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SOLUTION MANUAL for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee SevelSolution Manual for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan£15.33
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SOLUTION MANUAL for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee SevelSolution Manual for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan
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Intermediate Accounting Volume 1 8th Editio
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Intermediate Accounting Volume 1 8th Editio
SOLUTION MANUAL for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee SevelSolution Manual for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan| complete guide SOLUTION MANUAL for Interm...
Notes for Discussion With Elicia:
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There is a conflict of interest between the objectives of Elicia and Dabika due to
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the buyout clause in the shareholder agreement. Elicia will have a motivation to
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decrease shareholders‘ equity since this will reduce the amount that she will be
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required to pay to buy out Dabika. Dabika will be interested in increasing
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shareholders‘ equity to increase the amount she will receive. It must be clarified
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who I am working for since I may have a conflict of interest since I know both
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parties.
krte
It is important that all accounting policies are ‗fair‘ to both sides.
k r t e k r t e k r t e k r t e k r t e k r t e k r t e k r t e k r t e k r t e k r t e k r t e What k r t e i
considered
k r t e
‗fair‘? From Dabika‘s perspective, fair could be accounting policies consistent with
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prior years. From Elicia‘s perspective, fair could be if the economic events change
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the accounting policy would change. Fair could be both sides split the difference
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where Dabika and Elicia disagree on value. In the future it is important that the
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shareholders agreement is more specific.
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Due to the choices allowed within GAAP a policy could be selected that would be
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more beneficial to one of the parties. It is assumed since this is a small private
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company that they are using ASPE. There is no indication that neither Elicia or
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Dabika would be using IFRS nor that the bank requires it.
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Inventory
Elicia wants to write off the inventory value for the garden gnomes and statues and
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this will decrease the amount of the payment to Dabika. According to ASPE,
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inventory would be valued at the lower of cost and net realizable value. Even
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though this inventory has been sitting in the gardening centre there is still a few
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being sold each year. This indicates there is still some value associated with the
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inventory and therefore it should not be written down to zero. It should be
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determined what the net realizable value of this inventory is to determine the
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amount of the write off. If it is all written off and then sold at a later date this
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would not be fair to Dabika since Elicia would get the benefit of a reduced
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shareholders‘ equity and thus a lower payment required to Dabika. The purchase
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of this inventory would have been a decision made by both Dabika and Elicia so
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if the inventory is unsellable they should both bear the impact of this decision.
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Warranty
According to ASPE the accounting policy is appropriate and a warranty expense
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should be included for the guarantee. The impact is that this would decrease
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shareholders‘ equity and the amount of the payment to Dabika. This is a new
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policy that did not exist until this year. The estimate of 5% was only based on
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sales from the fall. Since it is a new policy that was made by Elicia on her own
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krte krte krte krte krte
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, it may be appropriate that the impact of this is excluded from the calculation of
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shareholders‘ equity. At a minimum the estimate should
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krte krte krte krte krte
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, be reviewed to determine if it is reasonable. Furthermore, the estimate, if included
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in the shareholders‘ equity calculation, should be agreed upon by both Elicia and
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Dabika.
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Computer Equipment krte
ASPE is flexible in the method used to depreciate assets. The declining balance
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method using 40% would write off the value of the computers in approximately
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two years. This is very fast especially for a small company that is likely to use a
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computer for a longer period of time due to limited resources as compared to a
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larger company. Just because the computer may become obsolete quickly does not
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mean the business will not continue to derive benefit from the continued use of
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the computer. The impact of higher depreciation is a reduction in the payment to
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Dabika. If we look at consistency with other assets it would be appropriate to use
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the straight line method. We should inquire with Elicia as to her rationale for
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choosing declining balance instead of the straight-line depreciatoin method used for
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all other assets and determine the declining method reflects the actual usage of the
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asset (i.e. more of the asset used earlier on). Since again since this was a decision
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made only be Elicia maybe it should be excluded from the calculation or maybe
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the policy should be consistent with their other assets but further information is
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I am happy to respond to your questions regarding the accounting changes that the
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new banker has requested. It is important that you realize that the needs of the
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banker are different than your needs. The bank is interested in your ability to
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make loan payments; therefore, the banker wants to assess future cash flows,
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collateral and your ability to pay back the loan.
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First, there is the issue of moving to the accrual basis. While it‘s true that,
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ultimately, what you earn is the net cash in your pocket, the cash basis of
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accounting doesn‘t wholly capture all of the cash flows that will happen in the
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future. Your banker wants to know what liabilities you‘ll have to pay in the
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coming months (and years), and what amounts you currently are owed that will be
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collected in the future weeks or months. The accrual method really gives a clear
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picture of future ―cash flow‖.
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It‘s for much the same reason that he wishes you to show your cattle at market
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value. I‘m sure he recognizes that both your dairy cattle and your breeders are
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intended for
krte continued use and are not for sale in the normal course of
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business.As saleable stock, the cattle represent a potential cash resource in the
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event of bankruptcy or default. After all, you probably use the cattle as collateral
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for loans, and he needs to know the value of that collateral.
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You should not try to estimate the value of your stock by yourself. For credibility,
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you should obtain an independent estimate. The valuation will require a
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krte krte krte krte krte
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