Reference no: EM13871448

Section 1. Economics of Financial Accounting Information

REQUIRED

Refer to the supplementary reading in "Economics of Financial Accounting Information."

1. Demand for Financial Accounting Information (Financial Reporting).

Explain why each of the following groups might want financial accounting information. What type of financial information would each group find most useful? (Pick one)

a. The company's existing and prospective shareholders.

b. Company managers.

e. The company's current and prospective employees.

f. Commercial lenders who have loaned money to the company.

g. Current suppliers of products and services.

2. Costs of Disclosure

Define each of the following disclosure costs associated with financial accounting information, and provide an example of each cost (Pick one):

a. Information collection, processing, dissemination costs.

b. Competitive disadvantage costs.

c. Litigation costs.

d. Political costs.

Section 2. FASB Codification

REQUIRED

Listed below are 5 case scenarios involving accounting issues. For each one, you are to use the Accounting Standards Codification (ASC) database to determine the precise reference that represents the most specific authoritative guidance in US GAAP. Your answers for each part should indicate one specific ASC reference.

Example: Your Company has asked you to prepare the footnotes for its 2014 annual report. Identify the authoritative guidance that indicates what information the footnote on accounting policies should present.

? The appropriate ASC Reference is 235-10-50-3.

Case A: Your Company has been accounting for depreciation of equipment on a straight-line basis. You are considering switching to an accelerated depreciation method. Identify the authoritative guidance that indicates how such a change in depreciation method is accounted for under GAAP.

Case B: Your Company makes investments in other companies (investees) in which it has significant influence, but not majority ownership. It uses the equity method of accounting for these investments. Identify the authoritative guidance that indicates your company should account for its share of the earnings or losses of these investees in the periods they are reported by the investees in their financial statements.

Case C: Your Company has incurred a material loss during the current fiscal year, and you are trying to decide how it should be presented in this year's income statement. Identify the authoritative guidance that indicates the criteria that need to be met to present the loss as extraordinary in the income statement.

Case D: Your Company speculates with small investments in equity securities of other companies and classifies them as trading securities. Identify the authoritative guidance that indicates unrealized holding gains for trading securities should be included in earnings.

Case E: Your Company disposed a component of its business at the end of 2010. During that year, the component had an impairment of goodwill on its balance sheet. Identify the authoritative guidance that indicates how your Company should report this impairment of goodwill in its 2010 income statement.

Section 3. Note to the Financial Statements

REQUIRED

Refer to the "Notes to Consolidated Financial Statements" (page 50 - 78) from the Apple Inc. annual report for the fiscal year of 2013 and respond to the following questions. "The Company" refers to Apple Inc. hereafter.

1. What are the conditions to be met for the Company to recognize revenue?

2. When are the development costs of computer software subject to capitalization? What is the reason that the software development costs were expensed as incurred during 2013, 2012 and 2011?

3. Which financial instruments are classified as cash equivalents, and as available-for-sale? What is the threshold of the maturities of marketable debt securities to be classified as long-term?

4. What are the factors the Company considers to estimate its allowance for doubtful accounts?

5. Find the amounts of adjusted costs, unrealized gains and losses, and Fair values of the following financial instruments in 2013:

1) U.S. Treasury securities

2) Commercial paper

3) Corporate securities

4) Municipal securities