Financial Accounting
3rd Edition
ISBN: 9780078025549
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 2, Problem 2.5APE
To determine
To Discuss: The issue.
To determine
To Identify: The parties affected.
To determine
The factors that Person L should consider in making his decision.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Ethics and the Manager
M. K. Gallant is president of Kranbrack Corporation, a company whose stock is traded on a national exchange. In a meeting with investment analysts at the beginning of the year, Gallant had predicted that the company’s earnings would grow by 20% this year. Unfortunately, sales have been less than expected for the year, and Gallant concluded within two weeks of the end of the fiscal year that it would be impossible to report an increase in earnings as large as predicted unless some drastic action was taken. Accordingly, Gallant has ordered that wherever possible, expenditures should be postponed to the new year—including canceling or postponing orders with suppliers, delaying planned maintenance and training, and cutting back on end-of-year advertising and travel. Additionally, Gallant ordered the company’s controller to carefully scrutinize all costs that are currently classified as period costs and reclassify as many as possible as product costs that are…
Professional ethics and end-of-year actions. Linda Butler is the new division controller of the snack-foods division of Daniel Foods. Daniel Foods has reported a minimum 15% growth in annual earnings for each of the past 5 years. The snack-foods division has reported annual earnings growth of more than 20% each year in this same period. During the current year, the economy went into a recession. The corporate controller estimates a 10% annual earnings growth rate for Daniel Foods this year. One month before the December 31 fiscal year-end of the current year, Butler estimates the snack-foods division will report an annual earnings growth of only 8%. Rex Ray, the snack-foods division president, is not happy, but he notes that the “end-of-year actions” still need to be taken. Butler makes some inquiries and is able to compile the following list of end-of-year actions that were more or less accepted by the previous division controller:
Deferring December’s routine monthly maintenance on…
Please help with this question.
Chapter 2 Solutions
Financial Accounting
Ch. 2 - Prob. 1RQCh. 2 - 2.List the steps we use to measure external...Ch. 2 - 3.Each external transaction will have a dual...Ch. 2 - 4.Describe the impact of each of these external...Ch. 2 - Prob. 5RQCh. 2 - Prob. 6RQCh. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 9RQCh. 2 - 10.Suzanne knows that an increase to an expense...
Ch. 2 - 11.What is a journal? What is a journal entry?Ch. 2 - Prob. 12RQCh. 2 - Prob. 13RQCh. 2 - Prob. 14RQCh. 2 - 15.Describe the events that correspond to the...Ch. 2 - 16.What does a T-account represent? What is the...Ch. 2 - Prob. 17RQCh. 2 - Prob. 18RQCh. 2 - Prob. 19RQCh. 2 - 20.If total debits equal total credits in the...Ch. 2 - List steps in the measurement process (LO21) Below...Ch. 2 - Balance the accounting equation (LO22) Using the...Ch. 2 - Suppose a local company has the following balance...Ch. 2 - Analyze the Impact of transactions on the...Ch. 2 - Understand the effect of debits and credits on...Ch. 2 - Prob. 2.6BECh. 2 - Record transactions (LO24) The following...Ch. 2 - Prob. 2.8BECh. 2 - Analyze T-accounts (LO25) Consider the following...Ch. 2 - Prob. 2.10BECh. 2 - Prob. 2.11BECh. 2 - Correct a trial balance (LO26) Your study partner...Ch. 2 - Listed below are several terms and phrases...Ch. 2 - Prob. 2.2ECh. 2 - Analyze the Impact of transactions on the...Ch. 2 - Analyze the Impact of transactions on the...Ch. 2 - Understand the components of retained earnings...Ch. 2 - Indicate the debit or credit balance of accounts...Ch. 2 - Associate debits and credits with external...Ch. 2 - Prob. 2.8ECh. 2 - Identify transactions (LO24) Below are recorded...Ch. 2 - Prob. 2.10ECh. 2 - Record transactions (LO24) Bearcat Construction...Ch. 2 - Correct recorded transactions (LO24) Below are...Ch. 2 - Correct recorded transactions (LO24) Below are...Ch. 2 - Prob. 2.14ECh. 2 - Post transactions to T-accounts (LO25) Consider...Ch. 2 - Identify transaction (LO25) Below are T-accounts....Ch. 2 - Prob. 2.17ECh. 2 - Prepare o trial balance (LO26) Below is the...Ch. 2 - Prob. 2.19ECh. 2 - Prob. 2.20ECh. 2 - Below is a list of activities for Jayhawk...Ch. 2 - Prob. 2.2APCh. 2 - Prob. 2.3APCh. 2 - Prob. 2.4APCh. 2 - Refer to the transactions described in P24A. Keep...Ch. 2 - Prob. 2.6APCh. 2 - Prob. 2.7APCh. 2 - Prob. 2.8APCh. 2 - Prob. 2.9APCh. 2 - Analyze the impact of transactions on the...Ch. 2 - Prob. 2.2BPCh. 2 - Prob. 2.3BPCh. 2 - Record transactions (LO24) Flip Side of P25B Eli...Ch. 2 - Prob. 2.5BPCh. 2 - Prob. 2.6BPCh. 2 - Prob. 2.7BPCh. 2 - Prob. 2.8BPCh. 2 - Prob. 2.9BPCh. 2 - Prob. 2.1APCPCh. 2 - Prob. 2.2APFACh. 2 - Prob. 2.3APFACh. 2 - Prob. 2.4APCACh. 2 - Prob. 2.5APECh. 2 - Prob. 2.6APIRCh. 2 - Prob. 2.7APWC
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
