Assignment Details and Rubric
GEL 1.2: Demonstrate college-level communication through the composition of original materials in Standard English.
Assignment Directions:
In the study of accounting it is important to have the necessary skills to use electronic libraries and databases for research purposes.
Professional Research
Students will complete the "Bridge to the Profession: Professional Research" case scenario found on p. 77 of the Wiley text. Students will submit a written Assignment addressing the required prompts.
BRIDGE TO THE PROFESSION
Professional Research: FASB Codification
Wie Company has been operating for just 2 years, producing specialty golf equipment for women golfers. To date, the company has been able to finance its successful operations with investments from its principal owner, Michelle Wie, and cash flows from operations. However, current expansion plans will require some borrowing to expand the company's production line.
As part of the expansion plan, Wie will acquire some used equipment by signing a zero-interest- bearing note. The note has a maturity value of $50,000 and matures in 5 years. A reliable fair value measure for the equipment is not available, given the age and specialty nature of the equipment. As a result, Wie's accounting staff is unable to determine an established exchange price for recording the equipment (nor the interest rate to be used to record interest expense on the long-term note). They have asked you to conduct some accounting research on this topic.
Instructions
If your school has a subscription to the FASB Codification, go to https://aaahq.org/ascLogin.cfm to log in and prepare responses to the following.
Provide Codification references for your responses.
(a) Identify the authoritative literature that provides guidance on the zero-interest-bearing note. Use some of the examples to explain how the standard applies in this setting.
(b) How is present value determined when an established exchange price is not determinable and a note has no ready market? What is the resulting interest rate often called?
(c) Where should a discount or premium appear in the financial statements? What about issue costs?
Case Scenario:
Your aunt recently received the annual report for a company in which she has invested. The report notes that the statements have been prepared in accordance with "generally accepted accounting principles." She has also heard that certain terms have special meanings in accounting relative to everyday use. She would like you to explain the meaning of the terms she has come across related to accounting.
Go to https://www.fasb.org and access the FASB Concepts Statements and respond to the following items. (Provide paragraph citations.) When you have accessed the documents, you can use the search tool in your Internet browser.
a) How is "materiality" defined in the conceptual framework?
b) The concepts statements provide several examples in which specific quantitative materiality guidelines are provided to firms. Identify at least two of these examples. Do you think materiality guidelines should be quantified? Why or why not?
c) The concepts statements discuss the concept of "articulation" between financial statement elements. Briefly summarize the meaning of this term and how it relates to an entity's financial statements.