor Son and deconsolidated Poor Son from its financial statement. Through the bidding process in May 2009, Poor Son and OtherCo, the winning sponsor, filed a joint plan of reorganization to the bankruptcy court, but the plan was rescinded by OtherCo later due to significant market value shrink of Poor Son. After that, the

Atkins issues 87,000 new shares of its common stock valued at $2 per share for all of the outstanding stock of Waterson. Immediately afterward, what are consolidated Additional Paid- In Capital and Retained Earnings, respectively?

This case provides an opportunity to use accounting authority to account for the two issues in the

Due to the information, 20 acres of land equal 80 sheep according to the exchange rate of last year, a one-room cabin equal 3 acres of land and equal 12 sheep finally, a plow equals 2 goat and equal 2/3 sheep according to last year’s exchange rate and 2 carts which were traded with a poor acre of land equals 8 sheep plus 400 sheep. So Deyonne’s total assets are 500(2/3) sheep. Deyonne’s liabilities and assets deduction are 35 sheep plus 3 sheep, which will come to 38 sheep,