1 – Jessica Dook, CPA, and a client had a conversation about an acquisition of a business that the client made last year. The original purchase of the business included the recording of goodwill. The client treated the goodwill like other intangibles and recorded amortization expense on it. Jessica must explain to the stubborn client that this accounting treatment is no longer acceptable.
REQUIRED – Determine the specific authoritative references that Jessica needs to convince the client of the proper accounting for the goodwill. Should the goodwill be amortized? State the correct accounting treatment.
2 – Cindy Lou Who is a new staff auditor on her first engagement. She was told that tomorrow she will be working with a senior auditor examining loss contingencies. To prepare, Cindy Lou wants to familiarize herself with the 3 areas in the range of likelihood for loss contingencies.
REQUIRED – Determine the specific authoritative reference that identifies the 3 areas in the range of likelihood for loss contingencies. What are the 3 areas?
3 – Elaine Bartley, CPA, is preparing for a meeting with an audit client. One topic for the meeting is whether it is necessary to record a valuation allowance against a material deferred tax asset that the client recorded during the current year. Elaine is reviewing the criteria that determine whether a valuation allowance is required.
REQUIRED – Cite a specific authoritative reference indicating the standard for determining whether recording a valuation allowance is required.
4 – Two intermediate accounting students, Mary and John, were having a discussion about their financial statement project for a private company for the year ending December 31, 2017. The conversation went as follows:
Mary: “I was reviewing the financial statements last night and I believe there is an error on the balance sheet.”
John: “Really? I thought I went over the balance sheet and it looked great.”Mary: “I think the deferred income tax asset and liability need to be split between current and non-current.”
REQUIRED – Cite the specific authoritative reference stating the appropriate treatment and presentation for deferred income tax assets and liabilities for private companies at the balance sheet date? “Who is correct, Mary or John?”
