Category: Accounting

Is the information in the financial reports more or less relevant under ASU 2016-01 vs. cost method? Explain your answer for marketable and non-marketable equity securities.

Multiple Choice Questions

Before a business combination the target’s retained earnings was $50K. Right after the business combination and initial elimination entries, the consolidated retained earnings on the parent’s balance sheet will be $50K higher.

a. True
b. False

2. Company A has an investment in Company B. Company B has $10K of net income during the year. How does the $10K earned by Company B impact Company A?

Company B’s net income will result in Company A’s investment account under the equity method:
a. no change
b. increase
c. decrease
.

Company B’s net income will result in Company A’s investment account under the fair value (no significance influence) method
a. no change
b. increase
c. decrease

Part A. Pre ASU 2016-01, a company reported its equity investments with no significant influence at cost – impairment of $350 million. The company currently has $100 million of unrealized losses from these investments (difference in fair value from cost). After
the implementation of ASU 2016-01 in Year 1, the company’s:

Before when it used the cost method, net income would now be
a. higher
b. lower
c. the same as.

Before when it used the cost method, retained carings would now be
a. higher
b. lower
c. the same as.

Before when it used the cost method, accumulated other comprehensive income would be
a. higher
b. lower
c. the same as.

before when it used the cost method, total asset would be
a. higher
b. lower
c. the same as.

(You are assuming there are no changes to any other
accounts besides just the change from ASU 2016-01)

It is now Year 2. From Year 1 to Year 2 the investments have increased in value by $20 million from the end of Year 1 ($250 million fair value at end of Year 1 now fair value is $270 million). The company updated its investments to follow 2016-01 last year in Question 1. How are the following impacted from the $20 million increase in Year 2?

From this $20 million increase in fair value, net income would
a. increase
b. decrease
c. the same

From this $20 million increase in fair value, retained earnings would
a. increase
b. decrease
c. the same

From this $20 million increase in fair value, accumulated other comprehensive income would
a. increase
b. decrease
c. the same

From this $20 million increase in fair value, total assets would
a. increase
b. decrease
c. the same

Choose the following impacts that are correct for debt investments:

Unrealized gains and losses are reported on the income statement for
a. held to maturity securities only
b. AFS securities only
c. trading securities only
d. trading, AFS, and held to maturity securities
e. AFS and held to maturity securities
f. trading and AFS securities

The following investment(s) is(are) reported at fair value on the balance sheet:
a. trading, AFS, and held to maturity securities
b. AFS and held to maturity securities
c. AFS securities only
d. trading and AFS securities
e. trading securities only
f. held to maturity securities only.

5. Comparing the fair value method under ASU 2016-01 to the cost – impairment method…
Is the information in the financial reports more or less verifiable under ASU 2016-01 vs cost
method? Explain your answer for marketable and non-marketable equity securities.

Is the information in the financial reports more or less relevant under ASU 2016-01 vs. cost method? Explain your answer for marketable and non-marketable equity securities.

Explain why banks do not want increased volatility in their regulatory capital and note what type of debt investment would be most desirable for specifically large banks.

Which one of the following statements best describes the evidence obtained and the opinion given in a reasonable assurance engagement?

UK Audit and Assurance

Which three of the following are key elements of a general assurance engagement?
a. A user
b. A subject matter
c. Suitable criteria
d. An assurance file

Which three of the following describe aspects of the expectations gap with respect to external audit?
a. Users do not understand the meaning of the audit opinion
b. Users are not aware of the limitations of the audit process
c. Users do not appreciate that reasonable assurance is a low level of assurance
d. Users do not understand what the audit process involves

Which two of the following are limitations of the provision of assurance?
a. Assurance work is carried out by people independent of the entity
b. Sampling is used in assurance work
c. Client systems have inherent limitations
d. Unqualified staff may be used on assurance engagements

In any assurance engagement there are three parties involved- the responsible party, the practitioner and the user. In respect of any given subject matter state which party:
determines the suitable criteria?
a. User
b. Practitioner
c. Responsible Party
Provides an opinion on whether the subject matter complies with the criteria?
d. User
e. Practitioner
f. Responsible party

Which one of the following statements best describes the evidence obtained and the opinion given in a reasonable assurance engagement?
a. Sufficient and appropriate evidence and a negatively worded opinion
b. Sufficient appropriate evidence and a positively worded opinion
c. A lower level of evidence and a negatively worded opinion
d. A lower level of evidence and a positively worded opinion

For each of the following statements, select whether they are true or false
A statutory audit gives reasonable assurance that the financial statements give a true and fair view
A. True
B. False
A negative assurance conclusion gives a limited level of assurance
A. True
B. False
Reasonable assurance is absolute assurance of the correctness of the subject matter
A. True
B. False

Jones LLP is the external auditor of Blue PLC, a listed company. The directors of Blue PLC have requested that Jones LLP carry out a review engagement assessing the effectiveness of its corporate governance policies against the UK corporate governance code. For the above review engagement select which part of the engagement description constitutes the subject matter, suitable criteria and which party is the responsible party.

