ACC 306 Inspiring Communication / snaptutorial.com

1. ACC 306 Entire Course (New) For more classes visit www.snaptutorial.com ACC 306 Week 1 Assignment E13-21, E13-22, P12-1, P12-7,P12-10, P12-14, P13-6 ACC 306 Week 1 Quiz ACC 306 Week 1 DQ 1 Equity Method ACC 306 Week 1 DQ 1 Accounting Pronouncements ACC 306 Week 1 DQ 2 Judgment Case 13-9 ACC 306 Week 2 Quiz ACC 306 Week 2 DQ 1 Ethics Case 14-8 Hunt Manufacturing Debt for equity swaps ACC 306 Week 2 DQ 2 Ethics Case 15-4 Leasehold Improvements ACC 306 Week 2 Assignment E 14-16, E 14-18, E 15-25, P14-21, P15-3 ACC 306 Week 3 Assignment E 16-24, E 16-25, E 17-10, E 17-19, P 16-7, P 17-16 ACC 306 Week 3 Quiz ACC 306 Week 3 Ethics Case 17-6 401(k) plan contributions ACC 306 Week 3 Integrating Case 16-5 accounting changes and error correction ACC 306 Week 4 Communication Case 18-10 ACC 306 Week 4 Quiz

2. ACC 306 Week 4 Ethics Case 19-7 International Network Solutions ACC 306 Week 4 Assignment E 18-18, E 18-24, E 19-2, E 19-5, E 19-9, E 19-24, P 18-5 ACC 306 Week 5 Analysis Case 20-10 ACC 306 Week 5 Ethics Case 20-5 Softening the blow ACC 306 Week 5 Ethics Case 21-7 ACC 306 Week 5 Assignment E 20-18, P 21-11, P 21-14 ACC 306 Week 5 Final Lease Paper (2 Papers) *********************************************** ACC 306 Week 1 Assignment E13-21, E13-22, P12-1, P12-7,P12-10, P12-14, P13-6 For more classes visit www.snaptutorial.com ACC 306 Week 1 Assignment E13-21, E13-22, P12-1, P12-7,P12- 10, P12-14, P13-6

3. *********************************************** ACC 306 Week 1 DQ 1 Accounting Pronouncements For more classes visit www.snaptutorial.com Accounting Pronouncements. The Financial Accounting Standards Board has issued accounting pronouncements that affect how accounting transactions should be treated. These pronouncements may affect all companies or just specific industries, but no pronouncements have been issued that affect social media companies, like Zynga and Facebook. In the Forbes article, “Social Media's Phony Accounting,” written by Francine McKenna, the author discusses how these new rules are being invented. Read the article and then: a. Discuss the methods that have been invented and how management estimates can manipulate the resulting income from these transactions. Provide examples to support your opinion. b. Should these invented rules be implemented without authoritative approval?

4. c. Should these new rules be labeled as Generally Accepted Accounting Principles (GAAP)? You must respond to at least two of your classmates’ postings by Day 7 to receive full credit. *********************************************** ACC 306 Week 1 DQ 1 Equity Method For more classes visit www.snaptutorial.com P 12–13 - Miller Properties - Equity method ● LO5 LO6 On January 2, 2011, Miller Properties paid $19 million for 1 million s hares of Marlon Company’s 6 million outstanding common shares. Mille r’s CEO became a member of Marlon’s board of directors during the firs t quarter of 2011. The carrying amount of Marlon’s net assets was $66 million. Miller e stimated the fair value of those net as- sets to be the same except for a patent valued at $24 million above cost. The remaining amortization period for the patent is 10 years.

