Free Essay

Intermediate Accounting I Paper

In: Business and Management

Submitted By jrenea60
Words 770
Pages 4
Accounting Policies for Reporting Income
Strayer University
Intermediate Accounting 1 – ACC 303
February 6, 2012
Professor Elizabeth Hewitt

Accounting Policies for Reporting Income

Examining accounting standards and policies information from various sources such as FASB Accounting Standards Codification (Financial Accounting Standards Board), AICPA (American Institute of CPA’s) and FASAB (Federal Accounting Standards Advisory Board) I can give a overview of how these items are defined in various resources.
The FASB Accounting Standards Codification is the single source of authoritative nongovernmental U.S. generally accepted accounting principles. Looking at the online FASB site it offers the most GAAP generally accepted accounting principles. The site is set up so that you can access the topics you’re looking for in a sort of drill down menu type of search. The site is somewhat user friendly in that it offers a tutorial on how to use the site. It also offers several useful functions such as cross-referencing and join-sections.
The AICPA sets ethical standards for the accounting profession and U.S. auditing standards for audits of private companies, non-profit organizations and federal, state and local governments. This resource offers tabs with drop down menus; one of which is marked Research under this tab you can find Standards that will take you to the Standard page offering a list of topics on Professional Accountant Standards such as ‘Audit and Attest Standards’, Code of Professional Conduct, Peer Review Standards, and Tax Standards. By clicking on any of these main topics you can access the statement or information you are seeking. This was by far the easiest to understand because of the commonly used format and the language. The AICPA
The mission of the FASAB is to develop accounting standards after considering the financial and budgetary information needs of congressional oversight groups, executive agencies, and the needs of other users of Federal financial information. The FASAB site is basically the handbook set up on a website it also has any updates to standards listed as well as an archived copy of the handbook I suppose for historical reference. The handbook contains the table of contents so it is easy to see what topics you are searching for and follow it to the Statement you need to reference. This too is easy to access but I would reiterate that mostly government accountants would probably use this resource. Using the FASB Accounting Standards Codification #220-10-10 states, “The purpose of reporting comprehensive income is to report a measure of all changes in equity of an entity that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners.” 10-2 If used with related disclosures and other information in the financial statements, the information provided by reporting comprehensive income should assist investors, creditors, and others in assessing an entity's activities and the timing and magnitude of an entity's future cash flows. FASB also provided 15-3: The guidance in this Topic does not apply to the following entities:
a. An entity that has no items of other comprehensive income in any period presented. In such cases, the entity is not required to report comprehensive income. See paragraphs 220-10-55-1 through 55-2 for items that are required to be reported as other comprehensive income.
b. A not-for-profit entity (NFP) that is required to follow the provisions of Subtopic 958-205.
As you can see the FASB does give the user an in-depth Statement on a topic with suggestions to follow through to other relevance facts on the subject. Our textbook defines comprehensive income as all changes in equity during a period except those resulting from investments by owners and distributions to owners. An example of comprehensive income would include unrealized net loss from marking investments to market value, increases or decreases in the value of foreign currency, adjustments resulting from changes in the value of pension plan assets needed to fund pension plan liabilities.
Most companies include revenues, expenses, gains and losses during the accounting period in net income. However, there are items that bypass regular classifications and are included in a measure called comprehensive income. Unrealized gains and losses on available-for-sale securities is one example of Comprehensive Income. These gains and losses are excluded from net income, due to the volatility because of fluctuation in fair value.

