Reference no: EM132345385
Complete the following homework questions and upload answers (saved in a Word document) to this assignment.
Chapter 7 - Using the Codification to Research Measurement Issues (questions #9, 14, & exercises 3, 9, 12 and 13 in your text)
Review Questions
9. What does it mean, for most of the Codification's measurement guidance to be "topic-specific"? What implications does this have for a researcher, looking for guidance in the Codification?
14. Describe two ways in which the present value of a note receivable exchanged for property, goods or services might be determined.
Exercises
Other Measurement Topics
Respond to the following using guidance in the Codification. Cite your sources for all responses.
3. What basic measurement principle exists for the measurement of nonmonetary transactions? What are two examples in which modifications to the basic principle apply?
9. Once an entity has determined that it is probable of having an environmental remediation liability, what costs must the entity initially include in its estimated environmental remediation liability (an "environmental obligation")?
12. In periods subsequent to the acquisition date in a business combination, what guidance is available regarding the measurement (by an acquirer) of contingent liabilities assumed? Assume the contingencies were recognized as of the acquisition date.
13. Under Topic 835-20 (Capitalization of Interest), what amount of interest may initially be capitalized as part of the initial investment in an asset, for certain qualifying assets? How should a company determine its "capitalization rate" for capitalizing interest?
Chapter 8 - Fair Value Measurements in the Codification (exercises 3, 4, 6 & 10 in your text)
Exercises to Improve Your Familiarity with Guidance in ASC 820. Respond to the following, citing your sources for all responses.
3. Briefly summarize, then explain the significance of, par. 15-1 (scope) of ASC 820-10 (Fair Value Measurement).
4. Briefly summarize par. 30-3 (initial measurement) of ASC 820-10 and provide one example listed in par. 30-3A of an instance when transaction price may not be reflective of fair value.
6. Assume that a wealthy investor owns 15% of a single, publicly traded company. In what level of the fair value hierarchy should this measurement be classified and should the investor adjust the fair value to reflect the fact that its position would be too large to sell in a single day (without negatively impacting the share price)? Such adjustments may be described as "blockage" factors.
10. Using PwC's Global Guide to Fair Value Measurements, look for the discussion of market participants, in the context of understanding broad fair value concepts. What is the role of market participants in measuring fair value, and is it necessary for an entity to identify specific market participants when forming fair value assumptions?
Read and complete the case from Chapter 7 in your text. Then upload a Word document (1-2 pages) to this assignment.
7.2 Accrual for a Lawsuit, Writing an Issues Memo
Your company has just been named as a defendant in a lawsuit related to a leak of chemicals, from one of your company's plants onto private property. The plaintiff is suing for $5 million in damages; your company's attorneys believe the ultimate amount of loss could range between $1 million and $3 million, with no amount in the range more likely than other amounts in the range. The lawsuit is expected to be resolved in the middle of next year.
Citing from authoritative literature, prepare a brief accounting issues memo to the files addressing (1) whether a loss should be accrued, and for what amount, and (2) what disclosures should be made in the company's financial statements.
Read and complete the case from Chapter 8 in your text. Then upload a Word document (1-2 pages) to this assignment.
8.5 Big Joe's Super Cars, Present Value (Revised Revenue Guidance)
Big Joe's Super Cars has just sold a luxury car to customer Tim. The purchase contract establishes a base price of $60,000, plus a contractual interest rate of 4%, payable in 60 monthly installments of $1,105. Control of the car transferred to Tim when Tim signed the contract and drove off the lot. If Tim had obtained a separate financing (say, a bank loan) for the purchase of the car, his interest rate would have been 6%.
What amount of revenue should Big Joe's record at the date of sale? What guidance should Big Joe's apply to the subsequent measurement of its receivable?
Next, reflect upon what measurement attribute is being used to record Big Joe's revenues. How does this approach achieve the objective of this measurement attribute?