CONCEPTS FOR ANALYSIS

CA22-1 GROUPWORK (Analysis of Various Accounting Changes and Errors) Mathys Inc. has recently hired a new independent auditor, Karen Ogleby, who says she wants “to get everything straightened out.” Consequently, she has proposed the following accounting changes in connection with Mathys Inc.'s 2017 financial statements.

1. At December 31, 2016, the client had a receivable of $820,000 from Hendricks Inc. on its balance sheet. Hendricks Inc. has gone bankrupt, and no recovery is expected. The client proposes to write off the receivable as a prior period item.

2. The client proposes the following changes in depreciation policies.

(a) For office furniture and fixtures, it proposes to change from a 10-year useful life to an 8-year life. If this change had been made in prior years, retained earnings at December 31, 2016, would have been $250,000 less. The effect of the change on 2017 income alone is a reduction of $60,000.

(b) For its new equipment in the leasing division, the client proposes to adopt the sum-of-the-years'-digits depreciation method. The client had never used SYD before. The first year the client operated a leasing division was 2017. If straight-line depreciation were used, 2017 income would be $110,000 greater.

3. In preparing its 2016 statements, one of the client's bookkeepers overstated ending inventory by $235,000 because of a mathematical error. The client proposes to treat this item as a prior period adjustment.

4. In the past, the client has spread preproduction costs in its furniture division over 5 years. Because its latest furniture is of the “fad” type, it appears that the largest volume of sales will occur during the first 2 years after introduction. Consequently, the client proposes to amortize preproduction costs on a per-unit basis, which will result in expensing most of such costs during the first 2 years after the furniture's introduction. If the new accounting method had been used prior to 2017, retained earnings at December 31, 2016, would have been $375,000 less.

5. For the nursery division, the client proposes to switch from FIFO to LIFO inventories because it believes that LIFO will provide a better matching of current costs with revenues. The effect of making this change on 2017 earnings will be an increase of $320,000. The client says that the effect of the change on December 31, 2016, retained earnings cannot be determined.

6. To achieve an appropriate recognition of revenues and expenses in its building construction division, the client proposes to switch from the completed-contract method of accounting to the percentage-of-completion method. Had the percentage-of-completion method been employed in all prior years, retained earnings at December 31, 2016, would have been $1,075,000 greater.

Instructions

(a) For each of the changes described above, decide whether:

(1) The change involves an accounting principle, accounting estimate, or correction of an error.

(2) Restatement of opening retained earnings is required.

(b) What would be the proper adjustment to the December 31, 2016, retained earnings?

• Explain changes with exercise for: RHR, MHR, EHR, submax SV, max SV, submax Q, maxQ.
• What are the four main things that determine stroke volume?
• Draw a graph of heart rate as exercise intensity increases. ➢   Draw a graph of SV as exercise intensity increases.
• Draw a graph of Q as exercise intensity increases
• Draw and/or explain a map showing how exercise increases SV.
• What causes increases in Q at low/moderate intensity?  High intensity?
• Define and explain the concept of cardiovascular drift.
• What is the bicarbonate buffer and how does it work?
• What causes increases in pulmonary ventilation during exercise?
• Draw a graph of ventilatory threshold.  What can this be used to estimate and why?
• How does the respiratory system aid in the acid-base balance?  ➢ Why is active recovery important?

Required information

Problem 11-4A Analysis of changes in stockholders' equity accounts LO C3, P2, P3

[The following information applies to the questions displayed below.]

The equity sections from Atticus Group’s 2016 and 2017 year-end balance sheets follow.

The following transactions and events affected its equity during year 2017.

Problem 11-4A Part 1

Required:
1. How many common shares are outstanding on each cash dividend date?

2. What is the total dollar amount for each of the four cash dividends?

3. What is the amount of the capitalization of retained earnings for the stock dividend?

4. What is the per share cost of the treasury stock purchased?

5. How much net income did the company earn during year 2017?

Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries are prepared.

1. On December 30, 2017, Rival Industries acquired its office building at a cost of $12,600,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2021, the estimate of useful life was revised to 28 years in total with no change in residual value.
2. At the beginning of 2017, the Hoffman Group purchased office equipment at a cost of $880,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the straight-line method. On January 1, 2021, the company changed to the double-declining-balance method.
3. At the beginning of 2021, Jantzen Specialties, which uses the straight-line method, changed to the double-declining-balance method for newly acquired vehicles. The change decreased current year net income by $625,000.

Required:

1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change as well as any adjusting entry for 2021 related to the situation described. (Ignore income tax effects.)

Analyzing Unearned Revenue Changes Take-Two Interactive Software, Inc. (TTWO) is a developer, marketer, publisher, and distributor of video game software and content to be played on a variety of platforms. There is an increasing demand for the ability to play these games in an online environment, and TTWO has developed this capability in many of its products. In addition, TTWO maintains servers (or arranges for servers) for the online activities of its customers. TTWO considers that its products have multiple performance obligations. The first performance obligation is to provide software to the customer that enables the customer to play the game offline or online. That performance obligation is fulfilled at the point at which the software is provided to the customer. In addition, TTWO’s customers benefit from “online functionality that is dependent on our online support services and/or additional free content updates.” This second performance obligation is fulfilled over time, and the estimated time period for which an average user plays the software product is judged to be a faithful depiction of the fulfillment of this performance obligation. At the beginning of the first quarter of fiscal year 2018, TTWO had a deferred net revenue liability of $509,527 thousand. When that quarter ended on June 30, 2018, the deferred net revenue liability was $419,786 thousand. Revenue for the quarter was $349,184 thousand.

a. What would cause the deferred net revenue liability to go down over the quarter?