References
Financial Accounting Standards Board Accounting Standards Codification (2012) https://asc.fasb.org American Institute of Certified Public Accountants (2012) http://www.aicpa.org Federal Accounting Standards Advisory Board (2011) http://www.fasab.gov/accounting-standards/authoritative-source-of-gaap

Similar Documents

Premium Essay

Intermediate Accounting

...Decreasing current net income. d 31. Single-step income statement advantage. b 32. Single-step income statement. d 33. Methods of preparing income statements. a 34. Income statement presentation. b 35. Event with no income statement effect. c S36. Net income effect. Multiple Choice—Conceptual (cont.) Answer No. Description b P37. Selling expenses. b P38. Reporting merchandise inventory. a 39. Definition of an extraordinary item. d 40. Classification of an extraordinary item. d 41. Identification of an extraordinary item. a 42. Identification of an extraordinary item. d 43. Identification of an extraordinary item. a 44. Presentation of unusual or infrequent items. d 45. Identification of a change in accounting principle. d 46. Classification of extraordinary items. c 47. EPS disclosures on income statement. c 48. Reporting discontinued operations. c S49. Reporting unusual or infrequent items. d 50. Intraperiod tax allocation. d 51. Purpose of intraperiod tax allocation. c 52. Intraperiod tax allocation. d 53. Reporting items net of tax. d 54. Reporting items at gross amount. c 55. Earnings per share disclosure. d 56. EPS disclosures on income statement. d 57. EPS disclosures on income statement. c S58. Earnings per share disclosure. d P59. Reporting correction of an error. c 60. Retained earnings statement. d 61. Prior period adjustment. d 62. Identification of a prior period adjustment. b 63. Reporting......

Words: 4342 - Pages: 18

Premium Essay

Intermediate Accounting

...Check Figures to accompany INTERMEDIATE ACCOUNTING Seventh Edition Spiceland, Sepe and Nelson Chapter 1 BE 1-1 Net income, $208,000 BE 1-2 1. Liabilities BE 1-3 2. The economic entity assumption BE 1-4 1.The matching principle BE 1-5 3. Disagree, matching principle E1-1 Req. 1, Net operating cash flow, Yr. 2, $50,000 Req. 2, Net income, Year 1, $25,000 E1-2 Req. 1, Net income, Year 2, $190,000 E1-5 3. Auditors E1-6 5. Comprehensive income E1-7 8. f E1-8 4. Timeliness E1-9 7. b E1-10 6. The going concern assumption E1-11 2. The periodicity assumption E1-12 1. Disagree, Monetary unit assumption E1-13 4. Agree, Matching principle E1-14 3. g. Matching principle Chapter 2 BE 2-1 4. –180,000, accounts receivable BE 2-2 2. Dr. Salaries expense, $40,000 BE 2-3 Accounts payable balance, $42,000 BE 2-4 2. Dr. Note receivable, $10,000 BE 2-5 1. Dr. Insurance expense, $3,000 BE 2-7 2. Cr. Prepaid advertising, $1,000 BE 2-9 Total operating expenses, $107,000 BE 2-10 Total assets, $91,000 BE 2-11 Cr. Retained earnings, $35,000 BE 2-12 Net income, $143,000 E2-1 6. + $6,000, Prepaid insurance E2-2 3. Dr. Inventory, $90,000 E2-3 Total debits, $471,000 E2-4 2. Cr. Cash, $40,000 E2-5 6. b E2-6 9. I E2-8 4. Dr. Interest expense, $4,000 E2-9 6. Cr. Supplies, $5,250 E2-11 Net income, $101,000 E2-12 Cr. Retained earnings, $177,000 E2-13 Cr. Retained earnings, $66,000 E2-14 Req. 3, Accrued wages,......

