Multiple Short Accounting Assignments

Multiple Short Accounting Assignments
All assignment directions are in each document.You have about 2 weeks to complete all of these assignments combined. If there is anything external that you feel is needed or have any questions, please let me know! Overall you should not need much then the actual assignment to finish it.

 

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Fair Value Assignment

Acc. 350

Fall, 2020

 

Name:

 

Directions:  This assignment is to be submitted via D2L by 11:00 p.m. November 8, 2020.

 

  1. A pharmaceutical company acquires a company with two drugs. Drug A is a cholesterol lowering drug. By itself, Drug A is moderately effective. Drug B is another moderately effective cholesterol lowering drug. When taken together, Drug A and Drug B are highly effective at lowering cholesterol levels. On a standalone basis, Drug A has a fair value of $200 million and Drug B has a fair value of $350 million. When the drugs are valued together, Drug A and Drug B have a combined fair value of $750 million.

 

 

Complete the table below indicating what is the highest and best use, and the fair value of these drugs?  Explain your answer below the table.

 

Highest and Best Use  
Fair Value  

 

 

 

 

 

  1. In a territory, there are two available markets for soy beans:

Market 1:  Export:   This is the market in which higher prices are available for the producer. However, there are limitations in the volumes that can be sold in this market because the government sets a limit on the volume of exports and each producer needs to get an authorization to export its production. It is rare for the government to authorize more than 25% of the production for export.

Market 2:  Domestic:   The prices are lower in this market as compared to the export market, but there are no restrictions in terms of volume (other than the demand for the product by purchasers). Producers intend to sell all of the production they are permitted in the export market and, when they do not have any further authorization to export, will sell the remaining production in the domestic market.

 

What is the principal market and why?

 

 

  1. This is a disclosure from Disney’s recent 10-K: “Level 3 borrowings include the Asia Theme Park borrowings, which are valued based on the current borrowing cost and credit risk of the Asia Theme Parks as well as prevailing market interest rates”.  Why would these be assigned as Level 3 (instead of Level 1 or Level 2) in the footnote disclosure?

 

 

 

 

 

  1. After reading the information for Camelback Investment Company (below) complete the table below:

Camelback Investment Company (CIC) is a private company that invests in various financial and non-financial assets for its shareholders.  Assets are measured at fair value at each reporting date so that the shareholders will know what their underlying shares are worth, which facilitates sales of the limited number of shares.

It is early November, 2020  and as the junior accountant at CIC you are assisting on closing the September 30th financial records.  You have been asked by the chief financial officer (CFO) to work with the chief investment officer (CIO) to evaluate and determine the propriety of fair values that the CIO is proposing for a number of investments as of September 30, 2020.  These valuations will be included in the September 30, 2020 financial statements.  The investments are as follows:

Investment in Smith Corporation

CIC has an investment in 100,000 shares of common stock Smith Corporation.  Smith Corporation is a public company whose stock is traded on the NYSE.  The stock is currently valued in the accounting records at $20.00 per share ($2.0 million), which was the value at the last measurement date of June 30, 2020.  The CIO is proposing to measure the fair value of the common stock at the bid price for the stock at the close of business on the measurement date of September 30, 2020, which is $25.0 per share.  This valuation approach is consistent with what has been used in the past three years by management.  Thus, the fair value is $2.5 million at year-end.

 

Investment in Chicago Corporation

CIC has an investment in 100,000 shares of Chicago Corporation which is a private company. The stock is currently valued in the accounting records at $15 per share (total value of $1,500,000) which was the value as of the last measurement date of June 30, 2020.   There are no market quotes with respect to the fair value of the common stock; however, the private company’s operations, size and performance are similar to a company whose stock is traded on the NASDAQ. These similar companies are valued at $16 per share as of September 30, 2020.

 

 

 

Land

CIC has an investment in a 10-acre parcel of land that is located near Los Angeles.    The carrying value of the land at September 30, 2020 was $1 million per acre, or $10 million, and is the equivalent of the cost of the land.  The land is currently zoned so that it may be developed for commercial warehouses or industrial manufacturing facilities.  Recent similar sales of land within the area to be developed as commercial warehouses have been approximately $800,000 per acre while recent sales of land to be developed as manufacturing are $900,000 per acre.

