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Log In Sign Up. Download Free PDF. Cameron Black. Download PDF. A short summary of this paper. Distinguishing accrual-basis revenue from cash receipts AICPA adapted Because the subscription begins with the first issue of , no revenue is recognized in No product or service has yet been provided by Gee Company to its customers. Converting from cash receipts to accrual-basis revenue AICPA adapted We first analyze the activity in the Deferred fee revenue account, which is shown below.
This account represents the liability to provide goods or services in exchange for consideration that has already been received. Once the goods or services are provided, the liability is relieved and the revenue is recognized in the income statement. In total, Dr. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Distinguishing between accrual basis expense and cash disbursement AICPA adapted The amount of premiums paid can be determined from a T-account analysis of prepaid insurance.
Converting from cash to accrual basis We first determine sales revenue by analyzing Accounts receivable. Inventory changes by the difference between cost of goods sold and purchases, and Accounts payable change by the difference between purchases and payments to suppliers. Now that we have determined the amount of inventory purchases, we can analyze the Inventory account. Preparing a multiple-step income statement Hardrock Mining Co. Per share disclosures are required on the face of the income statement for income from operations and items that follow on the income statement.
Income statement presentation Event 1 is a discontinued operation and would appear on the income statement below income from continuing operations. To qualify for discontinued operation treatment, the sold component must represent a strategic shift having a major effect on the operations or results. As the transactions are assumed to be material, this condition for discontinued operations treatment appears to be met.
Event 2 would be reported as an unusual or infrequently occurring item and thus would be included in income from continuing operations. Event 3 is also an unusual or infrequently occurring item, included in income from continuing operations. Event 4 is a change in accounting principle and would require retrospective application i. The current year income statement numbers would be based on the average cost method. The effect of the accounting principle change on the current period income numbers would be disclosed in a note to the financial statements explaining the accounting change.
Event 5 is a change in accounting estimate and thus would be included in income from continuing operations. No special income statement disclosure of this event is required. Depreciation expense in and beyond will be calculated using the new shorter lives. That is, the remaining book values will be depreciated over the remaining lives. Event 6 is an unusual on infrequently occurring item and thus would be included in income from continuing operations.
Event 7 is an unusual or infrequently occurring item and thus would be included in income from continuing operations. GAAP reported Adjust. Determining loss on discontinued operations The results of operations of an entity classified as held for sale are to be reported in discontinued operations in the periods in which they occur net of tax effects.
These amounts will be recognized in as they occur. Determining period vs. They are traceable in that they can be assigned to units produced in the current period, even if that is done by some allocation method.
However, generally costs incurred after the production process is complete are treated as period costs. It is not an inventory cost that is part of Cost of goods sold, but it is still matched to the period of the related revenue.
Therefore, it is generally treated as a period cost. It is not an inventory cost that becomes part of cost of goods sold, but it is matched to the period of the related sale. Note that we determined these amounts differently.
Inventory is a balance sheet account and we are given the amount by which it is misstated at December 31, In the case of accumulated depreciation — also a balance sheet account — we are not given the amount by which the account is misstated. Instead, we are given the amount by which depreciation expense was misstated, and it is the cumulative misstatement in depreciation expense that will be the amount by which accumulated depreciation is misstated.
Hence, we summed the depreciation expense misstatements to derive the accumulated depreciation misstatement. Amounts in the Inventory account at the beginning of a period or added to Inventory during the year are in one of two places at the end of the year.
They have either been expensed through cost of goods sold or are in the ending Inventory account balance. Therefore, for every dollar by which Inventory is too low, cost of goods sold, cumulatively over the life of the firm, has been too high. As a result, cumulative net income and therefore Retained earnings is also too low. Similarly for depreciation, for every dollar by which accumulated depreciation is too high, cumulative depreciation expense has been too high and therefore cumulative net income has been too low.
As a result, Retained earnings is understated and must be increased. Requirement 2: Assuming it is material, the error is corrected by restating all misstated periods retroactively. The financial statements will present prior periods as corrected.
In addition, disclosures will show the financial statement effects of the error correction on each of the restated periods. When an equipment purchase is expensed rather than capitalized, net income is understated, causing Retained earnings to be understated.
