accounitng exe

Even though Mr. Fordham mentions that he in his “Statement of Cost of Goods Manufactured for Year Ended Dec. 31 1956” that he depreciated $24,000 of Plant and Equipment, I decided to change the depreciation schedule so that PP&E would be fully depreciated by the end of the 5 year period. Thus, I used a straight-line depreciation schedule that accumulated $40,000 worth of depreciation per year, which was spread evenly across the 12 months of this Balance Sheet (or $3,333.33 per month).

The fixed cost is assumed that Larry has discovered the other fixed cost incurred. The total investment is $800,000. The worst case scenario assumes that Larry got a total line of credit from the bank in the amount of $400,000 and invested $400,000 from other source. The Notes payable – short term and the long-term debt is (11.8 + 3.7) = 15.5 % from Table F in the handout. The Loan interest and payment per year is ($400,000 * 0.155)= $62,000. The Income data from Table F indicates that there is a 0.4% of all other expenses net out of the total sales which equals to $109,908 (5,700,666 gallons * $4.82 *0.4%) .

The company should report the change in the contingency accrual as a 2009 event due change in estimate. ASC 250-10-45-17 specifies that “a change in accounting estimate shall not be accounted for by restating or retrospectively adjusting amounts reported in financial statements of prior periods.” Additionally, ASC 450-20-25-7 indicates that “all estimated losses for loss contingencies shall be charged to income rather than charging some to income and others to retained earnings as prior period adjustments”.

As ASC 450-20-25-2 states, an estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met:

The company maintains a minimum cash balance of at least $50,000 at the end of each month. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

From the analysis, relevant requirements to CCA are AASB 112 para. 79 and 80 (a), (b), (c) and (e), which require expense components to disclose separately. Also, para. 81(ab), (c(1)), (g) and 82A, regarding separate disclosure of tax consequences of other comprehensive income, numerical representation clarifying the relationship between tax expense and accounting profit, disclosure of amount of deferred tax assets and liabilities in balance sheet and income tax expense in income statement, and potential tax consequences have been followed respectively.

An accrual is not made for a loss contingency because any of the conditions in paragraph 450-20-25-2 are not met., b.  An exposure to loss exists in excess of the amount accrued pursuant to the provisions of paragraph 450-20-30-1.” Therefore, they also need to disclose the range of the possible loss with some explanation.

As per ASC 450-20-25-2, entities should accrue an estimated loss from a loss contingency by a charge to expense and a liability recorded only if both of the following conditions are met:

f. In December, the 2012 property tax bill for $1,600 was received from the city. The taxes, which have not been recorded, will be paid on February 15, 2013.

d. Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2009. They are being depreciated with the straight-line method using these facts and estimates.

3. All the stock is Sec. 1244 Stock. Under Sec. 1244, if Common stock is sold at loss or becomes worthless, the at least part of the loss would become ordinary loss that could be used to offset ordinary income.

b. The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The quantitative approach described in the definitions of the terms expected losses, expected residual returns, and expected variability is not required and shall not be the sole determinant as to whether a reporting entity has these obligations or rights.”

Considering real world practices, as well as in accordance with the conceptual framework from the textbook, accrual of a loss from ongoing litigation is rare. Companies usually do not record a loss until after the ultimate settlement has been reached. For example, the Las Vegas Sands Corporation, in a recent quarterly report, disclosed but did not accrue damages from a lawsuit it lost, even after the award was affirmed by the trial court, because the company believe that it has valid bases in law and fact to overturn or appeal the verdict. Consequently, M corporation should not accrue the contingency loss but continually disclose the matter even when a judgment was reached against the corporation to pay $18.5 million in 2009, given that the

Estimated machinery life: 3 years (after which there will be zero value for the equipment and no further cost savings)

* Comments relating to the adequacy of disclosures, the actual descriptions of rate reconciliation items, deferred tax assets and liabilities, uncertain tax positions, timing of reversals, or expiration of net operating losses in various jurisdictions.