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Advanced Financial Reporting and Analysis

ACT 6653
Spring Semester 2014

Instructor: Steve Grice, Ph.D., CPA

Course Prerequisites: NA

Office Hours TTH 8:30-10:00 & 11:30-12:00; TH 1:00-4:00; M 9:30-11:00

Office Location: 121 Bibb Graves Hall

Office Telephone: 334-670-3149


334-670-3136 Secretary

Email: sgrice@troy.edu

Time of Class: 1:00 to 3:45 T

Class Location: BG 201

Course Description: Discuss and solve problems associated with complex accounting topics.

Course Objectives: The objective of this course is to provide students with an understanding of the
accounting complexities associated with investments, pensions, leases, accounting
changes, deferred taxes, revenue recognition, stockholders’ equity, dilutive securities
and earnings per share, statement of cash flows, and business combinations. This
course should be very beneficial to the student when preparing for the FARE section
of the CPA exam.

Text(s): Wiley [FARE]

Other Materials: None

Grading Methods: Test 1 100 points 90%-100% A


Test 2 100 points 80%-89% B
Test 3 100 points 70%-79% C
Test 4 100 points 60%-69% D
Test 5 100 points below 60% F
Paper/Poster 100 points
Project 100 points
Total 700 total points

Attendance: You are expected to have attempted the assigned material before the
material is covered in class. You should be prepared for all assigned problems
during each class. Routine absences from class will have a large, negative impact on
your grade.

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Examinations: Tentative examination dates are indicated on the syllabus. More
information on the content and format of the exams will be provided as the material
is covered in class. The tentative format for each exam includes multiple-choice and
problems. No make-up exams will be given. If you are excused (by me) from
taking an exam, your final exam will be adjusted accordingly. Programmable
calculators (those that store text) are not permitted on the exams. Calculators
without text storage capability are allowed.

Americans With Disabilities Act (ADA): Any student whose disabilities fall within
ADA must inform the instructor at the beginning of the term of any special needs or
equipment necessary to accomplish the requirements for this course. Students who
have or may be dealing with a disability or learning difficulty should speak with the
instructor, contact the Office of Adaptive Needs Program (Wright 226), or call 670-
3221/3222. Various accommodations are available through the Adaptive Needs
Program.

Class Procedure and The student will be expected to attend scheduled class meetings and complete
Requirements: reading assignments prior to class.

CLASSROOM ADMINISTRATION
Students are expected to:
1. Punctually attend all scheduled classes. Students who arrive at class after roll
call will be counted absent.
2. Be responsible for all instructions and assignments given in class as well as for
the supporting textbook content.
3. Read the textbook material before the lecture covering that material. This leads
to a better understanding of the lecture (or lab) as well as the opportunity to ask
questions about material(s) in the text that were unclear or that the student did
not understand.

General Supports: The labs in Bibb Graves are available for student use and tutors are available.

Daily Assignments: See schedule below

Incomplete Work Policy: Any incomplete work at the end of the term will not be accepted unless the student
can provide acceptable and clear documentation prior to grades being submitted to
the Registrar.

Cheating Policy: If you are caught cheating, you will get a course grade of "F." See Student
Handbook for the definition and university policy on cheating. Plagiarism is a form
of cheating as is copying another’s assignments.

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MISSION AND VISION STATEMENTS:

School of Accountancy Mission Statement: The mission of the School of Accountancy


is to advance the accounting profession by providing quality accounting education to both
undergraduate and graduate students. To achieve this, our faculty will:
1) prepare students for career opportunities with increasing professional and
managerial responsibility in public accounting as well as government and industry
and prepare undergraduate students for admission to graduate programs in
accounting and business
2) publish quality intellectual contributions that impact the practice of accounting and
accounting education; and
3) provide service to and engage with the academic and professional communities.

SCOB Mission Statement


The Sorrell College of Business supports the Troy University mission by preparing our
diverse student body to become ethical professionals equipped to compete in the global
business environment. To achieve this, our faculty, staff, and administration will:
1) provide quality education in global business through our undergraduate and
graduate programs, delivered around the world through face-to-face and online
environments, to traditional, non-traditional, military, and international students;
2) contribute to the development and application of knowledge focused on applied
business, learning, and pedagogical research;
3) provide service to the University, business and professional organizations, and our
communities through individual involvement, business outreach, and our centers
for research.

