ADVANCED FINANCIAL ACCOUNTING-ACCESS
12th Edition
ISBN: 9781260518740
Author: Christensen
Publisher: MCG
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Chapter 2, Problem 2.5C
To determine
Concept Introduction: Business Combination is a process where two entities merge to take the benefit of synergies for a common objective.
To Draft: A memo to the chief accountant with the findings.
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Big Screen Scripts is a service-type enterprise in the entertainment field, and its manager, William Pippin, has only a limited knowledge of accounting. Pippin prepared the following balance sheet, which, although arranged satisfactorily, contains certain errors with respect to such concepts as the business entity and asset valuation. Pippin owns all of the corporation’s outstanding stock.
In discussion with Pippin and by inspection of the accounting records, you discover the following facts.
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Big Screen Scripts is a service-type enterprise in the entertainment field, and its manager, William Pippin, has only a limited knowledge of accounting. Pippin prepared the following balance sheet, which, although arranged satisfactorily, contains certain errors with respect to such concepts as the business entity and asset valuation. Pippin owns all of the corporation’s outstanding stock.
In discussion with Pippin and by inspection of the accounting records, you discover the following facts.
The amount of cash, $5,150, includes $3,400 in the company’s bank account, $540 on hand in the company’s safe, and $1,210 in Pippin’s personal savings account.
One of the notes receivable in the amount of $500 is an IOU that Pippin received in a poker game several years ago. The IOU is signed by “B.K.,” who Pippin met at the game but has not heard from since.
Office furniture includes $2,900 for a Persian rug for the office purchased on November 20. The total cost of the rug was $9,400. The…
Problem 1
For each situation, indicate whether it is indicative of poor corporate
governance. Explain the reasoning for your assessment.
a.
The company is in the financial services sector and has a large number of
consumer loans, including mortgages, outstanding.
b. The CEO's and CFO's compensation is based on three components: (a)
assets and profits, and (c)
base salary, (b) bonus based on growth
significant stock options.
c. The audit committee meets semiannually. It is chaired by a retired CFO
who knows the company well because she had served as the CFO of a
division of the firm. The other two members are local community
members - one is the president of the Chamber of Commerce and the
other is a retired executive from a successful local manufacturing firm.
d. The company has an internal auditor who reports directly to the CFO and
makes an annual report to the audit committee.
e.
The CEO is a dominating personality - not unusual in this environment.
He has been on the job for six…
Chapter 2 Solutions
ADVANCED FINANCIAL ACCOUNTING-ACCESS
Ch. 2 - What types of investments in common stock normally...Ch. 2 - Prob. 2.2QCh. 2 - Describe an investor’s treatment of an investment...Ch. 2 - How is the receipt of a dividend recorded under...Ch. 2 - How does carrying securities at fair value...Ch. 2 - Prob. 2.6QCh. 2 - Prob. 2.7QCh. 2 - Prob. 2.8QCh. 2 - Prob. 2.9QCh. 2 - Prob. 2.10Q
Ch. 2 - How are a subsidiary’s dividend declarations...Ch. 2 - Prob. 2.12QCh. 2 - Give a definition of consolidated retained...Ch. 2 - Prob. 2.14QCh. 2 - Prob. 2.15QCh. 2 - Prob. 2.16AQCh. 2 - When is equity method reporting considered...Ch. 2 - How does the fully adjusted equity method differ...Ch. 2 - What is the modified equity method? When might a...Ch. 2 - Choice of Accounting Method Slanted Building...Ch. 2 - Prob. 2.2CCh. 2 - Prob. 2.3CCh. 2 - Prob. 2.4CCh. 2 - Prob. 2.5CCh. 2 - Prob. 2.6CCh. 2 - Prob. 2.1.1ECh. 2 - Multiple-Choice Questions on Accounting for Equity...Ch. 2 - Prob. 2.1.3ECh. 2 - Prob. 2.1.4ECh. 2 - Multiple-Choice Questions on Intercorporate...Ch. 2 - Prob. 2.2.2ECh. 2 - Prob. 2.3.1ECh. 2 - Prob. 2.3.2ECh. 2 - Prob. 2.3.3ECh. 2 - Prob. 2.4ECh. 2 - Acquisition Price Phillips Company bought 40...Ch. 2 - Prob. 2.6ECh. 2 - Prob. 2.7ECh. 2 - Carrying an investment at Fair Value versus Equity...Ch. 2 - Carrying an Investment at Fair Value versus Equity...Ch. 2 - Prob. 2.10ECh. 2 - Prob. 2.11ECh. 2 - Prob. 2.12ECh. 2 - Prob. 2.13ECh. 2 - Income Reporting Grandview Company purchased 40...Ch. 2 - Investee with Preferred Stock Outstanding Reden...Ch. 2 - Prob. 2.16AECh. 2 - Prob. 2.17AECh. 2 - Changes ¡n the Number of Shares Held Idle...Ch. 2 - Investments Carried at Fair Value and Equity...Ch. 2 - Carried at Fair Value Journal Entries Marlow...Ch. 2 - Consolidated Worksheet at End of the First Year of...Ch. 2 - Consolidated Worksheet at End of the Second Year...Ch. 2 - Prob. 2.23PCh. 2 - Prob. 2.24PCh. 2 - Prob. 2.25APCh. 2 - Equity-Method income Statement Wealthy...Ch. 2 - Prob. 2.27BPCh. 2 - Prob. 2.28BP
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