Subject matter
A. Blue PLC’s corporate governance policies
B. The UK Corporate Governance Code
Suitable criteria
A. Blue PLC’s corporate governance policies
B. The UK corporate governance code
Responsible Party
A. Jones LLP
B. The directors of Blue PLC

For each of the following statements relating to the provisions of the Companies Act 2006, select whether they are true or false.

An individual or firm is eligible for appointment as a statutory auditor if the individual or firm is a member of a recognised supervisory body and is eligible for appointment under the rules of that body.
A. True
B. False
A person may not act as statutory auditor of a company if that person is an officer of employee of the company
A. True
B. False
Which one of the following best describes the concept of assurance?
Assurance refers to

An assurance firm’s high level of satisfaction as to the reliability of an assertion being made by one party for the use of another party

An assurance firm’s satisfaction as to the reliability of an assertion being made by one party for the use of another party

A user’s satisfaction as to the reliability of the assertion being made by another party

An assurance firm’s limited level of satisfaction as to the reliability of an assertion being made by one party for the use of another party?

Identify the following ratios for the company: current, quick, gross profit margin, price/earnings, debt-to-equity, return on assets, and return on equity. What does each ratio tell you about this firm’s current financial position?

Research and describe the company’s primary business activities. In addition, provide information regarding the company’s history, position within their industry, competition, recent developments, and future direction.

Analyze the company’s last four annual income statements. Identify trends, concerns, and opportunities.

Analyze the company’s last four annual cash flow statements. Identify trends, concerns, and opportunities.

Analyze the company’s last four annual balance sheets. Identify trends, concerns, and opportunities.

Analyze the company’s last four statements of stockholders’ equity.

Identify trends, concerns, and opportunities.

Identify the following ratios for the company: current, quick, gross profit margin, price/earnings, debt-to-equity, return on assets, and return on equity. What does each ratio tell you about this firm’s current financial position?

Explain why you would or would not recommend an investment in this company. Justify your recommendations based on the financial analysis and research you conducted regarding this firm.

Describe how you consider the systems might be improved considering the challenges the company is facing.

Performance Management and control

Critically evaluate the current performance measurement, management reporting, and budgeting systems at We Build Ltd. and highlight what you consider to be the problems of the system.

Describe how you consider the systems might be improved considering the challenges the company is facing.

What does Generally Accepted Accounting Principles (GAAP) mean?What represents the results of the accounting process that are summarized in periodic reports?

Why do we call accounting “the language of business”? Hint: Think in terms of the purpose of accounting.

What does Generally Accepted Accounting Principles (GAAP) mean?

What represents the results of the accounting process that are summarized in periodic reports?

If you were a business owner, what would be your choice of business entity?

How is accounting useful for charities such as BHF, on their Performance?Explain the reason why you are doing the research?

Significance of accounting in the performance and development of charities

What have you found as part of this project? What was the purpose? What did you find?

Background of accounting for charities- what procedures are used?

What needs to be considered when accounting for charities?

How is accounting useful for charities such as BHF, on their Performance?

Explain the reason why you are doing the research?

Why this research is important?

How could this research help charities understand the importance of accounting.

What was their aim of research and explain their finding of research?

What is your understanding of the results of their findings?

Why do you think this is an important topic to discuss?

Compare and contrast the net present value and internal rate of return methods for capital budgeting. What are the advantages and disadvantages of each?

Select one of the following questions to answer in your discussion:

Describe a flexible budget, how it works, and the associated variances?

What are the six key concepts for managerial accountants to understand when making decisions for their organizations:

Discuss volume trade-off decisions to include the terms constraint and bottleneck. provide examples.

Discuss the term capital budgeting. Further discuss typical capital budgeting decisions and provide examples.

Compare and contrast the net present value and internal rate of return methods for capital budgeting. What are the advantages and disadvantages of each?

Must use two sources and the BIBLE.

Are witnesses required for a holographic will? Should the executed holographic will operate as Liu’s will pending the execution of the typewritten will? Explain.

Taxation of Estates and Trusts (Wills)

Is a signed holographic will a valid will in your state?

Are witnesses required for a holographic will?
Should the executed holographic will operate as Liu’s will pending the execution of the typewritten will? Explain.

 Describe the changes and what would be the impact on Corporate America, society, CPA firms and other constituencies. IFRS and GAAP, Corporate Governance, issues, road blocks and more.

Try to find review articles about the new Ethics, Fraud & Corporate Governance” policy and other basic information to use for background (outside of what is provided in textbook)

Write the paper

You may use as many extra review articles or other empirical articles as you would like.

Describe the changes and what would be the impact on Corporate America, society, CPA firms and other constituencies. IFRS and GAAP, Corporate Governance, issues, road blocks and more. You are to cover this topic in relation to any aspects of it. Examples: issues with backdating contracts, issues with taxes, and more.