SCOB Value Statement


The Sorrell College of Business will be a recognized and respected leader for quality and
flexibility in the delivery of business education that prepares graduates to succeed in the
global business environment.

Troy University Mission Statement: Troy University is a public institution comprised of a


network of campuses throughout Alabama and worldwide. International in scope, Troy University
provides a variety of educational programs at the undergraduate and graduate levels for a diverse
student body in traditional, nontraditional and emerging electronic formats. Academic programs
are supported by a variety of student services which promote the welfare of the individual
student. Troy University's dedicated faculty and staff promote discovery and exploration of
knowledge and its application to life-long success through effective teaching, service, creative
partnerships, scholarship and research.

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Advanced Financial Reporting and Analysis
Tentative class schedule
Date Topic
January 14 Investments

21 Pensions

28 Test 1: Investments and Pensions

February 4 Leases

11 Accounting Changes

18 Test 2: Leases and Accounting Changes

25 Deferred Taxes

March 4 Revenue Recognition (Paper Drafts Due)

11 Spring Break

18 Test 3: Deferred Taxes and Revenue


Recognition

25 EPS and Dilutive Securities

April 1 Statement of Cash flows

NOTE: April 4, 2014 paper and


poster is due—Displayed April
16-18

8 Test 4: EPS, Dilutive Securities and


Statement of Cash Flows

15 Stockholders' Equity

22 Business Combinations

29 Test 5: Stockholders' Equity and Business


Combinations

May 1 Dead Day


TBA Final Exam (Project Due)

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SEMESTER PROJECT
The final project will emphasize the material covered during the term and will evaluate
the student's comprehension of the topic. Before you begin lesson 1, it is imperative that you read
the information related to the final project that is presented in the syllabus. In brief, the student
should gather information related to the final project as each lesson is completed during the
semester. Students are required to prepare a multi-step income statement, classified balance
sheet, and statement of stockholders' equity. These statements should reflect all adjustments
related to the problems. Students must show all work and all entries.

JSG, Inc.
Trial Balance
December 31, 20X5
Debit Credit
Cash $ 150,000
Accounts Receivable $ 1,201,000
Inventory (beginning & ending balance) $ 124,800
Investments $ 20,000
Land $ 184,000
Buildings $ 394,000
Acc. Depr. – Buildings $ (98,500)
Equipment $ 167,000
Acc. Depr. – Equipment $ (83,500)
Tools $ 50,000
Acc. Depr – Tools $ (39,200)
Accounts Payable $ (75,000)
Unearned Rent $ (40,000)
Accrued Pension Cost $ (100,000)
Litigation Payable $ (30,000)
Notes Payable $ (100,000)
Retained Earnings $ (46,200)
Common Stock, $.25 par value $ (100,000)
Paid-in-capital in excess of par $ (300,000)
Dividends $ 20,000
Sales $ (2,972,200)
Sales Discounts $ 9,200
Purchases $ 1,450,200
Purchases Discounts $ (32,000)
Freight-in $ 24,800
Salaries Expense $ 139,600
Utilities Expense $ 18,800
Repair Expense $ 11,800
Advertising Expense $ 14,400
Insurance Expense $ 7,000
Litigation Expense $ 30,000
Totals $ 4,016,600 $ (4,016,600)

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INVESTMENTS
On February 17, 20X5, JSG purchased equity securities for $20,000. The Company's
management properly classified these securities as available-for-sale securities. The market value
of the securities at December 31, 20X5 was $28,000.

Instructions:
Prepare the adjusting journal entry related to the available-for-sale securities. Record the journal
entry in the financial statement excel file.

PENSIONS
During 20X5 JSG, Inc. established a defined benefit pension plan. Details related to the pension
plan are as follows:
 Defined benefit, noncontributory plan with immediate full vesting.
 Benefits paid at the end of each retirement year beginning at age 60.
 Expected 9% rate of return on plan assets.
 Pension benefit = Years of service x .02 x Average of five highest annual salaries.