- Malone Industries has been in business for five years and has been very successful. In the past year, it expanded operations by buying Hot Metal Manufacturing for a price greater than the value of the net assets purchased. In the past year, the customer base has expanded much more than expected, and the companys owners want to increase the goodwill account. Your CPA firm has been hired to help Malone prepare year-end financial statements, and your boss has asked you to talk to Malones managers about goodwill and whether an adjustment can be made to the goodwill account. How do you respond to the owners and managers?arrow_forwardTerry House, the controller for MicroTech Software Company, is responsible for preparing the company’s financial statements. He learns that sales for the first quarter of the year have dropped so dramatically that the company is in danger of bankruptcy. As a result, he applies for an accounting position with another software company that competes with MicroTech. During his job interview, Terry is asked why he wants to leave MicroTech. He replies truthfully, “The company’s sales are down another 10% this quarter. I fear they will go out of business.” At that time, MicroTech had not released its sales results to the public. Discuss the ethics of this situation.arrow_forwardLinda Butler is the new division controller of the snack-foods division of Daniel Foods. Daniel Foods has reported a minimum 15% growth in annual earnings for each of the past 5 years. The snack-foods division has reported annual earnings growth of more than 20% each year in this same period. During the current year, the economy went into a recession. The corporate controller estimates a 10% annual earnings growth rate for Daniel Foods this year. One month before the December 31 fiscal year-end of the current year, Butler estimates the snack-foods division will report an annual earnings growth of only 8%. Rex Ray, the snack-foods division president, is not happy, but he notes that the "end-of-year actions" still need to be taken. Butler makes some inquiries and is able to compile the following list of end-of-year actions that were more or less accepted by the previous division controller: (Click the icon to view the end-of-year actions.) Read the requirements. Determine whether each of…arrow_forward
- James Wright is the chief financial officer (CFO) for The Butcher Block, a major steakhouse restaurant chain. As CFO, James has the final responsibility for all aspects of financial reporting. James tells investors that The Butcher Block should post earnings of at least $1 million. In examining the preliminary year-end numbers, James notices that earnings are coming in at $950,000. He also is aware that The Butcher Block has been depreciating most of its restaurant equipment over a five-year useful life. He proposes to change the estimated useful life for a subset of the equipment to a useful life of seven, rather than five, years. By depreciating over a longer useful life, depreciation expense will be lower in the current year, increasing earnings to just over $1 million. It looks like The Butcher Block is going to exceed earnings of $1 million after all. Do you think James Wright’s change in the depreciable life of assets is ethical? What concerns might you have?arrow_forwardLinda Butler is the new division controller of thesnack-foods division of Daniel Foods. Daniel Foods has reported a minimum 15% growth in annual earningsfor each of the past 5 years. The snack-foods division has reported annual earnings growth of more than20% each year in this same period. During the current year, the economy went into a recession. The corporatecontroller estimates a 10% annual earnings growth rate for Daniel Foods this year. One month beforethe December 31 fiscal year-end of the current year, Butler estimates the snack-foods division will report anannual earnings growth of only 8%. Rex Ray, the snack-foods division president, is not happy, but he notesthat the “end-of-year actions” still need to be taken.Butler makes some inquiries and is able to compile the following list of end-of-year actions that weremore or less accepted by the previous division controller:a. Deferring December’s routine monthly maintenance on packaging equipment by an independent contractoruntil…arrow_forwardLinda Butler is the new division controller of thesnack-foods division of Daniel Foods. Daniel Foods has reported a minimum 15% growth in annual earningsfor each of the past 5 years. The snack-foods division has reported annual earnings growth of more than20% each year in this same period. During the current year, the economy went into a recession. The corporatecontroller estimates a 10% annual earnings growth rate for Daniel Foods this year. One month beforethe December 31 fiscal year-end of the current year, Butler estimates the snack-foods division will report anannual earnings growth of only 8%. Rex Ray, the snack-foods division president, is not happy, but he notesthat the “end-of-year actions” still need to be taken.Butler makes some inquiries and is able to compile the following list of end-of-year actions that weremore or less accepted by the previous division controller:a. Deferring December’s routine monthly maintenance on packaging equipment by an independent contractoruntil…arrow_forward
