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.
The chance of future events’ occurrence is small. When the company recognizes the likelihood of a loss, contingencies are charged against income and a liability is recorded if conditions are met. 1. Information available prior to the issuance of the financial statements states that the company probable impairs an asset or incurs a liability at the date of the financial statements. 2.
The amount is determined with guidance from 450-20-30-1, which states to accrue the low end of a range, unless one estimate is more likely than another. That entry would be: Lawsuit Loss $17,000,000 Lawsuit Liability $17,000,000 Alternate to question 1: I believe that if management chooses to, they could make an argument to book the low end of the estimate. This fact is made apparent by the same section of the codification, 450-20-30-1 which allows the principle of conservatism. If
Once the predicted demand is frozen, L.L. Bean uses its historical demand and forecast data to analyze the forecasting errors. The forecast errors are calculated for each individual item and a frequency distribution of these is made, which is further used as a probability distribution for future errors. Thus, if 50% of the errors were within 0.7 and 1.6, the forecast for this year would be adjusted accordingly. Next, each item commitment quantity was calculated using its contribution margin and its total contribution in dollar to the revenue of the company.
It also refers to the worth of the asset. The relevance of market value to accelerated depreciation is that market valuation through accelerated depreciation creates a market for used assets and their sell until they are valueless. Inter-period tax allocation becomes present when there are differences between income tax rules and GAAP rules. An example of this is shown in inter-period tax allocations relevance to depreciation. Depreciation for income tax is based on income tax code and requires that equipment be depreciated over 7 years.
If Shakespeare were an SEC filer, ASC 805-10-50-2(h) requires Shakespeare to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting
General and Commercial Basis Accounting Principles Generally accepted accounting principles (GAAP) state the standard framework of guidelines for financial accounting used in any given jurisdiction; commonly known as standard accounting practice or accounting standards. These contain the rules, standards, and conventions that accountants practice in recording, summarizing and in the preparation of financial statements. Hubpages.com discusses commercial accounting, also known as profit accounting, defining that it performs mainly by profit and loss. The reporting for a profit organization is directed to the investors. ("The Principles of Commercial Accounting and Fund Accounting", 2011).
Assuming 2% growth, the terminal value has a NPV of $4,843 million for 2009 and beyond. Note that without the terminal value for sales after 2009, the investment has a negative NPV of $296 million. Discount rate is calculated by; R = Rf + (Rm – Rf), so the US bonds rate (Risk-free rate, Rf) and the evaluated riskiness (), and Market riskiness (Rm) all affect the discount rates. Also note that the operating margins are computed before repayment of capital contributions from vendors or risk sharing partners (RSPs) and launch aid from the partner national governments. 2.
In practice, the risk-free rate is often a short-term Treasury rate. We found that a 90-Day Treasury bill is most often used. By combining our analysis above, we compute the WACC calculation as following: 1. The value of debt (based on Exhibit 3). Since the book value of debt may represent the market value, we merely need to sum up the values of Long-term debt, Notes payable,
APV vs. WACC Problem Given the following information, answer questions 1 and 2 below. Company and market data: Rf = 4% Rm = 10% βu = 0.9 D/V (target) = 40% RD = 4% Tc = 30% Project CFs: I0 = 1000, CF1 = 300, CF2 = 400, CF3 = 500 1) Calculate the project’s value using WACC 2) Calculate the project’s value using APV -Oops, we can’t until we know the financing (debt) pattern over time. (a) OK, assume the project is financed with 60% debt which is paid off in three equal, annual installments. (b) Now assume instead of (a) that the debt is rebalanced to be consistent with the firm’s target debt ratio (i.e. D/V = 40%).