5. Marlon reported earnings of $12 million and paid dividends of $6 mil lion during 2011. On December 31, 2011, Marlon’s common stock was t rading on the NYSE at $18.50 per share. Required: 1. When considering whether to account for its investment in Marlon under the equity method, what criteria should Miller’s management appl y? 2. Assume Miller accounts for its investment in Marlon using the equi ty method. Ignoring income taxes, deter- mine the amounts related to the investment to be reported in its 2011: a. Income statement. b. Balance sheet. c. Statement of cash flows. *********************************************** ACC 306 Week 1 DQ 2 Judgment Case 13-9 For more classes visit www.snaptutorial.com ACC 306 Week 1 DQ2 Judgment Case 13-9

6. Judgment Case 13–9 - Valleck Corporation - Loss contingency and full disclosure ● LO5 LO6 In the March 2012 meeting of Valleck Corporation’s board of director s, a question arose as to the way a possible obligation should be disclose d in the forthcoming financial statements for the year ended December 3 1. A veteran board member brought to the meeting a draft of a disclosure note that had been prepared by the controller’s office for inclusion in th e annual report. Here is the note: On May 9, 2011, the United States Environmental Protection Agency (EPA) issued a Notice of Violation (NOV) to Valleck alleging violations of the Clean Air Act. Subsequently, in June 2011, the EPA commenced a civil action with respect to the foregoing violation seeking civil penalti es of approximately $853,000. The EPA alleges that Valleck exceeded a pplicable volatile organic substance emission limits. The Company estim ates that the cost to achieve compliance will be $190,000; in addition the Company expects to settle the EPA lawsuit for a civil penalty of $205,0 00 which will be paid in 2014. “ Where did we get the $205,000 figure? ” he asked. On being inform ed that this is the amount negotiated last month by company attorneys wi th the EPA, the director inquires, “Aren’t we supposed to report a liabilit y for that in addition to the note? ” Required: Explain whether Valleck should report a liability in addition to the no te. Why or why not? For full disclosure, should anything be added to the disclosure note itself? *********************************************** ACC 306 Week 1 Quiz

7. For more classes visit www.snaptutorial.com Question 1: Which of the following may create employer liabilities in connection with their payrolls? Question 2: Current liabilities are normally recorded at the amount expected to be paid rather than at their present value. This practice can be supported by GAAP according to the concept of: Question 3: The investment category for which the investor's "positive intent and ability to hold" is important is: Question 4: Which of the following investment securities held by Zoogle Inc. may be classified as held-to-maturity securities in its balance sheet? Question 5: Large, highly rated firms sometimes sell commercial paper: Question 6: If Pop Company exercises significant influence over Son Company and owns 40% of its common stock, then Pop Company: Question 7: A contingent loss should be reported in a footnote to the financial statements rather than being accrued if: Question 8: Assume that, on 1/1/06, Matsui Co. paid $1,200,000 for its investment in 60,000 shares of Yankee Inc. Further, assume that Yankee has 200,000 total shares of stock issued. The book value and fair value of Yankee's identifiable net assets were both $4,000,000 at 1/1/06. The following information pertains to Yankee during 2006: • Net Income$200,000 • Dividends declared and paid$60,000 • Market price of common stock on 12/31/06

8. • What amount would Matsui report in its year-end 2006 balance sheet for its investment in Yankee? Question 9: Other things being equal, most managers would prefer to report liabilities as noncurrent rather than current. The logic behind this preference is that the long-term classification permits the company to report: Question 10: Which of the following investment securities held by Zoogle Inc. are not reported at fair value in its balance sheet? $22/share *********************************************** ACC 306 Week 2 Assignment E 14-16, E 14-18, E 15-25, P14-21, P15-3 For more classes visit www.snaptutorial.com ACC 306 Week 2 Assignment E 14-16, E 14-18, E 15-25, P14-21, P15-3

9. *********************************************** ACC 306 Week 2 DQ 1 Ethics Case 14-8 Hunt Manufacturing Debt for equity swaps For more classes visit www.snaptutorial.com Ethics Case 14–8 - Hunt Manufacturing - Debt for equity swaps; have your cake and eat it too ● LO5 The cloudy afternoon mirrored the mood of the conference of division managers. Claude Meyer, assistant to the controller for Hunt Manufactu ring, wore one of the gloomy faces that were just emerging from the con ference room. “Wow, I knew it was bad, but not that bad,” Claude thoug ht to himself. “I don’t look forward to sharing those numbers with share holders.” The numbers he discussed with himself were fourth quarter losses wh ich more than offset the profits of the first three quarters. Everyone had known for some time that poor sales forecasts and production delays had

