1
AC 301
INTERMEDIATE ACCOUNTING I
Course Syllabus
I.
II.
Reference Material:
A.
Text: Intermediate Accounting (Comprehensive Volume)
by Skousen and Stice, 16th Edition
B.
Study Guides
C.
Printed Lecture Notes
D.
Simulation Project: Merchandising Corporation
(Instructor Prepared)
E.
Solutions to selected problems
F.
Computer Slide Shows (Instructor Prepared)
(Instructor prepared)
(Instructor Prepared)
Course Objectives:
A.
To present a conceptual framework for the financial
statements and accounting methods
B.
To apply accounting methods to practical situations
C.
To present some accounting procedures that were not
covered in Principles of Accounting I and II
To evaluate GAAP to determine if it accomplishes the major
objective of accounting, communication of useful
accounting information.
To compare and contrast U.S. accounting standards and
international accounting standards.
F.
III.
IV.
See study guides for specific chapter objectives
Learning Experiences:
A.
Lecture-discussion using computer slide shows and Elmo
video camera
B.
Simulation project, extra problem work, and case
discussions in small groups
C. Weekly homework assignments and open-note quizzes
Course Content:
2
A. Week #1
2.
B.
Week #2
1.
3.
C.
Week #3
1.
2.
3.
D.
Week #4
1.
E.
Week #5
2.
1.
2.
F.
Week #6
1.
2.
G.
Week #7
1.
2.
3.
H.
Week #8
1.
2.
3.
1.
Course Introduction and Review
Discussion of Chapter 1 Objectives:
Financial Reporting
Discussion of Chapter 2 Objectives:
Review of the Accounting Cycle
Exam over Chapters 1 & 2
Discussion of Chapter 4 Objectives:
Income Statement
Discussion of Chapter 3 Objectives:
Balance Sheet
Exam over Chapters 3 & 4
The
The
Discussion of Chapter 9 Objectives:
Inventory Valuation
Exam over Chapter 9
Discussion of Chapter 10 Objectives:
Acquisition of Non-current Operating
Assets
Exam over Chapter 10
Discussion of Chapters 11 Objectives:
Utilization & Retirement of Non-current
Operating Assets
Exam over Chapters 11
Discussion of Chapter 5 Objectives: The
Statement of Cash Flows
Discussion of FV Module Objectives: The
Time Value of Money
Exam over Chapter 5 and FV Module
Discussion of Chapter 6 Objectives:
Earnings Management
Discussion of Chapter 7 Objectives:
and Receivables
Exam over Chapter 6&7
Cash
3
V.
VI.
Student Evaluation:
A.
Seven Hourly Exams
1. Combination of essay questions and problems
2. Weight--1/7 of total grade (each)
B.
Weekly Grade
1. Weight--1/7 of total grade
2. Open-note quizzes over homework assignments--20
points each
3. Simulation project--50 points
C.
Grading
1. A =
2. B =
3. C =
4. D =
5. F =
Scale
90%--100%
80%--89%
70%--79%
60%--69%
Under 60%
Special Policies:
A. Students are dropped for non-attendance when they are
absent for two consecutive weeks.
B. Exams:
1. I will drop your lowest exam grade, but if you miss
an exam this will be the grade that is dropped.
2. If you miss a second exam, you will need a good
reason for a makeup exam.
3. The final exam will not be dropped as the lowest exam
unless you make at least a C- for the final exam
grade.
4. The daily grade will not be dropped as the lowest
exam grade.
C. Reports, bonus work, and other assignments to be
submitted:
1. You may submit assignments prior to the due date.
2. The assignment is due at the beginning of the period
on the due date.
3. If the assignment is late the following number of
points will be deducted:
(a) 2 points if submitted on the same day
(b) 3 points for each day the assignment is late.
the
D. Reasonable efforts will be made to accommodate the
testing and note-taking needs of students covered by
Americans with Disabilities Act.
4
Intermediate Accounting Review
I.