Words: 7295 - Pages: 30

Free Essay

Intermediate Accounting

...to possible gain (gain contingency) or loss (loss contingency) to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.” Liabilities are contingent on one or more future events to confirm the potential loss, payee, date payable or even existence of the loss. FASB identifies three categories to define the likelihood of losses that include probable, reasonably possible and remote. Liabilities that are probable and can be reasonably estimated should be accrued including pending litigation. The company should disclose the information that it has about the case including the probability of a favorable outcome and similarities to other cases. Kieso, Weygandt, & Warfield. (2012). Intermediate Accounting. 14th ed. Hoboken, NJ: John, Wiley & Sons. (a) Warranty costs are expensed as incurred under the cash-basis method. The costs are charged in the period in which the seller or manufacturer complies with the warranty. No liability is recorded for the future warranty costs and charges are not recorded at the time of sale. This method is normally used when the costs are immaterial or the warranty covers a short period. The cash-basis must be used when a liability is not probable or cannot be reasonably estimated. However, if it is probable that a warranty will occur and the costs can be reasonably estimated, the accrual method must be used. The costs are charged as an expense in the year of the sale. The accrual......

Words: 298 - Pages: 2

Premium Essay

Intermediate Accounting

...(i) As the plant was acquired for the company’s own use, and thus treat as non-current asset for the company. The plant is a newly addition of non-current assets for Creative. The cost of the newly acquired plant should be recorded in the book at the date of acquisition. [interest expense?] Moreover, the plant was financed by an 8% loan, Depreciation for the year, amounting $500,000 have to be recorded, debiting the Profit and loss account and crediting the Accumulated depreciation account, the amount is calculated on straight line basis, i.e. cost over its useful years, 10 years. For the year ended 2012, the plant have to be carried at cost less accumulated depreciation. As on 31 December, Creative recorded a net book value of Non-current Asset of $4,500,000 under the category of Plant and Machinery. 1/1/12 Addition: Plant $5,000,000 10years Financed by $5,000,000 8%loan 31/12/12 Depreciation: $500,000 NBV=$4,500,000 Journal: 1/1 Dr Plant and equipment $5,000,000 Cr 8% loan $5,000,000 31/12 Dr P&L- Depreciation $500,000 Cr accumulated depreciation $500,000 Dr P&L – Interest expense Cr Interest payable (ii) 1/1/12 Equipment Production unit $10,000,000 20 years Depre: $500,000 Electrical systems $3,000,000 10 years Depre: $300,000 Sub-assemblies $2,000,000 4 years Depre: $500,000 1/1 Dr Equipment $15,000,000 Cr Bank $15,000,000 31/12 Dr P&L – Depreciation...

Words: 729 - Pages: 3

Premium Essay

Intermediate Accounting Liabilities and Equities

...ACCT 307 Intermediate Accounting 2, Part B Assignment Professor: Allan Bishop Student Name: Darrell Allen Student Number: 810-390-377 Date: April 4th, 2013 1. The two companies that I have chosen are WalMart and Target. They are both retailer industries that sell numerous different items as well as provide services to customers. Particularly Walmart, which offers auto-repairs, eye-glasses, prescription drugs and fast food service (McDonalds). They sell items such as clothing, basic food items (amongst a wide variety of other food items), movies, books, video games and more. 2. A) The “capital” for Target is: Property and equipment: 2011 2012 Land 6,122 5,928 Buildings and improvements 26,837 23,081 Fixtures and equipment 5,141 4,939 Computer hardware and software 2,468 2,533 Construction-in-progress 963 567 Accumulated depreciation ...

Words: 868 - Pages: 4

Premium Essay

Intermediate Accounting

...INTERMEDIATE (FINANCIAL) ACCOUNTING I SUBCLASS KLM CASE ANALYSIS QUESTIONS CASE 1 – REVENUE RECOGNITION AND EARNINGS MANAGEMENT INTERMEDIATE (FINANCIAL) ACCOUNTING I SUBCLASS KLM CASE ANALYSIS QUESTIONS CASE 2 – REVENUE RECOGNITION FOR A CONSTRUCTION PROJECT HKU Technology Inc. (Hereafter, HKU Tech) is a large construction contracting firm that serves a variety of industrial customers that purchase machinery and equipment from HKU Tech. HKU Tech’s business primarily involves the design and manufacture of large, industrial machinery and tooling that is used by its customers in manufacturing parts and components for fighter jets, transport planes, and other aerospace-related machinery and equipment. All of HKU Tech’s construction contracts involve the design, development, and manufacture of machines that are unique and customized to the specifications of its customers. HKU Tech negotiates all its contracts with its customers on either a fixed-price or cost-plus basis. HKU Tech has developed an accounting policy to recognize revenue related to its customized construction contracts, which is outlined as follows: The Company performs under a variety of contracts, some of which provide for reimbursement of cost plus fees, and others that are fixed-price-type contracts. Revenues and fees on these contracts are primarily recognized on a contract-by-contract basis using the percentage-ofcompletion method of accounting, which is most often based on contract costs incurred to date......