10. wreaked havoc on the bottom line, but most were caught off guard by th e severity of damage. Later that night he sat alone in his office, scanning and rescanning the preliminary financial statements on his computer monitor. Suddenly his mood brightened. “This may work,” he said aloud, though no one could hear. Fifteen minutes later he congratulated himself, “Yes!” The next day he eagerly explained his plan to Susan Barr, controller o f Hunt for the last six years. The plan involved $300 million in convertib le bonds issued three years earlier. Meyer: By swapping stock for the bonds, we can eliminate a substan tial liability from the balance sheet, wipe out most of our interest expens e, and reduce our loss. In fact, the book value of the bonds is significantl y more than the market value of the stock we’d issue. I think we can pro duce a profit. Barr: But Claude, our bondholders are not inclined to convert the bo nds Meyer: Right. But, the bonds are callable. As of this year, we can call the bonds at a call premium of 1%. Given the choice of accepting that re demption price or converting to stock, they’ll all convert. We won’t have to pay a cent. And, since no cash will be paid, we won’t pay taxes either. Required: Do you perceive an ethical dilemma? What would be the impact of fo llowing up on Claude’s plan? Who would benefit? Who would be injure d? ***********************************************

11. ACC 306 Week 2 DQ 2 Ethics Case 15-4 Leasehold Improvements For more classes visit www.snaptutorial.com Ethics Case 15–4 - American Movieplex - Leasehold improvements ● LO3 American Movieplex, a large movie theater chain, leases most of its t heater facilities. In conjunction with recent operating leases, the compan y spent $28 million for seats and carpeting. The question being discusse d over break- fast on Wednesday morning was the length of the depreciation period fo r these leasehold improvements. The com- pany controller, Sarah Keene, was surprised by the suggestion of Larry Person, her new assistant. Keene: Why 25 years? We’ve never depreciated leasehold improvements for suc h a long period. Person: I noticed that in my review of back records. But during our expansion to the Midwest, we don’t need expenses to be any higher than necessary.

12. Keene: But isn’t that a pretty rosy estimate of these assets’ actual life? Trade pu blications show an average depreciation period of 12 years. Required: 1. How would increasing the depreciation period affect American Moviepl ex’s income? 2. Does revising the estimate pose an ethical dilemma? 3. Who would be affected if Person’s suggestion is followed? *********************************************** ACC 306 Week 2 Quiz For more classes visit www.snaptutorial.com Question 1: The method used to pay interest depends on whether the bonds are: Question 2: Bond X and bond Y are both issued by the same company. Each of the bonds has a maturity value of $100,000 and each matures in 10 years. Bond X pays 8% interest while bond Y pays 9%

13. interest. The current market rate of interest is 8%. Which of the following is correct? Question 3: Which of the following statements characterizes a leveraged lease? Question 4: If the lessee and lessor use different interest rates to account for a capital lease, then: Question 5: Of the four criteria for a capital lease, which two are not applied if the lease begins during the final quarter of the asset's useful life? Question 6: Griggs Co. failed to amortize the premium on an outstanding five-year bond issue. What is the resulting effect on interest expense and the bond carrying value, respectively? Question 7: When the interest payment dates are March 1 and September 1, and the notes are issued on July 1, the amount of interest expense to be accrued at December 31 of the year of issue would: Question 8: When bonds are retired prior to their maturity date: Question 9: Which of the following statements characterizes an operating lease? Question 10: The four criteria provided in FASB Statement No. 13 for distinguishing a capital lease from an operating lease do not include: *********************************************** ACC 306 Week 3 Ethics Case 17-6 401(k) plan contributions

