Christopher Nelson Intermediate Accounting II Research Case 1 1. As of December 31, 2011, what amount, if any , of sales taxes due should be recognized in eVade’s financial statements? Assuming the financial statements for year ending 12/31/2011 have not been issued, an adjustment to sales tax liability can be recognized for the entire $25,000.000. As well, affected prior period statements will need to be re-stated. This is consistent with FASB codification ASC250-10-45-23 2.
• What amount of accounts payable did the company have at the end of its 2 most recent annual reporting periods? Accounts payable are the obligation the organization has to its creditors. Any money that is owed, invoices, bills, and statements that are owed to by outside contractors are accounts payable. In June 11, 2011, the accounts payable amounts for PepsiCo were 3,865.00. In March 19, 2011 the accounts payable were 2,881.00.
Other things equal they prefer to pay more for stocks that are more risky and have uncertain cash flows. • Investors are risk averse. Other things equal they prefer to pay more for stocks that are less risky and that have relatively certain cash flows than other stocks. When determining the value of a firm, which of the following statements is ture? • A financial asset is considered to have value if it has the ability to generate positive cash flows.
INTERMEDIATE ACCOUNTING II/ Intermediate Accounting, Spiceland/Sepe/Nelson Re: Judgment Case 18-5 Requirement 1. The two alternatives Alcoa has for accounting for the repurchase of it’s shares are: 1) The shares can be formally retired. 2) The shares can be named treasury stock Either way, total shareholders’ equity remains the same. Cash is used to repurchase common stock so the effect is to reduce both cash and shareholders’ equity. This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet.
What course of action should the firm take? Current Balance Sheet: Assets: $100 Debt: $10 Equity: $90 Optimal Balance Sheet: Assets: $100 Debt: $20 Equity: $80 c. As a firm initially substitutes debt for equity financing, what happens to the cost of capital, and why? When a firm substitutes debt for equity financing the cost of capital will initially decrease because the effective cost of debt is less than the growth of the cost of equity. d. If a firm uses too much debt financing, why does the cost of capital rise? If a firm uses the more and more debt for financing, the cost of capital will increase.
The higher the ratio the more assurance exists that the retirement of current liabilities can be made. The current ratio measures the margin of safety available to cover any possible shrinkage in the value of current assets. Normally a ratio of 2 to 1 (2.0) or better is considered good. Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business.
The diagram above shows that real GDP has increased from Y1 to Y2 which means that economic growth has increased. As a result, unemployment falls as we are getting closer to the inelastic part of the AS curve, which is much needed as “unemployment has shot up” in this economic crisis. However, inflation has risen from P1 to P2 which means that our exports become less competitive so our trade deficit gets worse. However, the rise in inflation is needed as inflation is falling below the 2% target. The changes in the government’s macroeconomic objectives depends on where we are on the AS curve as shown below.
Debit - Duty or obligation to pay money, deliver goods, or render service under an express or implied agreement. Use of debt in a firm's financial structure creates financial leverage that can multiply yield on investment provided returns generated by debt exceed its cost. Because the interest paid on debt can be written off as an expense, debt is normally the cheapest type of long-term financing. 11. Yield - Annual income earned from an investment, expressed usually as a percentage of the money invested.
You decide week 6 The stock should not be purchase by Mr. Jones. Mr. Jones acquiring the assets, liabilities and also would inherit the contractual obligations of the selling corporation, would, be the results of the purchase. In lay terms, he has bought the existing Smithon Corporation and he is responsible of ensuring daily operations run efficiently but the tax aspect of acquisition he is responsible for existing and any future tax liabilities that the selling corporation had. It would be my advice for Mr. Jones to not buy the stock because of the liability of current and future tax obligations which Mr. Jones would incur from the purchase of the stock. Since the tax identity of Smithon corporation would have not ceased, it is not
If so, what amount should be recorded; and should the amount of the adjustment be considered a 2009 event or a prior period adjustment? For the year- end December 31, 2009, financial statement M should adjust its liability to $18.5 million FASB 450-20-50-3 through 50-8 required disclosure of additional exposure to loss if there is a reasonable possibility that there are additional amounts to be paid. The amount of the adjustment would be considered a 2009 event period adjustment. 3. Should M record the reduction of the previously recorded loss contingency in 2010 (upon the