Words: 1474 - Pages: 6

Premium Essay

Intermediate Accounting

...FASB Accounting Standards Codification Case This case consists of a series of questions. For each question, your mission is to locate the paragraph in the FASB Accounting Standards Codification (ASC) that answers the question. Please CUT AND PASTE the paragraph from the standards into this document for each question and provide a full reference, including the topic, subtopic, section, and paragraph (e.g. “ASC 605-15-25-1”, or “ASC Master Glossary” for definitions). Submit a hard copy of your answers by Wednesday, October 30th 9:00 am. The FASB Codification database is available at: http://aaahq.org/ascLogin.cfm Student Access Username: AAA51226 Password: KMFpjSW 1.   To gain familiarity with the content and organization of the FASB’s Accounting Standard Codification (ASC), use the general topics presented below and determine where the following accounting terms would be located. Topical Categories:         Section # General Principles ................................... 100 Presentation .............................................. 200 Assets........................................................... 300 Liabilities...................................................... 400 Equity........................................................... 500 Revenue........................................................ 600 Expenses..................................................... 700 Broad Terms............................................... 800 Industry.................

Words: 2093 - Pages: 9

Premium Essay

Intermediate Accounting Ch 4

...What we’ll cover: 1. Income Statement 2. Format of the Income Statement 3. Reporting Irregular Items 4. Special Reporting Issues 1. Income Statement a. Usefulness • Evaluate past performance • Predicting future performance • Help assess the risk or uncertainty of achieving future cash flows b. Limitations • Companies omit items that cannot be measured reliably • Income is affected by the accounting methods employed • Income measurement involves judgment c. Quality of Earnings • Companies have incentives to manage income to meet or beat Wall Street expectations, so that o market price of stock increases and o value of stock options increase. • Quality of earnings is reduced if earnings management results in information that is less useful for predicting future earnings and cash flows. 2. Format of the Income Statement a. Elements of the Income Statement • Revenues – Inflows of assets or settlements of its liabilities that constitute the entity’s ongoing major or central operations. Examples of Revenue Accounts: o Sales o Fee revenue o Interest revenue o Dividend revenue o Rent revenue • Expenses – Outflows or other using-up of assets or incurrences of liabilities that constitute the entity’s ongoing major or central operations.......

Words: 2418 - Pages: 10

Premium Essay

Intermediate Accounting Final

...present their balance sheets? Both companies use a classified report format to present their balance sheets h. How much working capital did each of these companies have at the end of 2007? Speculate as to their rationale for the amount of working capital they maintain. Coca-Cola had working capital of negative $1,120 million. Current Assets – Current Liabilities = Working Capital $12,105 - $13,225 = $-1,120 Coca-Cola increased accounts payable and accrued expenses $1,860 million during 2007, leading to negative working capital. This increase primarily consisted of commercial paper PepsiCo had working capital of $2,398. Current Assets – Current Liabilities = Working Capital $10,151 - $7753 = $2,398 Due to this increase in working capital, PepsiCo was able to meet its short-term debt obligations. The increases in accounts payable were primarily due to capital spending and acquisitions. i. What is the most significant difference in the asset structure of the two companies? What causes this difference? Coca-Cola has a larger amount of total assets, primarily coming from investments that are held with bottling partners and other affiliates of Coca-Cola. j. What were the two companies’ trends in net cash provided by operating activities over the period 2005 to 2007? Cash from operating activities for Coca-Cola is as follows: 2005 - $6,423, 2006 - $5,957, 2007 - $7150 Cash from operating activities fro PepsiCo is as follows: 2005 - $5852, 2006 - $6084, 2007 -......

