Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 22, Problem 7C
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Discuss the financial reporting issues and ethical perspectives raised in the given scenario.
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You are auditing the financial records of a company and are reviewing the depreciation computations. Included in the assets are two buildings and numerous machines in each building. One of the buildings is used to manufacture components of toys and the other for assembly and packing, using the manufactured components as well as others purchased from suppliers. You see that the company uses straight-line depreciation over 40 years for the buildings and 20 years for the machinery. You decide to ask the CFO about these calculations, and he replies, “We use 40 years for the buildings because it is close to the 39 we use for tax. And our best guess is that we will replace the machines twice while we use the building. And the method is easy to use and most companies use it, don’t they? Or have things changed that much since I was in college?” You feel as if you have annoyed the CFO with your questions, so you decide to leave. As you walk back to your office, you recall from earlier in the…
You are auditing the financial records of a company and are reviewing the depreciation computations. Included in the assets are two buildings and numerous machines in each building. One of the buildings is used to manufacture components of toys and the other for assembly and packing, using the manufactured components as well as others purchased from suppliers. You see that the company uses straight-line depreciation over 40 years for the buildings and 20 years for the machinery. You decide to ask the CFO about these calculations, and he replies, “We use 40 years for the buildings because it is close to the 39 we use for tax. And our best guess is that we will replace the machines twice while we use the building. And the method is easy to use and most companies use it, don’t they? Or have things changed that much since I was in college?” You feel as if you have annoyed the CFO with your questions, so you decide to leave. As you walk back to your office, you recall from earlier in the…
You are auditing the financial records of a company, and you are aware that it has grown quickly in the last few years by acquiring other companies. You look up the disclosure in last year’s annual report which states, “The company amortizes its intangibles over periods ranging from 3 to 15 years.” As you review the company’s records, you find that the company made an acquisition of a “high-tech” company 3 years ago and has not recognized any impairment on the related goodwill. In the last 6 years, the company has made five other acquisitions and has not recognized any impairment related to them. Included in the acquisitions are several patents that are amortized over 9 years and some intangibles with indefinite lives.
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From financial reporting and ethical perspectives, discuss the issues raised by this situation.
Chapter 22 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 22 - Prob. 1GICh. 22 - Prob. 2GICh. 22 - Prob. 3GICh. 22 - What steps are necessary to apply the...Ch. 22 - Prob. 5GICh. 22 - Prob. 6GICh. 22 - Prob. 7GICh. 22 - Prob. 8GICh. 22 - Define a change in estimate. What is the proper...Ch. 22 - Prob. 10GI
Ch. 22 - How is a change in depreciation method accounted...Ch. 22 - Describe a change in a reporting entity. How does...Ch. 22 - Prob. 13GICh. 22 - Prob. 14GICh. 22 - Prob. 15GICh. 22 - Prob. 16GICh. 22 - Prob. 17GICh. 22 - Prob. 18GICh. 22 - Prob. 19GICh. 22 - Prob. 20GICh. 22 - The cumulative effect of an accounting change...Ch. 22 - When a change in accounting principle is made...Ch. 22 - Prob. 3MCCh. 22 - A change in the expected service life of an asset...Ch. 22 - During 2019, White Company determined that...Ch. 22 - Generally, how should a change in accounting...Ch. 22 - On January 2, 2017, Garr Company acquired...Ch. 22 - A company has included in its consolidated...Ch. 22 - Shannon Corporation began operations on January 1,...Ch. 22 - Shannon Corporation began operations on January 1,...Ch. 22 - Prob. 1RECh. 22 - Heller Company began operations in 2019 and used...Ch. 22 - Refer to RE22-2. Assume the pretax cumulative...Ch. 22 - Refer to RE22-2. Assume Heller Company had sales...Ch. 22 - Bloom Company had beginning unadjusted retained...Ch. 22 - Suppose that Blake Companys total pretax...Ch. 22 - Bliss Company owns an asset with an estimated life...Ch. 22 - At the end of 2019, Framber Company received 8,000...Ch. 22 - At the end of 2019, Cortex Company failed to...Ch. 22 - At the end of 2019, Jayrad Company paid 6,000 for...Ch. 22 - At the end of 2019, Manny Company recorded its...Ch. 22 - Abrat Company failed to accrue an allowance for...Ch. 22 - The following are independent events: a. Changed...Ch. 22 - Prob. 2ECh. 22 - The following are independent events: a. A...Ch. 22 - Change in Inventory Cost Flow Assumption At the...Ch. 22 - Fava Company began operations in 2018 and used the...Ch. 22 - Berg Company began operations on January 1, 2019,...Ch. 22 - Prob. 7ECh. 22 - In 2020, Frost Company, which began operations in...Ch. 22 - Gundrum Company purchased equipment on January 1,...Ch. 22 - Prob. 10ECh. 22 - On January 1, 2014, Klinefelter Company purchased...Ch. 22 - The following are independent errors made by a...Ch. 22 - The following are independent errors made by a...Ch. 22 - Refer to the information in E22-13. Required:...Ch. 22 - The following are independent errors: a. In...Ch. 22 - Dudley Company failed to recognize the following...Ch. 22 - Prob. 1PCh. 22 - Prob. 2PCh. 22 - Koopman Company began operations on January 1,...Ch. 22 - Schmidt Company began operations on January 1,...Ch. 22 - Prob. 5PCh. 22 - Kraft Manufacturing Company manufactures two...Ch. 22 - Jackson Company has decided to issue common stock...Ch. 22 - At the beginning of 2020, Holden Companys...Ch. 22 - At the end of 2020, while auditing Sandlin...Ch. 22 - At the beginning of 2020, Tanham Company...Ch. 22 - A review of Anderson Corporations books indicates...Ch. 22 - Prob. 12PCh. 22 - Gray Companys financial statements showed income...Ch. 22 - Prob. 14PCh. 22 - There are three types of accounting changes:...Ch. 22 - Prob. 2CCh. 22 - Berkeley Company, a manufacturer of many different...Ch. 22 - When the FASB issues a new generally accepted...Ch. 22 - It is important in accounting theory to be able to...Ch. 22 - Prob. 6CCh. 22 - Prob. 7CCh. 22 - Prob. 8CCh. 22 - Prob. 9CCh. 22 - Sometimes a business entity may change its method...
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