Lenexa State Bank has followed the practice of capitalizing certainmarketing costs and amortizing these costs over their expected life.In the current year, the bank determined that the future benefitsfrom these costs were doubtful. Consequently, the bank adopted thepolicy of expensing these costs as incurred. How should the bankreport this accounting change in the comparative financialstatements?

Answered: Lenexa State Bank has followed the…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter6: Losses And Loss Limitations

Section: Chapter Questions

Problem 1BD

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Lenexa State Bank has adopted the practice of capitalizing and amortizing some marketing expenditures throughout the estimated life of the costs. The bank judged that the future advantages from these expenses were questionable in the present year. As a result, the bank decided to expense these expenditures as they were incurred. In the comparative financial accounts, how should the bank record this accounting change?
Which of the following statement is incorrect? *a. Trade payable are classified as current liabilities when they are expected to be settled within the normal operating cycle or one year, whichever is shorterb. Non-trade payables are classified as current liabilities only when they are expected to be settled within one yearc. Financial institutions need not classify their payables as trade or non-trade because their statement of financial position is presented based on liquidityd. A and B
Assume that banks aim to hold no excess reserves. The AAA bank responds to the change in its reserve position in part (b) by maximizing its loan portfolio. Under this assumption, show AAA's T-Account after it has fully adjusted to the change in its reserve position. Explain what actions occurred that caused the balance sheet to change. AAA Bank Assets Liabilities
Handy Bank holds a short-term note from General Store, Inc., that General Store expects to refinance. Which section of the Accounting Standard Codification best indicates whether this arrangement should be disclosed to General Store's investors.?
Jaycom Enterprises has invested its excess cash in the bonds of several different companies and desires to maximize income over the short run. Jaycom is unsure about the appropriate investment policy and thus what reporting practice to follow. What classification procedure and subsequent classification could Jaycom follow in order to meet its objective? How will Jaycom justify its choice to the Jaycom auditors?
You are required to identify and give reasons for the appropriate classification of the debt instruments A and B below: Part A.Macaroon holds certain debt investments to collect their contractual cash flows of interest and principle. The funding needs of the company are predictable and the maturity of such financial assets is matched to Macaroon’s estimated funding needs. Macaroon performs credit risk management activities with the objective of minimising credit losses.In the past, Macaroon has sold some of its debt investments when the credit risk of the financial assets increased beyond the acceptable levels of risk as documented in the company’s investment policy. In addition, infrequent sales have occurred as a result of unanticipated funding needs. The managers reports to key management personnel focus on the credit quality of the financial assets and the contractual return. Part B.Macaroon holds certain debt investments with specified contractual cash flows of interest and…
How would the transactions be reconciled if the bad debt allowance is changed to a write-off but the corporation is able to retrieve the funds?
Marshall Companies, Inc., holds a note receivable from a former subsidiary. Due to financial difficulties, the former subsidiary has been unable to pay the previous year’s interest on the note. Marshall agreed to restructure the debt by both delaying and reducing remaining cash payments. The concessions result in a credit loss on the creditor’s investment in the receivable. How is the credit loss on the troubled debt restructuring calculated?
How would the transactions be reconciled if the bad debt allowance was changed to a bad debt write-off but the corporation was able to recover the funds?
Which one of the following statements is NOT correct? a) A repurchase agreement is the sale of a non-monetary asset together with an agreement to repurchase it a specified future date b) The difference between the price at which a commercial bank sells an asset to the central bank and the price at which it agrees to buy it back can be expressed as an annualized percentage of the selling price, and this is called the refinancing rate c) In the UK the refinancing rate is known as the repo rate d) If the central bank raises its refinancing rate then the commercial banks will try to increase their lending
Which of the following statements is false? Unmatured principal installments and accrued interest which is due shortly after year end are required to be reported as liabilities in the debt service fund at year end. An encumbrance in a capital project fund is created when the contract for the work is signed or issued. Premiums generated from the issuance of bonds for a capital projects fund are generally transferred to the Debt Service Fund. If taxes are levied specifically for payment of interest and principal on long-term debt, those taxes are recognized as revenues of the Debt Service Fund.
Explain how the bank’s decisions to increase loan loss provision will affect the above balance sheet and income statement.

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