Define or describe the following terms:
1. Asset
2. Expense
3. Owner's Equity
4. Liability
5. Debit
6. General ledger
7. FIFO
8. Depreciation
9. Discounting a Note
10. Accrual Accounting System
11. Consolidated Financial Statements
12. Minority Interest
13. Allowance Method of Accounting for Bad Debts
14. Perpetual Inventory System
15. Adjusting Entries
16. Closing Entries
17. Straight-line Depreciation Method
18. Extraordinary Items
19. Debenture Bond
20. Participating Preferred Stock
21. Subsidiary Ledger
22. Par Value of Stock
23. Bond Premium
24. Stock Split
25. Deferral
26. Lower of Cost or Market
27. Cumulative Preferred Stock
28. Callable Bond
29. Operating, Financing, and Investing Activities
30. Equity Method of Accounting for Investments
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II.
Classify each of the following as an asset, contra asset,
liability, contra liability, owner's equity, contra
owner's equity, revenue, contra revenue, cost of goods
sold, contra cost of goods sold, or expense:
1. Sales
2. Accounts receivable
3. Wages Payable
4. Purchases
5. Accumulated Depreciation
6. Discount on Bonds Payable
7. John Doe Capital
8. Common Stock
9. Factory Overhead
10. Prepaid Insurance
11. Loss on Disposal of a Plant Asset
12. Bonds Payable
13. Paid in Capital in Excess of Stated or Par Value
14. Sales Returns and Allowances
15. Merchandise Inventory
16. Trading Securities
17. Land
18. Retained Earnings
19. Unearned Rent
20. Sinking Fund Investment
21. Rent Revenue
22. Advertising Expense
23. Direct Labor
24. Purchases Discounts
25. Finished Goods Inventory
26. Allowance for Bad Debts
27. Treasury Stock
28. Interest Expense
29. Social Security Tax Payable
30 Market Adjustment - Available-for-Sale Securities
31. Unrealized Holding Loss on Trading Securities
32. Organizational Costs
33. Dividend Revenue
34. Stock Dividends
35. Gain on the sale of Investments
36. Investment in X Co. Stock
37. Goodwill
38. Transportation--In
39. Building
40. Stock Dividend Distributable
41. Patent
42. Transportation--Out
43. Uninsured Flood Loss
44. Land Improvements
45. Interest Payable
46. Loss on Bond Redemption
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47. Unrealized Holding Gain/Loss - AFS Securities
III.
Answer the following questions in terms of debit and
credit theory:
1. Why are assets increased on the debit side?
2. Why are liabilities and owner's equity increased on
the credit side?
3. Why is accumulated depreciation increased on the
credit side?
4. Why are revenues increased on the credit side?
5. Why are cash and stock dividends increased on the
debit side?
6. Why are expenses increased on the debit side?
7. Why are sales returns and allowances increased on the
debit side?
8. Why is purchases increased on the debit side?
9. Why are purchases discounts increased on the credit
side?
10. Why is treasury stock increased on the debit side?
11. Why is discount on bonds payable increased on the
debit side?
12. Why is deferred tax benefit increased on the credit
side?
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Intermediate Accounting
Study Guide Chapter 1
Objectives:
1.
State the overall objective of accounting.
2.
Name three internal and three external users of
accounting information, and name the area of accounting
that provides the needed information to each group.
3.
Name the three types of general purpose financial
statements.
4.
Explain the purpose of an independent audit.
5.
Explain the role of accounting in the stock market crash
of 1929.
6.
Explain the specific legal authority of the SEC in
relation to accounting.
7.
Identify the following AICPA committees that developed
accounting standards prior to the establishment of FASB:
(a) Issued pronouncements known as Accounting Research
Bulletins from 1939 to 1959
(b) Issued pronouncements known as Opinions from 1959 to
1973
8.
Describe the FASB in terms of the following:
(a) size
(b) membership composition
(c) relationship of members to their former firm or
institution
(d) length of office
9.
