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accounting essay ques -Environment and Theoretical Structure of Financial Accounting

Alpaca Corporation had revenues of $200,000 in its
first year of operations. They have not collected on $20,000 of their sales,
and still owe $25,000 on $70,000 of merchandise they purchased. The company had
no inventory on hand at the end of the year. The company paid $15,000 in
salaries. Owners invested $20,000 in the business and $20,000 was borrowed on a
five-year note. The company paid $2,000 in interest that was the amount owed
for the year, and paid $6,000 for a two-year insurance policy on the first day
of business. Alpaca has an effective income tax rate of 40%.

98. Compute net income for the first year for Alpaca
Corporation.

99. Compute the cash balance at the end of the first
year for Alpaca Corporation.

Tri Fecta, a partnership, had revenues of $360,000 in
its first year of operations. The partnership has not collected on $35,000 of
its sales, and still owes $40,000 on $150,000 of merchandise they purchased.
There was no inventory on hand at the end of the year. The partnership paid
$25,000 in salaries. The partners invested $40,000 in the business and $25,000
was borrowed on a five-year note. The partnership paid $3,000 in interest that
was the amount owed for the year and paid $8,000 for a two-year insurance
policy on the first day of business.

100. Compute net income for the first year for Tri
Fecta.

101. Compute the cash balance at the end of the first
year for Tri Fecta.

The following information ($ in millions) comes from
a recent annual report of Amazon.com, Inc.:
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102. Compute Amazon’s balance in cash at the beginning
of the year.

103. Compute Amazon’s total liabilities at the end of
the year.

104. Compute cost of goods sold for the year.

105. Compute the income before income tax for
Amazon.

106. Compare net income (loss) for the year to net
cash flow from operating activities. Why are these amounts different? Briefly
explain.

107. For each of the following situations, state
whether you agree or disagree with the financial reporting practice employed,
and briefly explain the reason for your answer.
1. Cantor Corporation’s accountant increased the book value of a patent from
its original cost of $1 million to its recently appraised value of $6 million.
2. Stanton Corporation paid for the personal travel of its chief financial
officer and charged travel expense.
3. At the end of its 2011 fiscal year, Dower, Inc. received an order from a
customer for $60,000. The merchandise will ship early in 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap. Because the sale
was made to a long-time customer and the invoice was paid in 2011, the
controller recorded the sale in 2011.
4. In the middle of its 2011 fiscal year, Sanguinetti, Inc. paid $12,000 to its
insurance company for one-year comprehensive insurance coverage. Sanguinetti
recorded the entire expenditure as an expense in 2011.
5. The Churchill Pharmaceutical Company included a note in its financial
statements that described a pending lawsuit against the company.
6. The Daily Corporation, a company whose securities are publicly traded,
prepares monthly, quarterly, and annual financial statement for internal use
but disseminates to external users only the annual financial statements.

The following answers point out the key phrases that
should appear in students’ answers. They are not intended to be examples of
complete student responses. It might be helpful to provide detailed
instructions to students on how brief or in-depth you want their answers to be.

108. Identify or define the following terms: a.
economic entity, b. going concern.

109. List the four financial statements most
frequently provided to external users.

110. Explain and show an example of how the FASB’s
conceptual framework is needed in formulating standards on controversial
topics.

111. What is the SEC and how is it involved with
accounting standard setting?

112. What is the EITF and what is its purpose?

113. Accounting standard setting has been
characterized as a political process. Discuss this proposition giving an
example.

114. What are the key provisions of the Public Company
Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002?

115. How does the value of an audit affect financial
statements?

116. What provisions did the Public Company Accounting
Reform and Investor Protection (Sarbanes-Oxley) Act of 2002 make for
performance of non-audit services by an audit firm?

117. Briefly describe the materiality
constraint.

118. Give an example of a violation of the stable
monetary unit assumption. How would it affect the quality of financial
statement information?

119. Identify or define the following terms: a.
periodicity, b. monetary unit.

120. Identify or define the following terms: a.
historical cost, b. realization.

121. How does GAAP define fair value?

122. Accounting standards have developed over time to
reflect changes in the business world as well as changes in our ability to
account for such changes. Using the example of marking assets and liabilities
to their fair value, explain why you would expect accounting standards to
change.

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