December 31, 20X5 December 31, 20X4


Projected benefit obligation $1,000,000 $900,000
Fair value and market related value of plan 1,000,000 750,000
assets
Accumulated benefit obligation 900,000 800,000

Additional information:
 JSG's discount is 7%.
 Average remaining service period of employees expected to receive benefits is 10 years.
 Service cost for 20X5 is $100,000.
 Unrecognized prior service cost on January 1, 20X5 was $300,000.
 Unrecognized prior net gain on January 1, 20X5 was $100,000.
 The expected retirement period is 20 years.
 The remaining service period of participating employees at the time of adoption of ASC 715
was 12 years.
 At transition, the PBO exceeded the fair value of plan assets by $250,000. An unfunded
accrued pension cost of $100,000 had previously been recognized.

Instructions:
Calculate and record JSG's minimum required net periodic pension cost for 20X5.

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LEASES
On January 1, 20X5 JSG, Inc. signed a 10 year lease agreement for an asset with a remaining
estimated economic life of 12 years. The normal selling price of the asset is $210,482, and its
unguaranteed residual value at the end of the lease term is estimated to be $20,000. JSG, Inc. will
pay annual payments of $30,000 at the beginning of each year. The incremental borrowing rate
for JSG, Inc. is 11%. The lessor’s implicit rate of 10% is known by JSG, Inc. No entries related
to the lease have been recorded by JSG in 20X5.
Instructions:
Prepare the lease amortization and depreciation schedules using a spreadsheet [e.g., excel].
Prepare all the entries necessary for 20X5 and apply the entries to the financial statement
spreadsheet [e.g., excel].

ACCOUNTING CHANGES
On January 1, 20X2 JSG, Inc. purchased tools at a cost of $50,000. The tools had an estimated
useful life of five years and no estimated salvage value. During 20X5 JSG switch from double
declining balance to straight line depreciation method. No entries related to this change has been
recorded by JSG in 20X5.
Instructions:
Using an excel worksheet, prepare depreciation schedules for both the double declining balance
and straight line depreciation methods. Prepare the entries to record the 20X5 depreciation.
Record the entry in the financial statement excel file.

DEFERRED TAXES
The following differences enter into the reconciliation of financial income and taxable income of
JSG, Inc. for the year ended December 31, 20X5. The enacted tax rate is 30% for all years.

(a) The rent revenue will be recognized as earned for book purposes equally over a four year
period, 20X6-20X9; as such, $10,000 of the unearned rent is classified as a current liability
and the remaining $30,000 is classified as a noncurrent liability.
(b) It is estimated that the litigation liability will be paid in 20X8 and, as such, the liability is
classified as noncurrent.
(c) Excess tax depreciation of $48,000 will reverse equally over a four year period, 20X6-20X9.

[It is considered “more likely than not” that any deferred taxes related to deductible amounts will
be realized]

Instructions:
Using an excel spreadsheet, calculate the deferred taxes related to each temporary difference and
prepare schedules to show when the temporary differences reverse. Prepare the journal entry
necessary to record income tax expense, deferred taxes, and the income taxes payable for 20X5.
Record the journal entry in the financial statement excel file.

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EARNINGS PER SHARE
JSG has 400,000 shares of common stock outstanding throughout 20x5. In addition, the company
has 250,000 10% bonds issued on March 1, 20X5. Each $1,000 bond is convertible into 20 share
of common stock.

Instructions:
Compute the basic and diluted earnings per share for 20X5.

BONDS
JSG, Inc. sold $250,000 of 10% bonds on March 1, 20X5. The bonds pay interest on September
1, and March 1. The due date of the bonds is September 1, 20X9. The bonds yield 12%. No
entries related to the bonds have been recorded by JSG in 20X5.
Instructions:
Prepare a bond amortization schedule using an excel spreadsheet. Prepare all 20X5 entries
related to the bond issuance and apply them to the financial statement excel file.