Identify the following professional organizations:(Do not
use initials.)
(a) responsible for selecting members of the two boards
listed below
(b) sets accounting standards for state and local
governments
(c) its major function is to study accounting issues and
establish U.S. accounting standards
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Chapter 1 Objectives (continued)
10.
Identify the following documents issued in the major
projects procedure of FASB:
(a) a document that identifies the principal issues
involved with the topic
(b) a document that includes specific recommendations
for financial accounting and reporting
(c) the final document issued in the process. (Also
indicate the number of members of the Board that
must approve this document.)
11.
Identify the committee created by FASB to establish
methods of treating new issues that FASB has not yet
addressed
12.
Explain the requirements of the SEC in relation to the
following:
(a) disclosures prior to offering securities for sale to
the public.
(b) three periodic reports
(c) audits
13.
Explain two ways in which the SEC affects the operation
of FASB. (To be answered in class TBAIC)
14.
Identify the following statements of the SEC:
(a) accounting interpretation and policies used to
evaluate firm=s disclosure practices
(b) SEC staff accounting interpretations
15.
Name three major responsibilities of the AICPA.
9
Chapter 1 Objectives (continued)
16.
Explain how the AICPA is involved in the certification of
CPAs.
17.
Explain the purpose of the AICPA's CPE program.
18.
Explain three ways in which the AICPA continues to
influence the establishment of accounting standards
19.
Identify the following accounting organizations:
(a) primarily an organization for accounting professors
(b) its membership includes treasurers, controllers, and
financial VPs (TBAIC)
(c) concerned with information needs of internal users
of accounting data (TBAIC)
(d) its major function is to develop worldwide accounting
standards
20.
Rearrange the following from the most authoritative to
the least authoritative: (See exhibit 1-5.)
(a) FASB Technical Bulletins
(b) FASB Statements
(c) AICPA Practice Bulletins
(d) Q and A Guides of FASB's Staff
21.
Explain the SEC's position in relation to IASB's
statements.
22.
Name the FASB's six key objectives of financial
reporting, and match each of the three financial
statements with its objective.
23.
Name five qualitative characteristics of accounting
information.
24.
Explain how the following relate to the relevance of
financial information:
(a)Feedback value
(b)Predictive value
(c)Timeliness
10
Chapter 1 Objectives (continued)
25.
Explain how the following relate to the reliability of
financial information:
(a) Verifiability
(b) Representational faithfulness
(c) Neutrality
26.
Explain the following constraints relating to the
qualities of financial information:
(a) Comparability
(b) Consistency
(c) Materiality
(d) Conservatism
27.
Describe the following measurement methods, and give an
example of a balance sheet item that is valued using each
method:
(a) Historical cost
(b) Current replacement cost
(c) Current market value
(d) Net realizable value
(e) Present value
28.
Which of the measurements in question #27 is the dominant
measurement method used in the U.S.?
29.
Name two statement recommended in addition to the three
primary financial statements.
30.
Explain the following assumptions that have influenced
the FASB's conceptual framework:
(a) Economic Entity
(b) Going concern
(c) Arm's-length transactions
(d) Stable monetary units
(e) Specific accounting periods
31.
Name two of the "big four" CPA firms.
11
Chapter 1 Assignments:
1.
Exercise 1-4
2.
Exercise 1-5 (Select your answers from the following
alternatives:
(a) Timeliness vs verifiability
(b) Relevance vs reliability
(c) Comparability vs consistency
(d) Neutrality vs relevance
3.
Exercise 1-7 (Do not explain your answers, and select
your answers from the following alternatives:
(a) Going concern
(b) Stable monetary units
(c) Specific accounting periods
(d) Arm's-length transactions
(e) Economic entity
4.
Case 1-20
5.
Case 1-21
12
Intermediate
Accounting
Study Guide Chapter 2
Objectives:
1.