Words: 2131 - Pages: 9

Premium Essay

Intermediate Accounting

...Company Name: GCL-Poly Energy Holdings Limited Stock Code: 3800 To: Albert From: XXX Date: 28/10/2014 Subject: The accounting requirements for leases BACKGROUND | As per our discussion, I have reviewed the consolidated financial statement of the GCL-Poly Energy Holdings Limited for the last year ended 31 December, 2013. For your reference, I would like to answer your question to facilitate your decision of lending the money as an investment that why the leased assets do should be recorded as the company’s assets under the accounting standard even the assets are not under the name of GCL. As per the financial statements, we can extract the following details: Obligation under finance lease – due within one year $654,197 Obligation under finance lease – due after one year $1,416,322 Explanation of accounting treatments In accordance to the IAS 17: Leases, it defines a finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. This means that even if the titles of the assets are not transferred, if the lessee bears the responsibility to the assets’ risks and rewards such as the repairs and maintenances, depreciation and any related expenses, together with the lease term covering the major useful lives of the assets, the company should reflect the assets under the non-current assets. This is more likely to reflect the true and fair financial......

Words: 952 - Pages: 4

Premium Essay

Intermediate Accounting 2 Midterm

...INTERMEDIATE ACCOUNTING 2 of 3 MIDTERM EXAM Pick 7 problems that you will do. Each problem is worth 14 points. Please put your answer in the space provided, any back up can be attached at the end of the exam as long as it is clearly labeled . Your work can be done by hand as long as it is legible. Select the 7 problems you are completing: 1, 4, 5, 9, 10, 11, 12 Problem 1—Accounts and Notes Payable. Described below are certain transactions of Larson Company for 2010: 1. On May 10, the company purchased goods from Fry Company for $60,000, terms 2/10, n/30. Purchases and accounts payable are recorded at net amounts. The invoice was paid on May 18. 2. On June 1, the company purchased equipment for $90,000 from Raney Company, paying $25,000 in cash and giving a one-year, 10% note for the balance. 3. On September 30, the company discounted at 10% its $150,000, one-year zero-interest-bearing note at First State Bank. Instructions (a) Prepare the journal entries necessary to record the transactions above using appropriate dates. Date | Account Name | Debit | Credit | 05-10 | Purchases | 49,000 | | | Accounts Payable | | 49,000 | | To record purchased goods at net amounts. | | | 05-18 | Accounts Payable | 49,000 | | | Cash | | 49,000 | | To record payment of invoice. | | | 06-01 | Equipment | 90,000 | | | Cash | | 25,000 | | Note Payable | | 65,000 | | To record purchase of equipment. | |...

Words: 1854 - Pages: 8

Premium Essay

Intermediate Accounting Ii

... SCHAUM’S OUTLINE OF THEORY AND PROBLEMS OF INTERMEDIATE ACCOUNTING II Second Edition BARUCH ENGLARD, M.S., M.B.A., CPA Associate Professor of Accounting The College of Staten Island The City University of New York SCHAUM’S OUTLINE SERIES New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto Copyright © 2007, 1992 by The McGraw-Hill Companies, Inc. All rights reserved. Manufactured in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. 0-07-151048-6 The material in this eBook also appears in the print version of this title: 0-07-146974-5. All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit of the trademark owner, with no intention of infringement of the trademark. Where such designations appear in this book, they have been printed with initial caps. McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. For more information, please contact George Hoare, Special Sales, at george_hoare@mcgraw-hill.com or (212) 904-4069. TERMS...

