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- 1. Hard rock cafe is a wholly-owned subsidiary of Jollibee Foods corporation, and Hard Rock Cafe operating results and financial condition are included in the consolidated financial statements of pepsiCo. (Do not use full disclosure) Choices: a. Full disclosure principle b. Time period assumption c. Materiality constraint d. Cost Principle e. Revenue recognition principle f. Conservatism Constraint g. Matching principle h. Economic entity assumption i. Monetary unit j. Going concern k. Some other answers1. Lower of cost or market is used to value inventories. Choices: a. Full disclosure principle b. Time period assumption c. Materiality constraint d. Cost Principle e. Revenue recognition principle f. Conservatism Constraint g. Matching principle h. Economic entity assumption i. Monetary unit j. Going concern k. Some other answers 2. Hard rock cafe is a wholly-owned subsidiary of Jollibee Foods corporation and hard rock cafe operating result and financial condition are included in the consolidated financial statements of pepsiCo. (Do not use full disclosure) Choices: a. Full disclosure principle b. Time period assumption c. Materiality constraint d. Cost Principle e. Revenue recognition principle f. Conservatism Constraint g. Matching principle h. Economic entity assumption i. Monetary unit j. Going concern k. Some other answersAfter conducting a thorough review of the company’s fi nancial statements, Martinez concludes the following:Conclusion 1 Although Stellar’s fi nancial statements adhere to generally accepted accounting principles (GAAP), Stellar understates earnings in periods whenthe company is performing well and overstates earnings in periods whenthe company is struggling.Conclusion 2 Stellar most likely understated the value of amortizable intangibles whenrecording the acquisition of Solar, Inc. last year. No goodwill impairmentcharges have been taken since the acquisition.Conclusion 3 Over time, the accruals component of Stellar’s earnings is large relative tothe cash component.Conclusion 4 Stellar reported an unusually sharp decline in accounts receivable in thecurrent year, and an increase in long-term trade receivables.1 . Based on Martinez’s conclusions, Stellar’s fi nancial statements are best categorized as:A . non-GAAP compliant.B . GAAP compliant, but with earnings management.C . GAAP…
- After conducting a thorough review of the company’s fi nancial statements, Martinez concludes the following:Conclusion 1 Although Stellar’s fi nancial statements adhere to generally accepted accounting principles (GAAP), Stellar understates earnings in periods whenthe company is performing well and overstates earnings in periods whenthe company is struggling.Conclusion 2 Stellar most likely understated the value of amortizable intangibles whenrecording the acquisition of Solar, Inc. last year. No goodwill impairmentcharges have been taken since the acquisition.Conclusion 3 Over time, the accruals component of Stellar’s earnings is large relative tothe cash component.Conclusion 4 Stellar reported an unusually sharp decline in accounts receivable in thecurrent year, and an increase in long-term trade receivables.2 . Based on Conclusion 2, after the acquisition of Solar, Stellar’s earnings are most likely :A . understated.B . fairly stated.C . overstatedWhen a component of a company's operations is classified as held for sale at the end of an accounting period, The component may not be reported as a discontinued operation until sold. The component will be reported on the balance sheet at the higher of its (1) fair value net of any costs to sell or (2) book value. The company may report the difference between the component's (1) fair value net of any costs to sell and (2) book value as a loss from discontinued operations on the income statement. None of these choices apply.State the accounting principle or assumption that is most applicable in the following situations: 1. A company prepares consolidated financial statements for a subsidiary that it owns. 2. The decision to remove an asset from the balance sheet 3. A large sale on account is not recognized as revenue because collectability is an issue. 4. Disclosure of the liability from a lawsuit in the financial statements 5. Preparation of monthly financial statements 6. Using the Canadian dollar in financial statements 7. An energy company includes detailed information about its reserves in its notes to the financial statements.
- Camel Company sells a segment of its operations at a loss. Camel has not previously experienced such an event and does not expect to again.The loss from the disposal of the segment should be reported in the income statement as: Question 16 options: A) A separate amount in comprehensive income B) A separate amount in net income from continuing operations C) A separate amount in a discontinued operations section D) As part of cost of goods soldFor each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the accounting concept that is applied (if you agree) or violated (if you disagree). Wagner Corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar. Spooner Oil Company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. No mention of the change was included in the financial statements. The change had a material effect on Spooner's financial statements. Cypress Manufacturing Company purchased machinery having a five-year life. The cost of the machinery is being expensed over the life of the machinery. Rudeen Corporation purchased equipment for $180,000 at a liquidation sale of a competitor. Because the equipment was worth $230,000, Rudeen valued the equipment in its subsequent balance sheet at $230,000. Davis Bicycle Company received a…BBB,Inc sells its unprofitable division A at a gain of $20,000. Before the sale, division A had a net loss of $50,000 for the period. Which of the following is true? The$20,000. Before the sale, Division U had a net loss of $50,000 for the period. Which of the following is true O The $20,000 gain on sale will be disclosed in the notes to the financial statements only, with the 550 operations. The $50,000 net loss will be a part of continuing operations and the $20,000 gain on sale will be a part of discontinued operations. The $20,000 gain on sale will be a part of continuing operations and the $50,000 net loss wil be a part of discontinued operations. Both the net loss of $50,000 as well as the gain on sale of $20,000 will be included as a part of discontinued operations.
- Firenze Company developed a specialized banking application software program that it licenses to various financial institutions through multiple-year agreements. On January 1, 2018, these licensing agreements have a fair value of $997,500 and represent Firenze's sole asset. Although Firenze currently has no liabilities, the company has a $191,000 net operating loss (NOL) carryforward because of recent operating losses. On January 1, 2018, Parma, Inc., acquired all of Firenze's voting stock for $1,205,000. Parma expects to extract operating synergies by integrating Firenze's software into its own products. Parma also hopes that Firenze will be able to receive a future tax reduction from its NOL. Assume an applicable federal income tax rate of 35 percent. If there is a greater than 50 percent chance that the subsidiary will be able to utilize the NOL carryforward, how much goodwill should Parma recognize from the acquisition? If there is a less than 50 percent chance that the…On November 1, 2012, management of Dianne Company committed to a plan to dispose of a major subsidiary. The disposal meets the requirements for classification as discontinued operation. The carrying amount of the subsidiary was P8,000,000 and management estimated the fair value less costs to sell to be P6,500,000. For 2012, the subsidiary had a loss of P2,000,000. What total amount should be reported as loss from discontinued operation before the effect of taxes in the income statement for 2012?ase Provision and Contingencies In relation to a failed acquisition, a firm of accountants has invoiced ABC Co. for the sum of $300,000. ABC Co. has paid $20,000 in full settlement of the debt and states that this was a reasonable sum for the advice given and is not prepared to pay any further sum. The accountants are pressing for payment of the full amount but on the advice of its solicitors, ABC Co is not going to settle the balance outstanding. Additionally ABC Co is involved in a court case concerning the plagiarism of software. Another games company has accused ABC Co of copying their games software and currently legal opinion seems to indicate that ABC Co will lose the case. Management estimates that the most likely outcome will be a payment of costs and royalties to the third party of $1 million in two years’ time (approximately). The best case scenario is deemed to be a payment of $500,000 in one year’s time and the worst case…