Name the three steps in the recording phase of the
accounting process and four required steps in the
reporting phase of the accounting process.
2.
Name six examples of source documents.
3.
Explain what is meant by a contra account and an adjunct
account, and give an example of each.(TBAIC)
4.
Give an example of each of the following types of
adjustments:
(a) Unrecorded Assets (Accrued revenue)
(b) Unrecorded Liabilities (Accrued expense)
(c) Prepaid expense (Deferred expense)
(d) Unearned Revenue (Deferred revenue)
(e) Transactions involving estimates
5.
Explain why adjustments to inventory are required in each
of the following inventory systems:(See lecture notes)
(a) Periodic
(b) Perpetual
6.
Explain the difference between a nominal account and a
real account.
7.
Be able to indicate the debit and credit to record the
following transactions: (Some may require multiple
debits or credits)
(a) Credit or cash sale (perpetual system)
(b) Return of inventory to a supplier (perpetual system)
(c) Customer's return of inventory (perpetual system)
(d) Payment of transportation on purchased inventory
(perpetual system)
(e) Purchase of a plant asset
(f) Prepayment of an expense (both methods)
(g) Receipt of unearned revenue (both methods)
(h) Receipt of payment on account with a discount
(i) Payment of an operating expense
(j) Withdrawal by the owner of a sole proprietorship
(k) Declaration and payment of a cash dividend in a
corporation
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Chapter 2 Objectives (continued)
8.
Be able to indicate the debit(s) and credit(s) required
to adjust the following:
(a) Prepaid insurance (both methods)
(b) Unearned rent (both methods)
(c) Equipment
(d) Accrued wages
(e) Inventory (Perpetual system)
(f) Accrued interest earned
(g) Bad debts
9.
Be able to indicate if the following accounts would be
debited or credited to close them:
(a) Sales
(b) Operating expenses
(c) Cost of goods sold
(d) Rent revenue
(e) Interest revenue
(f) Sales returns and allowances
(g) Sales discounts
(h) Drawing or dividends
ASSIGNMENTS:
*1.
*2.
3.
*4.
*5.
Exercise 2-20 (Part 1 only)
Exercise 2-25 (Skip the last transaction)
Exercise 2-29 (Part 1)
Problem 2-33 (Part 1 only and assume the common stock was
issued at par on May 1.)
Problem 2-34
*Solution provided
14
Intermediate Accounting
Study Guide Chapter 3
Objectives:
1.
Explain how the following are calculated:
(a) Net assets
(b) Working capital
2.
Define the following terms:
(a) Current assets
(b) Normal operating cycle
3.
Name five types of current assets.
4.
Name four categories of noncurrent assets, and name three
specific assets fitting into each category.
5.
Name five types of current liabilities.
6.
Identify the balance sheet classification (current or
noncurrent liability) of each of the following:
(a) debts to be liquidated from a noncurrent sinking fund
(b) short-term obligation to be refinanced.
7.
Explain when a callable obligation should be classified
as a current liability.
8.
Explain the following contract clauses, and explain how
they affect the classification of a liability:
(a) Objective acceleration clauses
(b) Subjective acceleration clauses
9.
Name two types of liabilities that are not classified as
current in addition to long-term debt and other
noncurrent liabilities.
10.
Name three items listed under the long-term debt category
of the balance sheet.
11.
Name two items listed as other non-current liabilities.
15
Chapter 3 Objectives (continued)
12.
13.
Be able to classify a list of liabilities as current or
noncurrent.
Explain what is meant by a contingent liability, how it
differs from an estimated liability, and when it should
be credited to a liability account.
14.
Explain how the owner's equity section of a sole
proprietorship differs from a partnership.
15.
Name the two major categories of owner's equity in a
corporation.
16.
Name two items reported as stockholders' equity in
addition to the two major items.
17.
Name four offset (contra) accounts that appear on the
balance sheet.
18.
Explain two ways that the format of foreign balance
sheets often differ from U.S. balance sheets.