DEPRECIATION
(1) The building was purchased 20 years ago at a cost of $394,000. The building had an
estimated life of 40 years at acquisition. The straight-line depreciation method is used
allocate the cost of the building and no salvage value is estimated.
(2) The equipment was bought on January 1, 20X0 at a cost of $167,000. The equipment had an
estimated life of 10 years at acquisition. The straight-line depreciation method is used
allocate the cost of the building and no salvage value is estimated.
No entries related to depreciation have been recorded by JSG in 20X5.
Instructions:
Prepare depreciation schedules for both the building and equipment using an excel spreadsheet.
Prepare the December 31, 20X5 adjusting entry for depreciation and apply the entry to the
financial statements excel file.

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TO: Troy Campus Sorrell College of Business Faculty
FROM: Hank Findley and Daniel J. Smith
CONCERNING: 2014 Student Research Showcase
DATE: Tuesday, September 11, 2018

We are pleased to announce the 2nd Annual Sorrell College of Business Student
Research Showcase. SCOB Faculty in upper-level undergraduate and graduate courses
are encouraged to integrate a research component into their 2014 Spring course syllabi as
part of a university-wide initiative to promote research and creative works at the
undergraduate and graduate level. The promotion and development of a culture of student
research and mentorship is an important component of the AACSB accreditation criteria.
This annual showcase provides an opportunity for students to showcase original research
projects undertaken in SCOB courses.

Students must register and submit their original research paper by Friday, April 4th, 2014.
Selected students will then prepare a poster board detailing their research for the
presentation showcase to be held between April 15th and 18th, 2014. Judging and an
awards ceremony, along with the Sorrell College of Business Honor’s Day, will be held
on April 17th at the Troy campus. Awards will be granted to the 1st, 2nd, and 3rd place
winners for the undergraduate and graduate level separately.

Please find attached further details about the competition. Please feel free to email Daniel
Smith (djsmith@troy.edu) for more information. A webpage for the showcase is available
at the following address: http://business.troy.edu/Portal/student-research-showcase.aspx

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2014 SCOB Student Research Showcase
Prize
Undergraduate: 1st, 2nd, and 3rd Best Overall Research Paper
Graduate: 1st, 2nd, and 3rd Best Overall Research Paper

Judges
Faculty judges will be selected from each of the academic divisions within the SCOB.
Judging will be blind and independent. Borda count tallies submitted by the judges will
be amalgamated to determine the overall winners in the undergraduate and graduate
competitions.

Judges will evaluate the research papers based on their topic, methodology, conclusions,
quality of scholarship, and overall English and grammar. Student research papers should
be original, clear, accurate, sound, and professionally organized.

Submission
Students must register and submit their research papers electronically no later than 3:00
PM on Friday, April 4th. The link for registering and submitting papers will posted on the
webpage (http://business.troy.edu/Portal/student-research-showcase.aspx). Research
papers should also be sent via email to Dr. Daniel J. Smith (djsmith@troy.edu).

All identifying content, including the name of the authors, should be removed from the
submitted research paper prior to submission.

The top 40 research papers will be notified by Friday, April 11th and will be required to
prepare a poster board summary of their research paper for the showcase April 15th – 18th,
with an awards ceremony, and the Sorrell College of Business Honor’s Day, to be held on
April 17th. Professional dress is required.

Eligibility
All registered Troy University students enrolled in at least one Sorrell College of
Business course and located at the main Troy Campus are invited to participate.

Graduate students in Sorrell College of Business Programs at all campuses are invited to
participate.

Papers with multiple authors who fit the above eligibility requirements are permitted.

Paper Formatting Guidelines


 12 PT Times New Roman font
 Double-spaced lines
 Separate cover sheet with research paper title and abstract, but no author-
identifying content
 APA formatting

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 Suggested Page Length
o Undergraduates: 10-20 pages
o Graduates: 15-30 pages
 PDF Format

Poster Board Guidelines


 Size
o Graduate students
 Tri-fold foam display board around 36” x 48”
o Undergraduate students
 Poster board around 22” x 28”
 Required Display Information
o The research paper title, the author names, and graduate or undergraduate
designation must be readily visible to judges in the following format:

 Additionally, the students printed registration and publicity release forms must
be affixed to the backside of the poster.
Rules
1. Absolutely no plagiarism will be tolerated.
2. All submissions must adhere to the above specifications.

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