14. For more classes visit www.snaptutorial.com Ethics Case 17–6 - VXI International - 401(k) plan contributions ● LO1 You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet air- craft. VXI began a defined contribution pension plan three years ago. T he plan is a so- called 401(k) plan (named after the Tax Code section that specifies the c onditions for the favorable tax treatment of these plans) that permits volu ntary contributions by employees. Employees’ contributions are matche d with one dollar of employer contribution for every two dollars of empl oyee contribution. Approximately $500,000 of contributions is deducted from employee paychecks each month for investment in one of three em ployer-sponsored mutual funds. While performing some preliminary audit tests, you happen to notice that employee contributions to these plans usually do not show up on mu tual fund statements for up to two months following the end of pay perio ds from which the deductions are drawn. On further investigation, you di scover that when the plan was first begun, contributions were invested w ithin one week of receipt of the funds. When you question the firm’s inv estment manager about the apparent change in the timing of investments, you are told, “Last year Mr. Maxwell (the CFO) directed me to initially deposit the contributions in the corporate investment account. At the clos e of each quarter, we add the employer matching contribution and deposi t the combined amount in specific employee mutual funds.” Required: 1. What is Mr. Maxwell’s apparent motivation for the change in the way co ntributions are handled?

15. 2. Do you perceive an ethical dilemma? *********************************************** ACC 306 Week 3 Ethics Case 17-6 401(k) plan contributions For more classes visit www.snaptutorial.com Ethics Case 17–6 - VXI International - 401(k) plan contributions ● LO1 You are in your third year as internal auditor with VXI International, manufacturer of parts and supplies for jet air- craft. VXI began a defined contribution pension plan three years ago. T he plan is a so- called 401(k) plan (named after the Tax Code section that specifies the c onditions for the favorable tax treatment of these plans) that permits volu ntary contributions by employees. Employees’ contributions are matche d with one dollar of employer contribution for every two dollars of empl

16. oyee contribution. Approximately $500,000 of contributions is deducted from employee paychecks each month for investment in one of three em ployer-sponsored mutual funds. While performing some preliminary audit tests, you happen to notice that employee contributions to these plans usually do not show up on mu tual fund statements for up to two months following the end of pay perio ds from which the deductions are drawn. On further investigation, you di scover that when the plan was first begun, contributions were invested w ithin one week of receipt of the funds. When you question the firm’s inv estment manager about the apparent change in the timing of investments, you are told, “Last year Mr. Maxwell (the CFO) directed me to initially deposit the contributions in the corporate investment account. At the clos e of each quarter, we add the employer matching contribution and deposi t the combined amount in specific employee mutual funds.” Required: 1. What is Mr. Maxwell’s apparent motivation for the change in the way co ntributions are handled? 2. Do you perceive an ethical dilemma? *********************************************** ACC 306 Week 3 Integrating Case 16-5 accounting changes and error correction

17. For more classes visit www.snaptutorial.com Integrating Case 16–5 - Williams-Santana, Inc. - Tax effects of accounting changes and error correction; six situations ● LO1 LO2 LO8 Williams-Santana, Inc. is a manufacturer of high- tech industrial parts that was started in 1997 by two talented engineers w ith little business training. In 2011, the company was acquired by one of its major customers. As part of an internal audit, the following facts wer e discovered. The audit occurred during 2011 before any adjusting entrie s or closing entries were prepared. The income tax rate is 40% for all yea rs. a. A five- year casualty insurance policy was purchased at the beginning of 2009 f or $35,000. The full amount was debited to insurance expense at the tim e. b. On December 31, 2010, merchandise inventory was overstated by $25,000 due to a mistake in the physical inventory count using the perio dic inventory system. c. The company changed inventory cost methods to FIFO from LIFO at the end of 2011 for both financial statement and income tax purposes. The c hange will cause a $960,000 increase in the beginning inventory at Janua ry 1, 2010. d. At the end of 2010, the company failed to accrue $15,500 of sales commissions earned by employees during 2010. The expense was record ed when the commissions were paid in early 2011. e. At the beginning of 2009, the company purchased a machine at a c ost of $720,000. Its useful life was estimated to be 10 years with no salv age value. The machine has been depreciated by the double declining-