19.
Indicate the number of years of each of the following
that should be included in the annual reports to
stockholders according to SEC requirements: (TBAIC)
(a) Income statement
(b) Balance sheet
(c) Cash flow statement
20.
Name three methods commonly used by companies to provide
additional information about the financial statements.
(TBAIC)
21.
Name four types of notes that are typically included by a
company to the basic financial statements, and give an
example of each type.
22.
List two types of subsequent events that require
consideration for the preceding year's statement.
23.
Explain four limitations of the balance sheet.
16
ASSIGNMENT:
1.
2.
*3.
*4.
5.
6.
Exercise 3-22
Exercise 3-23 (Use the same categories as in Exercise
3-22 but add an (L) for other stockholders= equity)
Exercise 3-26 (Ignore items that do not belong on the
balance sheet, including Loss on Purchase Commitments.
The Pension Fund is an investment. The Deferred Tax
Liability is noncurrent)
Exercise 3-31
Exercise 3-33
Case 3-52
* Solutions provided
17
Intermediate Accounting
Study Guide Chapter 4
Objectives:
1.
Explain how the concepts of financial capital maintenance
and physical capital maintenance differ as they relate to
profitability, and indicate which concept was adopted by
the FASB.
2.
Name and describe the two factors that are considered in
deciding when revenues and gains should be recognized.
3.
Explain three exceptions to the "point-of-sale" criterion
of recognizing revenue.
4.
Give two examples of expense or losses that are
recognized under each of the following situations:
(a) Direct Matching
(b) Systematic and rational allocation
(c) Immediate recognition
5.
Name the sections that may appear in each of the
following categories of a multiple-step income statement:
(a) Income from continuing operations (six sections)
(b) Irregular or extraordinary items (three sections)
6.
Indicate the formula for each of the following in a
multiple-step income statement:
(a) Gross profit
(b) Operating income
(c) Income from continuing operations before income
taxes
(d) Income from continuing operations
7.
Explain what is meant by intraperiod income tax
allocation.
8.
Give two examples of segment changes that qualify as
discontinued operations and two that do not qualify as
discontinued operations.
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Chapter 4 Objectives (continued)
9.
Name two items that should be reported in relation to
discontinued operations.
10.
Indicate how assets and liabilities are reported for
discontinued components that have not been completely
disposed of as of the balance sheet date.
11.
Indicate how total revenue associated with discontinued
operations should be reported.
12.
Name two criteria that must be met for an item to be
reported as extraordinary.
13.
Explain how the reporting of gains and losses on early
debt extinguishment changed in 2002.(See FYI on page 175)
14.
Explain the current method used to report changes in
accounting principles that affect prior periods under
U.S. GAAP.
15.
Explain how IFRS#8 treats a cumulative effect of a change
in accounting principle.
16.
Give an example of a change in estimates, and indicate
for what periods income must be adjusted.
17.
Explain the present requirement of the FASB in relation
to reflecting the effects of changing prices in the
financial statements.
18.
Explain the difference between basic and diluted earnings
per share.
19.
List the items on the income statement that should be
reported on a per share basis.
20.
Explain what is meant by "comprehensive income" and list
two items added to or subtracted from net income to
obtain comprehensive income.
21.
List the two alternative methods that can be used to
report comprehensive income.(TBAIC)
22.
Name two types of retained earnings adjustments.
19
ASSIGNMENT:
1.
2.
3.
*4.
*5.
*6.
Question # 15
Exercise 4-25
Exercise 4-27
Exercise 4-29 (Omit per share items)
Exercise 4-37 (Instruction #2 only)
Problem 4-44
(a) The last two items are prior period adjustments
(errors) and not changes in estimates.
(b) The correction of sales is given net of taxes, but
you must deduct the tax savings from the
depreciation error
(c) The tax on continuing operations is $84,000.
*7.