Words: 107484 - Pages: 430

Premium Essay

Intermediate Accounting

...Exercises 1, 2, 3, 5 1, 5, 6 2 1 3 14, 15 24, 25 Kieso, Intermediate Accounting, 15/e, Solutions Manual 4 1 (For Instructor Use Only) 10-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives Questions Brief Exercises Concepts for Analysis Exercises Problems 1, 2, 3, 4, 5, 11, 12, 13 1, 2, 3, 4, 5, 6, 11 CA10-1 4, 5, 6, 11, 12 3 CA10-2 1. Describe property, plant, and equipment. 1 2. Identify the costs to include in initial valuation of property, plant, and equipment. 2, 3, 4, 5, 6, 21 3. Describe the accounting problems associated with self-constructed assets. 8 4. Describe the accounting problems associated with interest capitalization. 8, 9, 10, 11 2, 3, 4 5, 6, 7, 8, 9, 10 5, 6, 7 CA10-3 5. Understand accounting issues related to acquiring and valuing plant assets. 7, 12, 14, 16, 17, 19, 20, 22 5, 6, 7, 8, 9, 10, 11, 12 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 3, 4, 8, 9, 10, 11 CA10-4, CA10-6 6. Describe the accounting treatment for costs subsequent to acquisition. 6, 13, 15, 18 13 21, 22, 23 7. Describe the accounting treatment for the disposal of property, plant, and equipment. 7, 23 14, 15 24, 25 10-2 Copyright © 2013 John Wiley & Sons, Inc. 1 Kieso, Intermediate Accounting, 15/e, Solutions Manual CA10-5, CA10-6 2, 4 (For Instructor......

Words: 18805 - Pages: 76

Free Essay

Intermediate Accounting

...Financial Accounting Standards Board The Financial Accounting Standards Board (FASB) has been the assigned organization in a private sector for establishing standards. These standards are important to be useful because it allows investors to make informed decisions. Financial information must be reliable, consistent and transparent. Since 1973, FASB has been part of a structure that’s independent of all other business and professional organizations. The rest of the parts are Financial Accounting Foundation (FAF), Financial Accounting Standards Advisory Council (FASAC), Governmental Accounting Standards Board (GASB) and Governmental Accounting Standards Advisory Council (GASAC). The role of monitoring and controlling business reporting and accounting practices in a modern organization is to establish and improve standards of financial accounting. FASB has a board full of members that participate in accomplishing the mission. There are 7 board members as well as several staff members that help assist. The board members are: * Russell Golden is a chairman. He began in July of 2013. He served six years as a staff member (technical Director) for the FASB before he got appointed to the chairmen. His term will end in 2017, but then he can get an appointment to an additional 3 more years. He is also chaired in FASB’S emerging issues task force. * James Kroeker is the vice chairman. He was appointed in September 2013. He served as the deputy managing partner for......

Words: 2085 - Pages: 9

Premium Essay

Intermediate Accounting

...following statements is not an objective of financial reporting? (Points: 5) Provide information that is useful in investment and credit decisions. Provide information about enterprise resources, claims to those resources, and changes to them. Provide the liquidation value of a company. Provide information that is useful in assessing cash flow prospects. 2. (TCO A) The Financial Accounting Standards Board employs a "due process" system which (Points: 5) has all CPAs in the United States vote on a new Statement. enables interested parties to express their views on issues under consideration. identifies the accounting issues that are the most important. requires that all accountants receive a copy of financial standards. 3. (TCO A) The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the (Points: 5) SEC AICPA IASB GASB 4. (TCO A) The cash method of accounting: (Points: 5) is used by most publicly-traded corporations for financial statement purposes. is not in accordance with the matching principle for most publicly-traded corporations. is often used on the income statement by large, publicly-held companies. All of the above is true. 5. (TCO A) Which of the following is an ingredient of relevance? (Points: 5) ......

Words: 831 - Pages: 4