 

 

Automobiles

CIC owns a group of 10 automobiles, previously used by the senior executives of CIC that are currently for sale.  The automobiles currently have a carrying value of $15,000 per auto for a total of $150,000.  They have low mileage and could be sold in either the retail market or the dealer market.  The dealer market is an active market and management could access that market immediately.   Management has been told by a reputable dealer that the autos could be sold for approximately $13,000 per auto.  The retail market is harder to access and would take 6 months to access this market.  Pricing guides for the retail market lists the sales prices of the autos at approximately $15,500.

 

 

Real estate

CIC has an investment in a condominium project that was completed on December 31, 2019.  The carrying amount of the condominium at that date was $25 million and reflected the cumulative investments that CIC made to the developer.  Through September 30, 2020, there have not been any sales of any of the condominium units and the developer has just declared bankruptcy.

 

CIC has taken over the project, hired a management company to oversee the building and a marketing/sales company to sell the individual units.  The CIO hired Ace Number One (Ace) real estate valuation and appraisal experts to measure the fair value of the project as of June 30, 2020.  Ace ended up valuing the condominium project at $18 million and their report considered a combined approach of comparable sales figures for comparable condominium units.   However, the Chief investment Officer believes that this amount is too low and the correct valuation should be $25 million.

 

 

 

 

 

Financial Statement Item to Be Valued At Fair Value

 

Identify if Financial or Non Financial Asset

 

Determine the Fair Value as of September 30, 2020 

 

Level in

Fair Value Hierarchy

Investment in Smith  Corporation      
Investment in Chicago Corporation      
Land

 

     
Automobiles

 

     
Real Estate

 

     

 

 

  1. FASB released ASU 2018-13 in August, 2018.  This ASU impacts the disclosures for fair value measurement (ASC 820)
  2. Why did FASB issue this update?

 

  1. Who is affected by the amendments in this update?

 

 

  1. The main provisions of this update fall into what 3 categories?

 

  1. When is/was ASU 2018-13 effective for public and private entities?

 

 

 

This assignment must be submitted under Submissions in D2L no later than Sunday, September 20th, 11:00 p.m. 

 

The purpose of this assignment is to familiarize you with the type of content in SEC filings.  To complete this assignment, you will need to access Chipotle Mexican Grill’s (i.e. Chipotle) filings in EDGAR in the SEC’s website.  You will use Chipotle’s 10-K filed with the SEC on February 5, and their Proxy (DEF A) filed on April 7, 2020.

 

Complete the table below as follows:

  • Name which of the following filings where the information would be located.  Your answers will be one of the following:   10-K, Proxy, or 8-K
  • For the questions in which you selected 10-K or Proxy complete the table with the following information:
  • Item number where this information is located in the filing. (If your answer to the name of the filing is 8-K your answer will be N/A)
  • Item name where this information is located in the filing if your answer is 10-K or Proxy. .  (If your answer to the name of the filing is 8-K your answer will be N/A)
  • Answer the question. You may cut and paste the answer from the SEC filing.   If your answer is 8-K, briefly summarize the content of the 8-K in the “Answer” column of the table.

 

Example: 

Question Name of Filing Item Number within Filing Item Name within Filing Answer
When was Chipotle first opened? 10-K 1 Business 1993
Total amount paid to Ernst & Young in 2019 & 2018? Proxy 14 Principal Accounting Fees and Services 2019:  $1,257,611

2018:  $1,163,962

Information shared with SEC on Feb. 4, 2020 8-K N/A N/A On February 04, 2020, we announced that

our Board of Directors has authorized

repurchases of common stock with a total

aggregate purchase price of $100 million

 

 

 

   

 

 

Question

Name of Filing Item number within Filing Item name within Filing  

 

 

Answer

1. Who founded Chipotle and where?        
2. How many restaurants did Chipotle operate in the United States as of December 31, 2019?        
3. How many times a day does each restaurant fry the tortilla chips?        
4. What does Chipotle do to ensure purchasing and food safety?        
5. What did Chipotle do in 2019 to make their brand more visible?

