ACC 312 Rutger University Week 1 Accounting Codification Questions

Accounting 312Research Assignment I
Instructions: This assignment must be submitted in the Submission folder named Research
Assignment I (under Submissions in D2L) no later than 9:00 a.m. Tuesday, September 13,
2022. No late submissions will be accepted/graded.
Only Word documents will be accepted (no Mac/Apple, pdf or google docs). You may type
your answers directly after each question.
Research the FASB codification on the issues listed below. To access the codification, use the
login information below for FASB Academic Accounting access.
Codification Login: http://aaahq.org/ascLogin.cfm
Your source for all answers will be the Codification.
1. Go to “General Principles”. Go To: 105-10-10-1. Answer the following in your
own words:
a. What is the Codification?
b. Which entities are required to follow the guidance in the Codification?
2.
Go to the Master Glossary: What is the definition of Inventory? (you may cut and
paste from the Codification)
3. You have just joined the Chicago office of the Blue Demon CPA firm. We are glad
to have you on our accounting team. We are an accounting firm that works with
clients to solve their accounting issues. Our client, Buchanan, Inc. is a company
which sells industrial equipment. Buchanan, Inc. is a privately held company that
has been in business for 5 years.
Buchanan, Inc. wants to better understand some of the requirements for correctly
implementing U.S. GAAP. Your role is to provide the answers to their questions.
a. Buchanan, Inc. is unsure which financial statements the company should
prepare for annual reporting. Go to 205-10-45.
Question:
Paragraph
where guidance
is located
Answer: (in your own
words)
Which financial
statement(s) is the company
required to prepare for
annual reporting?
b.
Buchanan is unsure of how to determine the amount to record for inventory. In
order to give them the correct accounting advice you are going to look in the
codification. Go to ASC 330-10- 30 -1. Based upon the guidance in this
paragraph what will you tell the client about the correct amount to record for
inventory. Answer this question in your own words.
c.
Buchanan is unsure of what inventory methods are acceptable for calculating
ending inventory and cost of goods sold. Go to ASC 330-10-30-9 to provide
the guidance for this question. Answer this question in your own words.
d.
The market price of the inventory that Buchanan acquired last month has
increased. Due to this price increase Buchanan would like to increase the
amount recorded for this inventory on the balance sheet and has asked if this is
permissible. Go to ASC 330-10-35-15 to determine the guidance for this issue.
What advice will you give Buchanan?
e.
As of August 31, 2022 Buchanan has $750,000 in Accounts Receivable from
credit customers. In addition, the CEO for Buchanan received a $100,000 loan
from the company which is scheduled to be repaid in 2 months. The company
would like to present the following in the August 31, 2022 balance sheet.
Receivables
$850,000
Is this the correct presentation for the receivables in the company
balance sheet. Go to ASC 310-10-45 to find the guidance.
Question:
Paragraph
where
guidance is
located
Answer: (in your own
words)
Is Buchanan permitted
combine the Accounts
Receivable and CEO
loan as one line item in
the balance sheet?
4.
California University has a fiscal year ending June 30th. California University (CU)
has a policy in which all tenured professors who have worked for CU for a minimum
of 5 years may take a one semester sabbatical every 5 years in order to focus
exclusively on research. During the sabbatical the professor will still be compensated
by CU. As of June 30, 2022 CU estimates that the annual payroll cost for faculty
taking sabbaticals in the upcoming fiscal year to be $2,000,000. Is CU required to
accrue the cost of the faculty sabbaticals as of June 30, 2022?
a. What is the accounting issue?
b.
Which of the following section(s) would most likely contain the
directly on point guidance for this accounting issue?
i. Recognition
ii. Initial Measurement
iii. Subsequent Measurement
iv. Other Presentation Matters
5.
Shamrock Corporation has a December 31st year end and is publicly traded.
Shamrock Corporation announced in September 2022 a 10% stock dividend for all
common shareholders. Shamrock’s CFO is unsure if the stock dividend should be
measured at the par value of the stock or at the fair value. Assume that the total value
of the stock dividend measured at par value is $500,000 and the value measured at fair
value is $1,200,000.
The following guidance is available from the codification. Which of these references
is the directly on point guidance? (Hint: determine the issue and then determine which
option below addresses the issue)
a.
Many recipients of stock dividends look upon them as distributions of
corporate earnings, and usually in an amount equivalent to the fair value of
the additional shares received. If the issuances of stock dividends are so
small in comparison with the shares previously outstanding, such issuances
generally do not have any apparent effect on the share market price and,
consequently, the fair value of the shares previously held remains
substantially unchanged.
b.
In accounting for a stock dividend, the corporation shall transfer from
retained earnings to the category of capital stock and additional paid-in capital
an amount equal to the fair value of the additional shares issued. Unless this is
done, the amount of earnings that the shareholder may believe to have been
distributed to him or her will be left, except to the extent otherwise dictated
by legal requirements, in retained earnings subject to possible further similar
stock issuances or cash distributions
c. The number of additional shares issued as a stock dividend may be so great that
it has, or may reasonably be expected to have, the effect of materially reducing
the share market value. In such a situation, because the implications and
possible shareholder belief are not likely to exist, the substance of the
transaction is clearly that of a stock split.