Problem 4-47
(a) Ignore the following items and report Cost of Goods
Sold as $4,755,500: Inventory (Jan. 1 and year-end
values), Purchases, Purchases Discounts, FreightIn,
and Loss on Write-down
(b) The following are reported in the administrative
expense category: Employee Pension Expense, Bad
Debts Expense, and Property Tax Expense.
(c) Delivery expense is a selling expense.
(d) In the per share items section, just report the
final net income per share.
8.
Case 4-56 (Give an argument to justify each of the three
alternatives)
* Solutions provided
20
Intermediate Accounting
Study Guide Chapters 5 & 21
Objectives:
1.
Explain why the cash flow statement can provide valuable
information in the following situations:
(a) a company has a large amount of noncash expenses
(b) rapidly growing companies
(c) companies who are preparing for a loan application or
an initial public offering.
2.
Name two requirements for an investment to qualify as a
cash equivalent.
3.
Explain what is meant by original maturity and how it
applies to cash equivalents.
4.
Name the three major types of activities that are
reported in a cash flow statement, and name three cash
receipts and three cash payments in each activity.
(Note: an additional cash receipt from financing
activities is the sale of treasury stock.)
5.
Indicate the normal pattern (positive or negative) for
the net cash flow for each of the categories in question
#4.
6.
Explain how non-cash investing and financing activities
are reported in a cash flow statement.
7.
Explain the difference between the direct and the
indirect method of reporting cash flows from operating
activities. Which method is most commonly used?
8.
Be able to indicate whether the following would be added
or deducted from net income in determining net cash flow
from operating activities using the indirect method:
(a) Depreciation
(b) Gain on the sale of assets
(c) Amortization of premium on bonds payable
(d) Amortization of discount on bonds payable
(e) Bad debts expense
(f) Loss on sale of assets
(g) Loss on Bond Redemption
(h) Gain on Bond Redemption
(i) Increase in accounts receivables
(j) Increase in accounts payable
21
Chapter 5 Objectives (continued)
8. (Continued)
(k)
(l)
(m)
(n)
(o)
(p)
Decrease
Decrease
Increase
Increase
Increase
Decrease
NOTE:
The following would not be used to adjust net
income. Be able to indicate this on the exam.
Cash and cash equivalents
Changes in current available-for-sale and held-tomaturity securities
Changes in notes receivable (Nontrade)
Changes in notes payable (Nontrade)
Changes in dividends payable
(a)
(b)
(c)
(d)
(e)
9.
10.
in
in
in
in
in
in
prepaid insurance
wages payable
inventory
Unearned Rent
Interest Payable
Taxes Payable
For each of the following, indicate what income statement
item it would be used to adjust, and indicate if the
adjustment would be an increase or a decrease under the
direct method:
(a) Net increase in accounts receivable
(b) Net decrease in accounts receivable
(c) Net increase in unearned rent
(d) Net decrease in unearned rent
(e) Net increase in interest receivable
(f) Net decrease in interest receivable
(g) Net increase in prepaid insurance
(h) Net decrease in prepaid insurance
(i) Net increase in merchandise inventory
(j) Net decrease in merchandise inventory
(k) Net increase in accounts payable
(l) Net decrease in accounts payable
(m) Depreciation expense for the period
(n) Net increase in wages payable
(o) Net decrease in wages payable
(p) Net increase in income taxes payable
(q) Net decrease in income taxes payable
(r) Net increase in interest payable
(s) Net decrease in interest payable
What additional disclosure is required with the indirect
method? (See page 238.)
22
Chapter 5 Objectives (continued)
11.
Indicate the cash flow pattern (+ or -) of each of the
cash flow sections (operating, investing, and financing)
in each of the following situations:
(a) a company is covering its operating cash flow problems
by the sale of fixed assets, by borrowing or by
stockholders= contribution
(b) a company is using cash flow from operations to expand
and to pay down debt
(c) A company using cash from operations and from
investments by creditors and owners to expand.
12.
Explain why the cash flow-to-net income ratio will usually
have a value greater than one.