18. balance method. Its carrying amount on December 31, 2010, was $460, 800. On January 1, 2011, the company changed to the straight- line method. *********************************************** ACC 306 Week 3 Quiz For more classes visit www.snaptutorial.com Question 1: If a company's deferred tax asset is not reduced by a valuation allowance, the company believes it is more likely than not that: Question 2: Which of the following statements typifies defined contribution plans? Question 3: The annual pension expense for what type of pension plan(s) is recorded by a journal entry that includes a debit to pension expense and a credit to the pension asset or pension liability? Question 4: Which of the following causes a temporary difference between taxable and pretax accounting income? Question 5: The result of interperiod tax allocation is that: Question 6: Pension gains related to plan assets occur when:

19. Question 7: Under SFAS 87, delayed recognition of gains and losses in earnings achieves: Question 8: Consider the following: I present value of vested benefits at present pay levels II present value of nonvested benefits at present pay levels III present value of additional benefits related to projected pay increases Which of the above constitutes the vested benefit obligation? Question 9: Of the following temporary differences, which one ordinarily creates a deferred tax asset? Question 10: A gain from changing an estimate regarding the obligation for pensions and other postretirement benefit plans will: *********************************************** ACC 306 Week 4 Assignment E 18-18, E 18-24, E 19-2, E 19-5, E 19-9, E 19-24, P 18-5 For more classes visit www.snaptutorial.com

20. ACC 306 Week 4 Assignment E 18-18, E 18-24, E 19-2, E 19- 5, E 19-9, E 19-24, P 18-5 *********************************************** ACC 306 Week 4 Communication Case 18-10 For more classes visit www.snaptutorial.com Communication Case 18–10 Should the present two- category distinction between liabilities and equity be retained? Group int eraction. ● LO1 The current conceptual distinction between liabilities and equity defin es liabilities independently of assets and equity, with equity defined as a residual amount. The present proliferation of financial instruments that c ombine features of both debt and equity and the difficulty of drawing a d istinction have led many to conclude that the present two- category distinction between liabilities and equity should be eliminated. Two opposing viewpoints are: View 1: The distinction should be maintained.

21. View 2: The distinction should be eliminated and financial instrument s should instead be reported in accordance with the priority of their clai ms to enterprise assets. One type of security that often is mentioned in the debate is convertib le bonds. Although stock in many ways, such a security also obligates th e issuer to transfer assets at a specified price and redemption date. Thus i t also has features of debt. In considering this question, focus on concept ual issues regarding the practicable and theoretically appropriate treatme nt, unconstrained by GAAP. Required: 1. Which view do you favor? Develop a list of arguments in support of you r view prior to the class session for which the case is assigned. *********************************************** ACC 306 Week 4 Ethics Case 19-7 International Network Solutions For more classes visit www.snaptutorial.com

22. Ethics Case 19–7 International Network Solutions ● LO6 International Network Solutions provides products and services relate d to remote access networking. The company has grown rapidly during i ts first 10 years of operations. As its segment of the industry has begun t o mature, though, the fast growth of previous years has begun to slow. In fact, this year revenues and profits are roughly the same as last year. One morning, nine weeks before the close of the fiscal year, Rob Mas hburn, CFO, and Jessica Lane, controller, were sharing coffee and ideas in Lane’s office. Lane: About the Board meeting Thursday. You may be right. This m ay be the time to suggest a share buyback program. Mashburn: To begin this year, you mean? Lane: Right! I know Barber will be lobbying to use the funds for our European expansion. She’s probably right about the best use of our fund s, but we can always issue more notes next year. Right now, we need a q uick fix for our EPS numbers. Mashburn: Our shareholders are accustomed to increases every year. Required: 1. How will a buyback of shares provide a “quick fix” for EPS? 2. Is the proposal ethical? 3. Who would be affected if the proposal is impl emented? *********************************************** ACC 306 Week 4 Quiz

23. For more classes visit www.snaptutorial.com Question 1: Which of the following will require a recalculation of weighted-average shares outstanding for all years presented? Question 2: Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock? Question 3: When treasury shares are sold at a price above cost: Question 4: When a property dividend is declared, the reduction in retained earnings is for: Question 5: When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction: Question 6: When stock is issued in exchange for property, the best evidence of market value might be any of the following except: Question 7: When treasury stock is purchased for an amount greater than its par value, what is the effect on total shareholders' equity? Question 8: Preferred shares that are participating may: Question 9: Stock options do not affect the calculation of: Question 10: Preferred dividends are subtracted from earnings when computing earnings per share whether or not the dividends are declared or paid if the preferred stock is: ***********************************************

