INTERMEDIATE ACCT VOL.2>CUSTOM<
9th Edition
ISBN: 9781307165067
Author: SPICELAND
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 1CCTC
Continuing Cases
Target Case
• LO12-4, LO12-6
Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended January 30, 2016, are available Connect. This material also is available under the Investor Relations link at the company’s website (www.target.com). Target does not have investments in stock or bonds. However, CVS Health Corp., which purchased Target’s pharmacy and clinical business during 2015, does have some investments. Access CVS’s 2015 10K (issued on February 9, 2016) at investors.cvshealth.com to answer the following questions,
Required:
1. CVS indicates in Note 1 that it has some short-term investments that consist of certificates of deposit (CDs).
a. How has CVS classified those CDs for accounting purposes?
b. Per CVS’s balance sheet, what was the balance in CVS’s short-term investments as of December 31, 2015 and December 31, 2014?
c. Per CVS’s statement of
d. Prepare a T-account that summarizes transactions affecting CVS’s short-term investments during 2015. Speculate as to the explanation for any “plug” figure necessary to make the T-account balance.
2. Per Note 1, CVS has equity-method investments in SureScripts, LLC and in Heartland Healthcare Services. CVS indicates that those investments are immaterial for the year ended December 31, 2015. Assuming that the Heartland investment is material,
a. How would Heartland’s earnings affect CVS’s income statement?
b. How would Heartland’s earnings affect CVS’s balance sheet?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Hw.5.
Facts
Ryan recently disposed Bitcoin but initially did not report this. After an ATO investigation, the ATO issued an Amended Notice of Amendment which reported that he would be liable to pay tax liability totalling $100,000 and this was due 1 January 2021.
As Ryan did not have access to additional funds in the short term, Ryan was only able to pay the ATO debt 1 January 2022.
Question
Advise Ryan whether he can challenge the new liability imposed.
Assuming Ryan cannot challenge the new liability imposed, advise what administrative penalty and interest charges Ryan will be subject to and what information need to be provided to request a penalty and interest charge reversal.
Problem 13-6 (Algo) Various contingencies [LO13-5, 13-6]
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022.
a. Eastern is involved in a lawsuit resulting from a dispute with a supplier On February 3, 2022, judgment was rendered against Eastern in the amount of $111 million plus interest, a total of $126 million. Eastern plans to appeal the judgment and is unable to predict its outcome though it is not expected to have a material adverse effect on the company.
b. In November 2020, the State of Nevada filed suit against Eastern, seeking civil penalties and injunctive relief for violations of environmental laws regulating hazardous waste. On January 12, 2022, Eastern reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $144 million will be…
Problem 12-13 (Algo) B Equity method [LO12-6, 12-7]
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling. Inc., on January 2, 2021, for $570
million.
At the date of purchase, the book value of Vancouver's net assets was $860 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $10 million for the inventory and by $15 million for the plant facilities
The estimated useful life of the plant facilities is 12 years. All inventory acquired was sold during 2021.
Vancouver reported net income of $190 million for the year ended December 31, 2021. Vancouver paid a cash dividend of $30 million.
Required:
1. Prepare all appropriate journal entries related to the investment during 2021.
2. What amount should Northwest report…
Chapter 12 Solutions
INTERMEDIATE ACCT VOL.2>CUSTOM<
Ch. 12 - All investments in debt securities are classified...Ch. 12 - When market rates of interest rise after a...Ch. 12 - Does GAAP distinguish between fair values that are...Ch. 12 - When a debt investment is acquired to be held for...Ch. 12 - Prob. 12.5QCh. 12 - What is comprehensive income? Its composition...Ch. 12 - Why are holding gains and losses treated...Ch. 12 - Prob. 12.8QCh. 12 - Prob. 12.9QCh. 12 - Prob. 12.10Q
Ch. 12 - Under IFRS No. 9, which reporting categories are...Ch. 12 - Prob. 12.12QCh. 12 - Do U.S. GAAP and IFRS differ in the amount of...Ch. 12 - Under what circumstances is the equity method used...Ch. 12 - The equity method has been referred to as a...Ch. 12 - In the application of the equity method, how...Ch. 12 - Prob. 12.17QCh. 12 - Prob. 12.18QCh. 12 - Prob. 12.19QCh. 12 - How does IFRS differ from U.S. GAAP with respect...Ch. 12 - What is the effect of a company electing the fair...Ch. 12 - Define a financial instrument. Provide three...Ch. 12 - Some financial instruments are called derivatives....Ch. 12 - (Based on Appendix 12A) Northwest Carburetor...Ch. 12 - Prob. 12.25QCh. 12 - Prob. 12.26QCh. 12 - (Based on Appendix 12B) Reporting an investment at...Ch. 12 - Prob. 12.28QCh. 12 - Explain how the CECL model (introduced in ASU No....Ch. 12 - Prob. 12.30QCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Trading securities LO12-3 For the Coca-Cola bonds...Ch. 12 - Available -for-sale securities LO12-4 SL...Ch. 12 - Available -for-sale securities LO12-4 For the...Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Equity investments and dividends LO12-5 Turner...Ch. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Equity method investments LO12-6, LO12-9 Kim...Ch. 12 - Change in principle; change to the equity method ...Ch. 12 - Fair value option; equity method investments ...Ch. 12 - Prob. 12.17BECh. 12 - Impairments (AFS Credit Loss Model) (Appendix 12B)...Ch. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.1ECh. 12 - Prob. 12.2ECh. 12 - Securities held-to-maturity LO12-1 FFT...Ch. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Trading securities LO12-1 [This is a variation of...Ch. 12 - Various transactions relating to trading...Ch. 12 - Prob. 12.8ECh. 12 - Securities available-for-sale; adjusting entries ...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Classification of securities; adjusting entries ...Ch. 12 - Prob. 12.14ECh. 12 - Equity investments; fair value through net income ...Ch. 12 - Equity investments; fair value through net income ...Ch. 12 - Prob. 12.17ECh. 12 - Equity investments; fair value through net income ...Ch. 12 - Investment securities and equity method...Ch. 12 - Equity method; purchase; investee income;...Ch. 12 - Error corrections; equity method investment ...Ch. 12 - Prob. 12.22ECh. 12 - Prob. 12.23ECh. 12 - Prob. 12.24ECh. 12 - Prob. 12.25ECh. 12 - Prob. 12.26ECh. 12 - Prob. 12.27ECh. 12 - Prob. 12.28ECh. 12 - Prob. 12.29ECh. 12 - Prob. 12.30ECh. 12 - Prob. 12.31ECh. 12 - Prob. 12.32ECh. 12 - Accounting for impairments under IFRS (Appendix...Ch. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Securities available-for-sale; bond investment;...Ch. 12 - Prob. 12.4PCh. 12 - Various transactions related to trading securities...Ch. 12 - Various transactions related to securities...Ch. 12 - Prob. 12.7PCh. 12 - Various transactions relating to trading...Ch. 12 - Securities held-to-maturity; securities available...Ch. 12 - Investment securities and equity method...Ch. 12 - Prob. 12.11PCh. 12 - Prob. 12.12PCh. 12 - Prob. 12.13PCh. 12 - Equity method LO12-6, LO12-7 On January 2, 2018,...Ch. 12 - Prob. 12.15PCh. 12 - Prob. 12.16PCh. 12 - Accounting for debt and equity investments ...Ch. 12 - Prob. 12.18PCh. 12 - Real World Case 121 Intels investments LO12-4 The...Ch. 12 - Prob. 12.2BYPCh. 12 - Prob. 12.4BYPCh. 12 - Prob. 12.6BYPCh. 12 - Real World Case 127 Comprehensive income Microsoft...Ch. 12 - Continuing Cases Target Case LO12-4, LO12-6...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Problems 26-30 assume that a U.S.-based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes for each problem.Harrington Company was sued by an employee in late 2017. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $20,000 to $70,000, with no amount in the range more likely than any other. The lawsuit was settled in 2018, with Harrington making a payment of $60,000.a. Determine the appropriate accounting for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.b. Prepare the entry(ies) that Harrington would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.arrow_forwardProblems 18–25 assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes for each problem.On January 1, 2017, Xiamen Company made amendments to its defined benefit pension plan that resulted in 60,000 yuan of past service cost. The plan has 5,000 active employees with an average expected remaining working life of 15 years. There currently are no retirees under the plan.a. Determine the appropriate accounting for the past service cost for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP.b. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.arrow_forward2.Chapter 11 When the Master Printing Company filed for bankruptcy, it filed under Chapter 11 of the U.S. bankruptcy code. Key information is shown here: Assets Claims Mortgage bonds $27,000 Senior debentures 12,100 Junior debentures 8,500 Going concern value $37,500 Book equity −10,100 As a trustee, what reorganization plan would you accept? INTERMEDIATE(Questions 3–4) 3.Z-Score Fair-to-Midland Manufacturing, Inc. (FMM), has applied for a loan at True Credit Bank. Jon Fulkerson, the credit analyst at the bank, has gathered the following information from the company’s financial statements: Total assets $115,000 EBIT 7,900 Net working capital 4,100 Book value of equity 23,000 Accumulated retained earnings 19,600 Sales 112,000 The stock price of FMM is $31 per share and there are 7,800 shares outstanding. What is the Z-score for this company?arrow_forward