What marketing channels did they use to do this?

       
6. How many total employees did Chipotle have as of December 31, 2019?        
7. When did E & Y become Chipotle’s auditor?        
8. On which stock exchange does the Chipotle common stock trade?        
9. What is the CEO to median employee pay ratio?        
10. How many shares of stock are beneficially owned by all directors and executive officers as a group?  What percentage of the stock is this?        
11. How much did Chipotle spend on advertising expenses during fiscal 2019?        
12. How many members of the board of directors are independent?  What is the average age of the board of directors?  How many meetings did the board of directors hold during 2019?        
13. Where is the main office for Chipotle?        
14. What are Chipotle’s 5 key fundamental business strategies?        
  Question  

Name of Filing

Item Number within Filing Item Name within Filing  

 

 

Answer

15. Which Board of Directors committee is responsible for overseeing compliance with the Company’s Code of Ethics and whistleblower reporting process?        
16. Did Chipotle recognize a worldwide pandemic as a risk factor?  If so, which risk factor?        
17. How many Board of Directors meetings were held in fiscal 2019?        
18. Has Chipotle ever paid a dividend?        
19. From 2014 through 2019 how did Chipotle’s common stock perform compared to the S&P 500?        
20. What was the salary for the CEO in 2019?  How much was the CEO’s total compensation in 2019?        
21. What was the amount of the adjustment recognized by Chipotle for current and long term lease liabilities due to the adoption of ASU 842?        
22. What is the typical team of employees in each restaurant?        
23. What was Chipotle’s basic EPS for 2019 and 2015?        
24. What were the average restaurant sales in 2019?        
25. What was the average price paid by Chipotle for each share of repurchased stock in the 4th quarter of 2019?  How many shares of stock were purchased during this period?        
26. Did Chipotle recognize a goodwill impairment in fiscal 2019, 2018 or 2017?        
27. What were the proceeds from the maturities of investments in 2019?        
    Question Name of Filing Item number/

Name  within Filing

Answer
  28. How many new restaurants were opened in 2019? What were the average sales per restaurant?      
  29. Which members of the board of directors served on the audit committee in 2019?      
  30. Were there any material changes in internal control in fiscal 2019?      
  31. What were the two critical audit matter identified by Chipotle’s auditor for the year ending December 31, 2019?      
  32. Did Chipotle have any disagreements with their auditors about disclosures in 2019?      
  33. Which quarter had the highest dollar amount of revenue in 2019 and 2018?      
  34. How long does it typically take for gift card to be redeemed?  Which quarter has the highest level of revenue related to redemption of gift cards?      
  35. What is the amount of Accounts Payable as of December 31, 2019?      
  36. On March 6, 2020 Chipotle filed this report with the SEC.   What was the overall purpose of this report?      
  37. On May 21, 2020 Chipotle filed this report with the SEC.   What was the overall purpose of this report?      

 

Name:  __________________

Instructions: This assignment will be submitted under “Submissions” in D2L in the folder labeled “Standard Setting”.  This assignment must be submitted under “Submissions” no later than 11:00 p.m., Sunday, September 20th,, 2020.

 

Assignment:  As discussed in the Standard Setting topic FASB utilizes a due process in financial accounting standard setting.  One of the steps is to release an exposure draft/(also called a proposed accounting standards update)  to solicit public comments.  FASB evaluates/considers these comments before releasing the final Accounting Standards Update.

 

On April 28, 2016 FASB released a proposed accounting standards update titled “Proposed Accounting Standards Update— Statement of Cash Flows (Topic 230): Restricted Cash.  Comments were due by June 27, 2016. 

 

 

The accounting issue that FASB is addressing is as follows:

“….diversity exists in the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. Entities classify transfers between cash and restricted cash as operating, investing, or financing activities, or as a combination of those activities, on the statement of cash flows. Also, some entities present direct cash receipts into, and direct cash payments made from, a bank account that holds restricted cash as cash inflows and cash outflows, while others disclose those cash flows as noncash investing or financing activities”….