And, for every dollar of depreciation that is not taken but should have been, cumulative depreciation expense has been too low and therefore cumulative net income has been too high. As a result, Retained earnings is overstated and must be increased. Correction of errors Requirement 1: a This error affected ending inventory in and beginning inventory in However, if comparative financial statements are issued in , income as presented for and must be restated to correct the error, making appropriate note disclosure of the correction.
The corrected financial statements would include a revision to Cost of goods sold for both and At the beginning of , accumulated depreciation should reflect depreciation for one year Requirement 2: a This error does not affect the financial statements. Requirement 1: Revaluations occur when the company hires and then receives a valuation report from a professional appraiser.
Because these changes in value are unrealized and the company has no current interest in realizing them through a sales transaction, the changes in value are reported in Other Comprehensive Income.
If the company actually sold the property to realize the changes in value, then the changes would appear in Net Income. Requirement 2: The values of land and property, plant, and equipment went up because the company reports the Revaluation changes as increases in Other Comprehensive Income. Requirement 3: U. GAAP does not allow for upward Revaluation of land or property, plant, and equipment.
Therefore there would be no entry observed for Revaluation in Other Comprehensive Income. Financial Reporting and Analysis 7th Ed.
Revenue is recognized in because Frances Corp. Ralph Retailers, Inc. Requirement 2: Ralph Retailers, Inc.
Requirement 3: Ralph Retailers, Inc. Understanding the accounting equation Flaps Inc. Item A: Current liabilities: Current liabilities plus noncurrent liabilities equals total liabilities. Item C: Additional paid-in capital: Common stock plus additional paid-in capital is equal to contributed capital. Item D: Current assets: Current assets plus noncurrent assets equals total assets.
Item I: Noncurrent liabilities: Current liabilities plus noncurrent liabilities is equal to total liabilities. Item J: Current assets: Current assets plus noncurrent assets equals total assets.
Item L: Common stock: Common stock plus additional paid-in capital equals contributed capital. Item M: Noncurrent assets: Current assets plus noncurrent assets equals total assets. Item S: Noncurrent liabilities: Current liabilities plus noncurrent liabilities is equal to total liabilities. Item T: Additional paid-in capital: Common stock plus additional paid-in capital is equal to contributed capital.
Item X: Noncurrent assets: Current assets plus noncurrent assets equals total assets. Understanding the accounting equation Bob Touret, Inc. Items are not necessarily solved in alphabetical order.
Item A: Current assets: Current assets plus noncurrent assets equals total assets. Current liabilities plus noncurrent liabilities is equal to total liabilities. Item H: Current liabilities: Current assets less current liabilities equals working capital.
Item F: Noncurrent assets: Current assets plus noncurrent assets equals total assets. Item L: Current assets: Current assets plus noncurrent assets equals total assets. Item N: Current liabilities: Current assets less current liabilities equals working capital.
Financial Reporting and Analysis 6th Ed. Determining accrual and cash basis revenue AICPA adapted Since the subscription begins with the first issue of , no revenue can be recognized in on an accrual basis. No product or service has been exchanged between Gee Company and its customers. Therefore, no subscription revenue has been earned. Determining unearned subscription revenue AICPA adapted Since subscription revenue is not earned until the customer has received the jellies, unearned subscription revenue should be equal to the amount of subscriptions sold but not yet expired. Determining when to recognize revenue AICPA adapted Generally, sales revenue is recognized at the date of delivery, because that generally is the time at which a sale title has passed has occurred.
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This book employs a true "user" perspective by discussing the contracting and decision implications of accounting, helping readers understand why accounting choices are so important and to whom they matter. Revsine, Collins, Johnson, and Mittelstaedt train their readers to be good financial detectives by enabling them to read, use, and interpret the statements. For use as a core text for undergraduate Juvenile Delinquency courses in departments of Criminology and Sociology. When the use of quantitative tools or formal modeling is indicated, it is only to perform the necessary analysis needed to inform and support a practical business solution. The second title in the "Storyteller's Series", "Ladron De La Mente" is a surreal and supernatural story for high-beginning and low-intermediate students, written in simple Spanish for learners of Spanish.
Download solutions manual for financial reporting and analysis by revsine on tinehandpoons. Current analysis of negative interest and its influence on accounting is the topic of this article. Another approach is to use the textbook in a single course, Financial Reporting and Statement Analysis, which combines the content of the two-course sequence. Schedule 3 presents an outline for this course.
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