Reference no: EM13755303
Addison Manufacturing holds a large portfolio of debt and equity securities as an investment. The fair value of the portfolio is greater than its original cost, even though some securities have decreased in value. Sam Beresford, the financial vice president, and Angie Nielson, the controller, are near year-end in the process of classifying for the first time this securities portfolio in accordance with GAAP. Beresford wants to classify those securities that have increased in value during the period as trading securities in order to increase net income this year. He wants to classify all the securities that have decreased in value as available-for-sale (the equity securities) and as held-to-maturity (the debt securities).
Nielson disagrees. She wants to classify those securities that have decreased in value as trading securities and those that have increased in value as available-for-sale (equity) and held-to-maturity (debt). She contends that the company is having a good earnings year and that recognizing the losses will help to smooth the income this year. As a result, the company will have built-in gains for future periods when the company may not be as profitable.
Instructions
Answer the following questions.
(a) Will classifying the portfolio as each proposes actually have the effect on earnings that each says it will?
(b) Is there anything unethical in what each of them proposes? Who are the stakeholders affected by their proposals?
(c) Assume that Beresford and Nielson properly classify the entire portfolio into trading, available-for-sale, and held-to-maturity categories. But then each proposes to sell just before year-end the securities with gains or with losses, as the case may be, to accomplish their effect on earnings. Is this unethical?
|
Internal control environment
: Compare the existing internal control environment at Microsoft to management's responsibility for designing effective internal controls outlined in the textbook, and identify the deficiencies that existed.
|
|
Compute the net tax payable or refund due
: Tim and Sarah Lawrence are married and file a joint return. Tim’s Social Security number is 123-45-6789, and Sarah’s Social Security number is 111-11-1111. They reside at 100. Olive Lane, Covington, LA 70434. They have two dependent children, Sean an..
|
|
Explain why shared accounts is considered bad practice
: In your own words, explain why each of the following is considered bad practice:
|
|
What friedan mean by phrase the problem that has no name
: What does Friedan mean by the phrase "the problem that has no name"? What kinds of women seem to be excluded from her account of the problem?
|
|
Large portfolio of debt and equity securities as investment
: Addison Manufacturing holds a large portfolio of debt and equity securities as an investment. The fair value of the portfolio is greater than its original cost, even though some securities have decreased in value. Will classifying the portfolio as ea..
|
|
Distinction between input and output lines
: How many cross points would be required if there were no distinction between input and output lines (i.e., if any line could be interconnected to any other line serviced by the crossbar)?
|
|
Network management architecture is
: The third piece of network MANAGEMENT architecture is?
|
|
Role of healthcare marketing in an hcos
: What is the role of healthcare marketing in an HCO's strategic planning process? Provide an example. Be sure to identify and discuss basic marketing elements. Be sure to discuss why effective communication is paramount in getting the right message..
|
|
Occur during inflation of the airbag are complete
: 2) What is the maximum size of airbag (in litres) that can be inflated using 100 g of NaN3 at 25.0 °C and 101 kPa? Assume that all of the chemical reactions that occur during inflation of the airbag are complete.
|