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You are in charge of a storage shed business. You recognize sales when the shed is fully installed in the customer s yard. Your company takes 25% deposits on all orders. At the end of your accounting cycle, you have $500,000 in customer deposits.

How do you state and properly account for this activity in your financial statements?

Jaycie Phelps Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2008. The purchase price was $1,200,000 for 50,000 shares. Kulikowski Inc. declared and paid an $0.85 per share cash dividend on June 30 and on December 31, 2009. Kulikowski reported net income of $730,000 for 2009. The fair value of Kulikowski s stock was $27 per share at December 31, 2009.

INSTRUCTIONS:

a) Prepare the journal entries for Jaycie Phelps Inc. for 2008 and 2009, assuming that Phelps CANNOT exercise significant influence over Kulikowski. The securities should be classified as available for sale.

b) Prepare the journal entries for Jaycie Phelps Inc. for 2008 and 2009, assuming that Phelps CAN exercise significant influence over Kulikowski.

c) At what amount is the investment in securities reported on the balance sheet under each of these methods at December 31, 2009? What is the total net income reported in 2009 under each of these methods?

Under what circumstances would a company need to estimate their inventory? What are the differences between using the gross profit and retail inventory method for estimating inventory? Which method of estimation, gross profit or retail inventory, is best? Explain your answer.

What is the fundamental issue surrounding capitalization versus expensing?

Using course materials, the internet, and/or the Library answer the following questions:

What is the fundamental issue surrounding capitalization versus expensing?

Which approach do you believe management would prefer?

Which approach do you believe auditors would prefer? Why?

What is the difference between assurance services, attestation services, and auditing services? What are the economic issues that drive the increased demand for assurance services? What is one assurance engagement and one attestation engagement other than an audit of financial statements? What are the differences between the two?