codification oCh 15 FASB Codification Case Treasury Stock Facts Target Inc. arranged to purchase a large block of its common stock from a major shareholder. The total number of shares purchased is 10,000 and these shares are to be held as treasury shares. Target Inc. uses the cost method to account for treasury shares. This shareholder had a controlling interest before the transaction. After the transaction this shareholder no longer has a controlling interest.
Analysis of Issue On what basis did Medicis initially justify the use of replacement cost to estimate returns? Why is it valid or invalid? Medicis justified the use of replacement to estimate returns using ASC 605-15-15-2 (Revenue Recognition - Products – Scope and Scope Exceptions) which states including: 15-2 (a). [E]xchanges by ultimate customers of one item for another of the same kind, quality, and price (for example, one color or size for another) are not considered returns for purposes of this Subtopic. E&Y reasoned this as it creates an exception to the general rule of reserving for expected future product returns at the gross sales price and deferring the recognition of an equal amount of revenue.
Suppose that consumer spending is expected to decrease in the near future. If output is at potential output, which of the following policies is most appropriate according to the AS/AD model a. an increase in government spending b. an increase in taxes c. a reduction in government spending d. no change in taxes or government spending. 4. What tool of monetary policy will the Federal Reserve use to increase the federal funds rate from 1% to 1.25%? A.
Following graph depicts the effect of inflation on cost One of the method firms use for adjusting for inflation is by deflating nominal cost data using an implicit price deflator. Usually the deflator value is obtained from Survey of current business for a period question. Nominal cost is divided by deflator to arrive at the real cost. Using real cost will help up the firm to come up with good a short run cost estimate. Since short run involves a smaller period the effect of inflation on input prices is ignored.
Peter Swap I. Issue: Will recognizing compensation expense as part of Mizri Corporation’s stock compensation plan faithfully represent the exchange? II. GAAP List: * 718-10-30-22: An equity instrument for which it is not possible to reasonably estimate fair value at the grant date shall be accounted for based on intrinsic value * 718-20-35-3: A modification of an equity award shall be treated as an exchange of the original award for a new award incurring additional compensation cost for any incremental value III. Alternatives: A.
Apparently, her calculation is wrong. To find the cost of debt, we should use the yield to maturity approach: PV=t=1Tc×FV(1+y)T+FV(1+y)T Nike’s bond with a current price of $95.60 will expire on 2021. If the NorthPoint Group decides to invest in 2001, interests will be paid semi-annually for 20 years at a rate of 6.75%. Thus we can calculate the current yield to maturity of the bond to represent the cost of debt before tax as following: 95.6=i=1406.75%×100(1+y)40+100(1+y)40 Question 4: What is your estimate of the debt cost of capital? According to
This section would focus on the possible cons of adopting IFRS in the U.S. faced by the same group of people discussed above. The auditors will have to make changes to the reports from the previous years for the comparative purposes. The public companies would have to bear a heavy monetary cost of transition from the U.S. GAAP standards to IFRS. It may affect the prices of the stocks of these companies, which in turn would be faced by the investors. This can affect the growth of the company.
Taking the original cost of the item minus the liquidation value will give them the loss for failing to sell that item, in essence overstocking an item. L.L. Bean has an annual cost of $10 million for having too much of the wrong inventory, according to the case. Another cost that is involved with overstocking is the annual holding time of their facility when they keep inventory for the next year. 2.
Accelerated depreciation refers to any one of several methods by which a company, for 'financial accounting' and/or tax purposes, depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset’s life. For financial accounting purposes, accelerated depreciation is generally used when an asset is expected to be much more productive during its early years, so that depreciation expense will more accurately represent how much of an asset’s usefulness is being used up each year. For tax purposes, accelerated depreciation provides a way of deferring corporate income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years. This is a valuable tax incentive that encourages businesses to purchase new assets. For financial reporting purposes, the two most popular methods of accelerated depreciation are the declining balance method and the sum-of-the-years’ digits method.
What information would you request? The quotes drastically differ from BL’s costs, especially for T-69 Follow up with the controller, Mike Carr. Info such as material and direct labor costs could be helpful. Is the cost savings sufficient enough to move the business to Mayes? Savings in purchasing cost: Annual demand: 800, 11.89*800 = $9512 per year.