24. ACC 306 Week 5 Analysis Case 20-10 For more classes visit www.snaptutorial.com Analysis Case 20–10 - DRS Corporation - Various changes ● LO1 through LO4 DRS Corporation changed the way it depreciates its computers from t he sum-of-the-year’s-digits method to the straight- line method beginning January 1, 2011. DRS also changed its estimated residual value used in computing depreciation for its office building. At t he end of 2011, DRS changed the specific subsidiaries constituting the g roup of companies for which its consolidated financial statements are pr epared. Required: 1. For each accounting change DRS undertook, indicate the type of change and how DRS should report the change. Be specific. 2. Why should companies disclose changes in accounting principles? ***********************************************

25. ACC 306 Week 5 Assignment E 20-18, P 21-11, P 21-14 For more classes visit www.snaptutorial.com ACC 306 Week 5 Assignment E 20-18, P 21-11, P 21-14 *********************************************** ACC 306 Week 5 Ethics Case 20-5 Softening the blow

26. For more classes visit www.snaptutorial.com Ethics Case 20–5 Softening the blow ● LO1 LO2 LO3 Late one Thursday afternoon, Joy Martin, a veteran audit manager wit h a regional CPA firm, was reviewing documents for a long- time client of the firm, AMT Transport. The year- end audit was scheduled to begin Monday. For three months, the economy had been in a down cycle and the tran sportation industry was particularly hard hit. As a result, Joy expected A MT’s financial results would not be pleasant news to shareholders. How ever, what Joy saw in the preliminary statements made her sigh aloud. R esults were much worse than she feared. “Larry (the company president) already is in the doghouse with share holders,” Joy thought to herself. “When they see these numbers, they’ll hang him out to dry.” “I wonder if he’s considered some strategic accounting changes,” she thought, after reflecting on the situation. “The bad news could be softene d quite a bit by changing inventory methods from LIFO to FIFO or reco nsidering some of the estimates used in other areas.” Required: 1. How would the actions contemplated contribute toward “softening” the bad news? 2. Do you perceive an ethical dilemma? What would be the likely impact o f following up on Joy’s thoughts? Who would benefit? Who would be in jured? ***********************************************

27. ACC 306 Week 5 Ethics Case 21-7 For more classes visit www.snaptutorial.com Ethics Case 21–7 - Ben Naegle - Where’s the cash? ● LO1 LO3 After graduating near the top of his class, Ben Naegle was hired by th e local office of a Big 4 CPA firm in his hometown. Two years later, im pressed with his technical skills and experience, Park Electronics, a large regional consumer electronics chain, hired Ben as assistant controller. T his was last week. Now Ben’s initial excitement has turned to distress. The cause of Ben’s distress is the set of financial statements he’s stare d at for the last four hours. For some time prior to his recruitment, he ha d been aware of the long trend of moderate profitability of his new empl oyer. The reports on his desk confirm the slight, but steady, improvemen ts in net income in recent years. The trend he was just now becoming aw are of, though, was the decline in cash flows from operations. Ben had sketched out the following comparison ($ in millions): Profits? Yes. Increasing profits? Yes. The cause of his distress? The o minous trend in cash flow which is con sistently lower than net income. Upon closer review, Ben noticed three events in the last two years tha t, unfortunately, seemed related:

28. a. Park’s credit policy had been loosened; credit terms were relaxed and pa yment periods were lengthened. b. Accounts receivable balances had increased dramatically. c. Several of the company’s compensation arrangements, including that of the controller and the company president, were based on reported net inc ome. Required: 1. What is so ominous about the combination of events Ben sees? 2. What course of action, if any, should Ben take? *********************************************** ACC 306 Week 5 Final Lease Paper (2 Papers) For more classes visit www.snaptutorial.com ACC 306 Week 5 Final Paper (Lease)

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