Chapter 21 Objectives
13.
What additional disclosure is required with the direct
method? (See page 1236.)
14.
Explain how IFRS#7 differs from SFAS#95 in the following
areas: (See page 1238.)
(a) cash received from interest and dividends
(b) cash paid for interest
(c) cash paid for dividends
(d) cash paid for income taxes
ASSIGNMENT:
*1.
*2.
*3.
*4.
Exercise 5-28
Exercise 5-31
Exercise 5-32 (Total operating expenses = $100,000)
(Ignore the dividends paid)
Exercise 21-17 (The depreciation expense is not included
in the general expense total.)
* Solutions Provided
23
Intermediate Accounting
Study Guide Time Value Module
Objectives:
1.
Name five business applications of present value or
future value calculations.
2.
Define the following terms:
(a) Compound interest
(b) Annuity
(c) Implicit Rate of Interest (see footnote on page
TVM-13)
(d) Ordinary annuity(TVM-16)
(e) Annuity due
3.
Be able to calculate the following:
(a) FV
(b) PV
(c) I
(d) i given FV and PV
(e) n given FV and PV
(f) FVa
(g) FVad
(h) PVa
(i) PVad
(j) a to equal a desired FV
(k) a to pay off a given PV + interest
4.
Study the assignments for calculations similar to the
ones for objective #3.
(#1,2,3,9(part2),10,11,13,14,15,16,17,18, & bonus
problem)
24
ASSIGNMENT:
(Note: Solutions provided for all of the assignment.)
1. Exercise M-2 (parts a & b)
2. Exercise M-3 (parts a & b)
3. Exercise M-6
4. Exercise M-7
5. Exercise M-8
6. Exercise M-9
7. Exercise M-10
8. Work Exercise M-10 assuming payments are made at the
beginning of each period.
9. Exercise M-11
10. Exercise M-13
11. Exercise M-16 (part 1b only) (Also change the rate to
12% and use the table.)
12. Exercise M-17 (Calculate present value.)
13. Calculate the selling price of the following bond issue:
(a) bond face value = $100,000
(b) contract rate of interest = 52
(c) market rate of interest = 6%
(d) annual interest payments
(e) life = 20 years
14. A company is making annual lease payments on
amount of $10,000 (payments are made at the
period). Calculate the following assuming
of
10 years, an interest rate of 10%, and
compounding:
(a) the present value of the payments or the
the leased asset
(b) the dollar cost of the implicit interest
equipment in the
end of each
a lease period
annual
true cost of
15. For each of the following, compute the future value of an
ordinary annuity (round to the nearest dollar):
(a) 12 annual payments of $100 at 6% per annum, compounded
annually
(b) 8 semiannual payments of $50 at 8% per annum, compounded
semiannually
(c) 19 quarterly payments of $125 at 12% per annum,
compounded quarterly.
16. Calculate the future value for the payments in question
#15 assuming payments are made at the beginning of each
period.
25
ASSIGNMENT (continued)
17. For each of the following, compute the present value of an
ordinary annuity (round to the nearest dollar):
(a) 10 annual payments of $1000 at 8% per annum, compounded
annually
(b) 12 semiannual payments of $2050 at 6% per annum,
compounded semiannually
(c) 12 quarterly payments of $5600 at 8% per annum,
compounded quarterly.
18. Calculate the present value for the payments in question
#17 assuming payments are made at the beginning of each
period.
26
Intermediate Accounting I
Study Guide Chapter 6
Objectives:
1.
Name four reasons for manipulation of earnings.
2.
Explain what is meant by income smoothing, and indicate
why it may be beneficial to a company.
3.
Name four methods of earnings management in order from
least to most fraudulent, and give an example of each.
4.
Describe the following techniques of accounting Ahocuspocus@:
(a) big bath charges
(b) cookie jar reserves
5.
Explain what is meant by pro forma earnings and how
companies justify its reporting.