- G.252. Required information Skip to question [The following information applies to the questions displayed below.] Brooks Company purchases debt investments as trading securities at a cost of $77,000 on December 27. This is its first and only purchase of such securities. At December 31, these securities had a fair value of $87,000. Brooks sells a portion of its trading securities (costing $38,500) for $41,000 cash. Analyze each transaction above by showing its effects on the accounting equation—specifically, identify the accounts and amounts (including + or −) for each transaction.arrow_forwardContingent liabilities Altria Group, Inc., has more than 12 pages dedicated to describing contingent liabilities in the notes to recent financial statements. These pages include extensive descriptions of multiple contingent liabilities. Use the Internet to research Altria Group, Inc., at www.altria.com. a. What are the major business units of Altria Group? b. Based on your understanding of this company, why would Altria Group require more than 12 pages of contingency disclosure?arrow_forward(Appendix 14.1)Pamlico Company has a 500,000, 15%, 3-year note dated January 1, 2019, payable to Forest National Bank. On December 31, 2020, the bank agreed to settle the note and unpaid interest of 75,000 for 50,000 cash and marketable securities having a current market value of 375,000. Pamlicos acquisition cost of the securities is 385,000. Ignoring income taxes, what amount should Pamlico report as a gain from the debt restructuring on its 2020 income statement? a. 65,000 b. 75,000 c. 140,000 d. 150,000arrow_forward
- Problem 13-47 (LO 13-3) Jackson invested $190,000 in a passive activity five years ago. On January 1, 2018, his at-risk amount in the activity was $45,000. His share of the income and losses in the activity were $52,000 loss in 2018, $20,000 loss in 2019, and $80,000 gain in 2020. Required: How much can Jackson deduct in 2018 and 2019?arrow_forwardnEED IN 10 MINUTES 9. On January 1, 20x1, an entity purchased marketable equity securities for P2,500,000. The entity paid commission and taxes of P190,000. The equity securities do not qualify as financial asset held for trading. The entity made irrevocable election to present unrealized gain and loss in other comprehensive income. The securities have a market value of P2,600,000, and P2,750,000 on December 31, 20x1 and December 31, 20x2. On July 1, 2022, half of the securities are sold for P1,400,000. On July 1, 2022, the net increase/ decrease in retained earnings account is (sample answer: 10,500 increase or 10,500 decrease)arrow_forwardProblem 13NOREEN INC, a truck dealer, sells a truck on January 1, 2019, to MENDOZA INC for P3,000,000. NOREEN agrees to repurchase the truck on December 31, 2020 for P3,630,000. How much should NOREEN INC record interest and retirement of its liability to MENDOZAINC on December 31, 2020?None C. 330,000; 3,630,000 300,000; 3,600,000 D. 630,000; 3,630,000arrow_forward
- 3. Determine the implication of the following independent cases to the December 31, 2020financial statements as per PAS 37, on Provisions, Contingent Liabilities, and ContingentAssets.Case 1On December 5, 2020, an employee filed a P3,000,000 lawsuit against Lance Company fordamages suffered when one of the company’s equipment malfunctioned in August, 2020.In your inquiry of the company’s legal counsel, the legal counsel expects the company willlose the lawsuit and estimates the losses to be between P500,000 and P1,500,000. Theemployee has offered to settle the lawsuit out of court for P1,200,000, but Lance Companywill not agree to the settlement.Case 2Lance Company has guaranteed a loan of P2,000,000 of one of its key officers from a bankin 2020. By the time the financial statements of Lance Company were approved forissuance by its BOD, it is clear that the key officer is in financial difficulties and it is probablethat Lance Company will meet the guarantee.Case 3On December 20, 2020,…arrow_forward12/31/20 Lexus inc recorded an unrealized gain of $5000 related to its trading debt securities original purchased on 12/15/20for $20000. Lexus recognized pretax income of $80000 in 2020 and had a tax rate of 25%. What is the reported amount of trading securities in the financial statements of Lexus on 12/20/20? What is the tax basis of the securities on 12/30/20? What is the deferred tax balance and how would it be reported on the 12/31/20 balance sheet?arrow_forward25 – 26:Judicious Company acquired an equity investment a number of years ago for P 3,000,000 and classified it as fair value through other comprehensive income. On December 31, 2020, the cumulative loss recognized in other comprehensive income was P 400,000 and the carrying amount of the investment was P 2,600,000. On December 31, 2021, the issuer of the equity instrument was in sever financial difficulty and the fair value of the equity investment had fallen to P 1,200,000. 25: What cumulative amount of unrealized loss should be reported as component of other comprehensive income in the statement of changes in equity for the year ended December 31, 2021? 26: prepare journal entry to recognize the decrease in value on December 31, 2021.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial & Managerial AccountingAccountingISBN:9781285866307Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Accounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Accounting (Text Only)
Accounting
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License