- You are working as an accountant for a local business. The CEO says that business is going great this year in spite of the covid pandemic. The CEO states that business is so great that they can forgo including an allowance account for their accounts receivables on the company balance sheet. The CEO states that with no allowance account, the company net income will increase which means more in year-end bonuses! You on the other hand believe from all the accounting classes you have completed believe that an allowance account is mandatory when a company has accounts receivables. Please draft an accounting issues memo and an email to the CEO answering the following: 1. Use the FASB codification to determine whether GAAP requires an allowance account for accounts receivable. Please use specific Codification references to support your answer. 2. Please draft example journal entries and show how this is done if required. Also show how the accounts receivable would be shown in the…arrow_forwardGRB Ltd has several product lines with a manager in charge of each product line. The managers are paid a bonus based on the net income generated by their product line. Rubica (the CEO of GRB Ltd) was going through the financial reports of the 2nd quarter of 2021 to analyse the performance of the product lines. For 'Sweets' one of the largest product lines of GRB Ltd, Rubica noted that while the sales declined from $800,000 in quarter 1 to $600,000 in quarter 2, the product line manager of Sweets received a bonus larger than the 1st quarter. The manager of Sweets division was eligible for a higher bonus due to an operating profit increase from $90,000 in the 1st quarter to $120,000 in the 2nd quarter. Rubica wondered how the product line manager was entitled to a higher bonus with a decline in sales. Rubica also wants to know how net income increased with a decline in sales. Rubica found the following data from the financial reports of 'Sweets': Particulars Quarter 2 Quarter 1 Units…arrow_forwardApplying ethical standards, management accountability Ava Borzi is the new controller for Halo Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, Jeremy Busch, the company president, asks Borzi how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 9% for the first time in the company’s five-year history. Busch explains that financial analysts have again predicted a 9% earnings growth for the company and that he does not intend to disappoint them. He suggests that Borzi talks to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies: Persuade suppliers to postpone billing $18,000 in invoices until January 1. Record as sales $120,000 in certain software awaiting sale that is held in a public warehouse. Delay the year-end closing a few days into January of the next year so that some of…arrow_forward
- Applying ethical standards, management accountability Ava Borzi is the new controller for Halo Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, Jeremy Busch, the company president, asks Borzi how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 9% for the first time in the company’s five-year history. Busch explains that financial analysts have again predicted a 9% earnings growth for the company and that he does not intend to disappoint them. He suggests that Borzi talk to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies: a. Persuade suppliers to postpone billing $18,000 in invoices until January 1. b. Record as sales $120,000 in certain software awaiting sale that is held in a public warehouse. c. Delay the year-end closing a few days into January of the next year so that…arrow_forwardEdward L. Vincent is CFO of Energy Resources, Inc. The company specializes in the exploration and development of natural gas. It's near year-end, and Edward is feeling terrific. Natural gas prices have risen throughout the year, and Energy Resources is set to report record-breaking performance that will greatly exceed analysts' expectations. However, during an executive meeting this morning, management agreed to "tone down" profits due to concerns that reporting excess profits could encourage additional government regulations in the industry, hindering future profitability. Edward decides to adjust the estimated service life of development equipment from 10 years to 6 years. He also plans to adjust estimated residual values on development equipment to zero as it is nearly impossible to accurately estimate residual values on equipment like this anyway. Required: 1.Explain how the adjustment of estimated service life from 10 years to 6 years will affect depreciation…arrow_forwardShepherd Ltd is about to enter a long-term contract to be a principal supplier for a successful new business, Bowdry Ltd. Bowdry has recently increased its capital base by significantly increasing its loan capital. While the directors of Shepherd are impressed by the rapid increase in profitability of Bowdry, they are concerned that their customer has only been in business for about five years. In the last year, the year ending 30 June 2021, the economy in which both companies operate has experienced a recession or downturn for the first time in 9 years. Question 3 Shepherd Ltd now wants to analyse Bowdry's solvency and working capital management as part of its assessment to see whether the company is a good long-term credit risk. All sales and purchases are on 60 days' credit allowed. Below are extracts from the latest financial statements of Bowdry Ltd for the past two financial years. Bowdry Ltd Extracts from the statement of financial 2021 2020 position at 30 June £ £ Current…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Ethical Decision Making in Management; Author: GreggU;https://www.youtube.com/watch?v=6UrBO-cL27Q;License: Standard Youtube License