-TTWO must have recognized less in revenue than it sold during the quarter.

- TTWO must have recognized the same amount in revenue as it sold during the quarter.

- TTWO must have recognized more in revenue than it sold during the quarter.

- None of these are correct.

b. What was the amount of online-enabled games purchased by TTWO’s customers in the first quarter ended June 30, 2018? Answer (in thousands)

Were the purchases greater or less than the revenue recognized in the income statement?

- Purchases were less than the revenue recognized in the income statement.

- Purchases were greater than the revenue recognized in the income statement.

- Purchases were equal to the revenue recognized in the income statement.

- Not enough information is provided to answer the question.

2. Would the following procedural changes cause the experimentally determined mass percent of NH₃ in Ni(NH₃)_nCl₂ to be too high, too low, or unchanged. Briefly explain each answer.

(a). After dissolving a known mass of Ni(NH₃)_nCl_2, a student directly titrated the NH₃ with HCl solution, using a mixed bromocresol green – methyl red indicator.

(b). A student added excess standard HCl solution to a known mass of dissolved Ni(NH₃)_nCl₂ and back titrated the excess HCl with standard NaOH solution, using phenolphthalein indicator solution.

3. Would the following procedural changes cause the experimentally determined mass percent Ni²⁺ ion in NH₃ in Ni(NH₃)_nCl₂ to be too high, too low, or unchanged. Briefly explain each answer.

(a). In Part III of the procedure, a student omitted adding concentrated NH₃ solution to the dissolved Ni(NH₃)_nCl₂ sample before analysis using the spectrophotometer, thinking that the additional NH₃ was unnecessary because the Ni²⁺ ion was already complexed [Ni(NH₃)_n]²⁺ ion.

(b). The student measured the %T of the standard and unknown solutions at a wavelength that was 20 nm lower than the actual analytical wavelength.

Hi, I am currently doing a paper on Philippine Retail Industry - Department Stores

I am asking for your help in the following section of my paper

Analysis of Potential Changes in Macroenvironment

1. Political

2. Social

3. Environmental

4. Technological

5. Legal

The following changes took place last year in Pavolik Company’s balance sheet accounts:

D = Decrease; I = Increase.

Long-term investments that cost the company $6 were sold during the year for $16 and land that cost $15 was sold for $9. In addition, the company declared and paid $30 in cash dividends during the year. Besides the sale of land, no other sales or retirements of plant and equipment took place during the year. Pavolik did not retire any bonds during the year or issue any new common stock.

The company’s income statement for the year follows:

The company’s beginning cash balance was $90 and its ending balance was $85.

Required:

1. Use the indirect method to determine the net cash provided by operating activities for the year.

2. Prepare a statement of cash flows for the year.

During June, the following changes in inventory item 27 took place:

Perpetual inventories are maintained.

a. What is the cost of the ending inventory for item 27 under the FIFO method?

b. What is the cost of the ending inventory for item 27 under the LIFO method?

Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 25% in all years. Any tax effects should be adjusted through the deferred tax liability account.

1. Fleming Home Products introduced a new line of commercial awnings in 2020 that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 2% of sales. Sales of the awnings in 2020 were $2,600,000. Accordingly, warranty expense and a warranty liability of $52,000 were recorded in 2020. In late 2021, the company’s claims experience was evaluated, and it was determined that claims were far fewer than expected: 1% of sales rather than 2%. Sales of the awnings in 2021 were $3,100,000, and warranty expenditures in 2021 totaled $70,525.
2. On December 30, 2017, Rival Industries acquired its office building at a cost of $820,000. It was depreciated on a straight-line basis assuming a useful life of 40 years and no salvage value. However, plans were finalized in 2021 to relocate the company headquarters at the end of 2025. The vacated office building will have a salvage value at that time of $610,000.
3. Hobbs-Barto Merchandising, Inc., changed inventory cost methods to LIFO from FIFO at the end of 2021 for both financial statement and income tax purposes. Under FIFO, the inventory at January 1, 2021, is $600,000.
4. At the beginning of 2018, the Hoffman Group purchased office equipment at a cost of $231,000. Its useful life was estimated to be 10 years with no salvage value. The equipment was depreciated by the sum-of-the-years’-digits method. On January 1, 2021, the company changed to the straight-line method.
5. In November 2019, the State of Minnesota filed suit against Huggins Manufacturing Company, seeking penalties for violations of clean air laws. When the financial statements were issued in 2020, Huggins had not reached a settlement with state authorities, but legal counsel advised Huggins that it was probable the company would have to pay $110,000 in penalties. Accordingly, the following entry was recorded:

Late in 2021, a settlement was reached with state authorities to pay a total of $251,000 in penalties.

6. At the beginning of 2021, Jantzen Specialties, which uses the sum-of-the-years’-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net earnings by $346,000.

Required:
For each situation:
1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change, as well as any adjusting entry for 2021 related to the situation described.