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Section: 004 ACCT 3001 Fall 2011 Supplemental Assignment #1

General Codification Questions 1. For what dates is the Codification effective for? a. It is effective for interim and annual periods ending after September 15, 2009.

2. What are the primary purposes for developing the Codification? a. Simplify user access by codifying all authoritative US GAAP in one spot b. Reduce the amount of time and effort required to solve an accounting research issue c. Mitigate the risk of noncompliance through improved usability of the literature d. Provide accurate information with real-time updates as Accounting Standards Updates are released e. Assist the FASB with the research and convergence efforts

3. How many levels of authoritative GAAP currently exist? a. All previous level (a)-(d) GAAP standards are superseded

4. What is the purpose of the Whats New link? a. This link provides descriptions of recent modifications and enhancements to the FASB Accounting Standards Codification website

Research Questions (Include the Codification reference that aided you in each answer for credit!) 1. At year end, Tiger Company has a 10-year note payable that is due and payable six months after year-end. Should this note payable be classified as a current liability or a long-term liability? a. Current liability 1

2. List the disclosures that must be made in the financial statements regarding inventory. Reference that aided me: SEC Rules, Regulations, and Interpretations; Regulation S-X Rule 5-02, Balance Sheets a. State separately in the balance sheet or in a note the amounts of major classes of inventory such as: i. (1) Finished goods ii. (2) inventoried costs relating to long-term contracts or programs iii. (3) work in process iv. (4) raw materials and v. (5) supplies b. The basis of determining the amounts i. If cost is used to determine any portion of the inventory amounts, the description of this method shall include the nature of the cost elements included in inventory ii. The method by which amounts are removed from inventory (e. g., average cost, first-in, first-out, last-in, first-out, estimated average cost per unit) shall be described. If the estimated average cost per unit is used as a basis to determine amounts removed from inventory under a total program or similar basis of accounting, the principal assumptions shall be disclosed. iii. If any general and administrative costs are charged to inventory, state in a note to the financial statements the aggregate amount of the general and administrative costs incurred in each period and the actual or estimated amount remaining in inventory at the date of each balance sheet. c. if the LIFO inventory method is used, the excess of replacement or current cost over stated LIFO value shall, if material, be stated parenthetically or in a note to the financial statements. d. For all long-term contracts or programs, the following information, if applicable, shall be stated in a note to the financial statements: i. The aggregate amount of manufacturing or production costs and any related deferred costs (e. g., initial tooling costs) which exceeds the aggregate estimated cost of all in process and delivered units on the basis of the estimated average cost of all units expected to be produced under long-term contracts and programs not yet complete, as well as that portion of such amount which would not be absorbed in cost of sales based on existing firm orders at the latest balance sheet date. In addition, if practicable, disclose the amount of deferred costs by type of cost (e. g., initial tooling, deferred production, etc.) ii. The aggregate amount representing claims or other similar items subject to uncertainty concerning their determination or ultimate realization, and include a description of the nature and status of the principal items comprising such aggregate amount. iii. The amount of progress payments netted against inventory at the date of the balance sheet.

3. What are subsequent events? When should subsequent events be recognized in the financial statements? Reference that aided me: 855 Subsequent Events; 10 Overall; 55 Implementation Guidance and Illustrations

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. Subsequent events should be recognized in financial statements when:
a. An entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. b. Examples: i. If the events that gave rise to litigation had taken place before the balance sheet date and that litigation is settled after the balance sheet date but before the financial statements are issued or are available to be issued, for an amount different from the liability recorded in the accounts, then the settlement amount should be considered in estimating the amount of liability recognized in the financial statements at the balance sheet date. ii. Subsequent events affecting the realization of assets, such as receivables and inventories or the settlement of estimated liabilities, should be recognized in the financial statements when those events represent the culmination of conditions that existed over a relatively long period of time. For example, a loss on an uncollectible trade account receivable as a result of a customers deteriorating financial condition leading to bankruptcy after the balance sheet date but before the financial statements are issued or are available to be issued ordinarily will be indicative of conditions existing at the balance sheet date. Thus, the effects of the customers bankruptcy filing shall be considered in determining the amount of uncollectible trade accounts receivable recognized in the financial statements at balance sheet date.

4. What section of the Codification would contain industry practices for the oil and gas industry? Reference that aided me: 932 Extractive ActivitiesOil and Gas; 270 Interim Reporting; 05 Overview and Background a. Extractive activities section

5. List the four items for which earnings per share must be disclosed. a. Income from operations b. Discontinued operations c. Extraordinary items d. Net income(loss)

6. The Codification defines what constitutes GAAP. Find and copy the paragraph that discusses the authoritative sources for GAAP. Resource that aided me: 105 Generally Accepted Accounting Principles; 10 Overall; 65 Transition and Open Effective Date Information a. The Financial Accounting Standards Board (FASB) Accounting Standards Codification shall become the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.

7. FASB specifies that certain gain and loss items can only be considered discontinued operations in the income statement if two conditions are met. What are these two conditions? a. Company eliminates the results of operations and cash flows of component from its ongoing operations b. There is no significant continuing involvement in that component after the disposal transaction

8. Use the Master Glossary to state the definition of Effective Interest Rate. Reference that aided me: master glossary a. The rate of return implicit in the loan, that is, the contractual interest rate adjusted for any net deferred loan fees or costs, premium, or discount existing at the origination or acquisition of the loan.