Chapter 12: Q31. (page 610)
In what situation will the unrealized holding gain or loss on inventory be reported in income?
Unrealized holding gain is reported in income only when it has a qualifying fair value.
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Question: (Accounting for Research and Development Costs) Czeslaw Corporation’s research and development department has an idea for a project it believes will culminate in a new product that would be very profitable for the company. Because the project will be very expensive, the department requests approval from the company’s controller, Jeff Reid.
Reid recognizes that corporate profits have been down lately and is hesitant to approve a project that will incur significant expenses that cannot be capitalized due to the requirements of the authoritative literature. He knows that if they hire an outside firm that does the work and obtains a patent for the process, Czeslaw Corporation can purchase the patent from the outside firm and record the expenditure as an asset. Reid knows that the company’s own R&D department is first-rate, and he is confident they can do the work well.
Instructions
Answer the following questions.
Hiram Co. uses the equity method to account for investments in common stock. What accounting should be made for dividends received from these investments subsequent to the date of investment?
: As a new intern for the local branch office of a national brokerage firm, you are excited to get an assignment that allows you to use your accounting expertise. Your supervisor provides you with the spreadsheet below, which contains data for the most recent quarter for three companies that the firm has been recommending to its clients as “buys.” Each of the companies’ returns on assets has outperformed their industry cohorts in the past. But, given recent challenges in their markets, there is concern that the companies may experience operating challenges and lower earnings. (All numbers in millions, except return on assets.)
A | B | C | D | E |
Company | Fair Value of Company | Book Value (Net Assets) | Carrying Value of Goodwill | Return on Assets |
Sprint Nextel | \(36,361 | \)51,271 | $30,718 | 3.5% |
Washington Mutual | 11,742 | 23,941 | 9,062 | 2.4 |
E* Trade Financial | 1,639 | 4,104 | 2,035 | 5.6 |
Instructions
Question: Where can authoritative IFRS guidance related to intangible assets be found?
Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2015, the company expends \(325,000 on a research project, but by the end of 2015, it is impossible to determine whether any benefit will be derived from it.
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