 

Part I: 

To view the Proposed Accounting Standard on the FASB  website: 

http: fasb.org

Select :  Reference Library

Exposure Documents and Public Comments

 

On the left side you can scroll down to find this proposed accounting standard update and the related comment letters (labeled EITF-16A). 

 

These are the main provisions of the proposal: 

“The amendments in this proposed Update would require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows”.

 

The  proposed ASU has 9 questions for comment.  We are going to look at questions 1, 6, & 9. 

 

Complete the table bellowing by reviewing the comment letters from the following respondents: 

 

 

  NYSSCPA Baker Tilly

Virchow, Krause

 

Plante Moran Mastercard Incorporated Illinois CPA Society
Q1.  Do you agree that the statement of cash flows should explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents?          
Q6.  Do you agree that the proposed amendments should be applied using a retrospective transition method?          
Q 9.  Should early adoption be allowed?          

 

 

 

Part II: 

Review the Accounting Standard Update (ASU) released by FASB after receiving the comment letters.

To access the update go to fasb.org.

Select Standards and then Accounting Standards Updates issued.  The ASU is number 2016-18.

After opening ASU 2016-18 use the accounting standard update summary on pages 2 & 3.  to complete the table below.

 

    Final ASU Decision
Q1.  Will the statement of cash flows

explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents?

   
Q6.  Do you agree that the proposed amendments should be applied using a retrospective transition method?    
Q 9.  Should early adoption be allowed?    

 

 

 

 

Acc. 350

Comprehensive Revenue from Contracts with Customers Assignment

Fall, 2020

 

This assignment must be submitted via D2L by 11:00 p.m. November 1, 2020. 

Economy Appliance Co. manufactures low-price, no –frills appliances that are in great demand for rental units.  Customers may purchase each appliance separately or as a bundle.  Yellow Card Property Managers operates upscale student apartment buildings near many college campuses in the United States.  Yellow Card is expanding near college campuses due to the decreased availability of on campus housing due to COVID-19.   On October 1, 2020 Economy signed a contract with Yellow Card for 500 appliance bundles (see below). Yellow Card will pick up and install the appliance bundles in the apartments.  It will help Yellow Card secure lease agreements with students if the appliance bundles can be available for pick up by Yellow Card by November 30, 2020.  Yellow Card offers a 10% bonus if Economy can supply the appliance bundles by November 30, 2020.  Economy estimates its chances of meeting the bonus deadline to be 90% likely based on their experience in the industry.  In addition, each appliance includes a 1 year standard warranty and Economy offers customers the option to purchase an extended 2 year warranty for $300 for an appliance bundle.    Yellow Card has excellent credit and both parties signed the agreement stipulating the payment terms.  The terms of the contract between Economy and Yellow Card are as follows:

  • Contract is signed on October 1, 2020
  • Economy agrees to have 500 appliance bundles available for Yellow Card on or before November 30, 2020. The purchase price will be $2500 per bundle.
  • Yellow Card agrees to purchase the extended warranty for the 500 appliance bundles for $300.
  • Total purchase price for the appliance bundle and extended warranty will be $2,800.
  • Total payment is due on December 31, 2021. Interest rates on comparable projects are 6% and in total is equal to $85,000.
  • Economy is eligible to earn a 10% bonus (based upon the bundled price excluding extended warranty) if appliances are available on or before November 30, 2020 for Yellow Card to pick up.

 

 

 

Appliance Bundle:

  Standalone

Pricing

Appliance Bundle $2,800
Warranty $400

 

Required:

Apply the requirements of revenue from contracts with customers.  For each of the five steps describe how the revenue model applies to this transaction.  If any step that is not applicable simply indicate that it is not applicable.  Show all of your calculations and clearly label all of your work.

 

 20201115015244mod2_project_powss (1) 20201115021638chapter_10_fta__1_

 

 

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