Question: Suppose that Kroger used FIFO instead of LIFO, what amount would have Kroger reported as inventories on January, 30 2021?

10 Oct 2022,9:47 PM

 

Flag question: Question 1

Question 15 pts

Regarding the scenario described above, how much revenue for the part of the contract relating to software design should Accenture recognize during the fiscal year that ended on August 31, 2021?

Your answer should be in dollars.

 

Flag question: Question 2

Question 25 pts

Regarding the scenario described above, how much revenue for the part of the contract relating to software installation should Accenture recognize during the fiscal year that ended on August 31, 2021?

Your answer should be in dollars.

 

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The scenario for questions three through five is similar to the scenario described above. However, instead of agreeing on a fixed contract price, Accenture and the client agreed to the following performance-based schedule:

Completion Date	Total Contract Price	Probability
September 20, 2021	$570,000	80%
September 30, 2021	$555,000	15%
Later	$480,000	5%

 

Flag question: Question 3

Question 35 pts

Suppose Accenture deems a revenue reversal of $10,000 or larger to be significant (i.e., material) with materiality deemed to be greater than 25% probability. On the date Accenture signed the contact, what was the variable consideration (for this contract) equal to?

Your answer should be in dollars.

 

Flag question: Question 4

Question 45 pts

Suppose that Accenture finished the design stage of the project on August 15, 2021, and then immediately began the installation stage. Further suppose that on August 31, 2021, incurred installation costs equaled 50 percent of expected installation costs.

How much TOTAL revenue (for this contract) should Accenture recognize during the fiscal year that ended on August 31, 2021?

Your answer should be in dollars.

 

Flag question: Question 5

Question 55 pts

Suppose that the client will only pay Accenture on the date that Accenture completes the project. Further suppose that the client has a strong credit history and Accenture expects the client to pay in full.

Does this affect your answer to any of the previous questions?

Group of answer choices

Yes

No

 

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Working Capital (Questions Six and Seven)

When answering questions six and seven, please refer to the excerpts from Kroger’s 10-K for the fiscal year that ended on January 30, 2021. In particular, you should refer to the consolidated balance sheets and the consolidated statements of operations. Note that for your convenience, Kroger’s balance sheets and statement of operations are also provided in the Excel workbook.

When answering questions six and seven, please show your supporting calculations in the worksheet named Kroger Balance Sheet and Kroger Statement of Operations, which is in the Excel file. You are to enter the relevant data into it, and then use Excel to calculate your answers.

 

Flag question: Question 6

Question 65 pts

Suppose that Kroger used FIFO instead of LIFO, what amount would have Kroger reported as inventories on January, 30 2021?

Your answer should be in millions of dollars.

 

Flag question: Question 7

Question 75 pts

Suppose that Kroger used FIFO instead of LIFO, what amount would have Kroger reported as cost of merchandise sold for the fiscal year that ended on January 30, 2021?

Your answer should be in millions of dollars.

 

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Leases (Questions Eight through 17)

Please refer to the excerpt about leases taken from Southwest’s 10-K for the fiscal year that ended on December 31, 2019. Note that, for your convenience, the table shown in this excerpt is also provided in the Excel workbook. It is in the worksheet named Southwest Leases.

When answering questions eight through 11, please show your supporting calculations in the worksheet named Southwest Leases. Please make the following assumptions:

• The relevant discount rate is five percent (i.e., 5%).
• The operating lease rental payments that will be made after 2023 will be spread evenly over the years 2024 through 2027 – i.e., the last payment will be made in 2027.

Note that Southwest adopted ASU 2016-02 on the first day of its 2019 fiscal year – i.e., the fiscal year that ended on December 31, 2019.

 

Flag question: Question 8

Question 85 pts

Suppose Southwest adopted ASU 2016-02 one year earlier. That is, suppose it adopted ASU 2016-02 on the first day of its 2018 fiscal year – i.e., the fiscal year that ended on December 31, 2018.

Estimate the total (i.e., current plus non-current) amount of operating lease liabilities that Delta would have reported on its balance sheet for the fiscal year that ended on December 31, 2018.

Note, you only need to provide your estimate of the total amount, you do not need to provide separate estimates of the current and non-current portions.

Your answer should be in millions of dollars.

 

Flag question: Question 9

Question 95 pts

Suppose Southwest adopted ASU 2016-02 one year earlier. That is, suppose it adopted ASU 2016-02 on the first day of its 2018 fiscal year – i.e., the fiscal year that ended on December 31, 2018.

Estimate the amount of operating lease assets that Southwest would have reported on its balance sheet for the fiscal year that ended on December 31, 2018.

Your answer should be in millions of dollars.

 

Flag question: Question 10

Question 105 pts

Suppose Southwest adopted ASU 2016-02 one year earlier. That is, suppose it adopted ASU 2016-02 on the first day of its 2018 fiscal year – i.e., the fiscal year that ended on December 31, 2018.

Estimate the effect that early adoption would have had on Southwest’s net operating profit before tax for the fiscal year that ended on December 31, 2018.

Your answer should be in millions of dollars; and, if the effect causes net operating profit before tax to increase (decrease), you should enter your answer as a positive (negative) amount.

 

Flag question: Question 11

Question 115 pts

Suppose Southwest adopted ASU 2016-02 one year earlier. That is, suppose it adopted ASU 2016-02 on the first day of its 2018 fiscal year – i.e., the fiscal year that ended on December 31, 2018.

Estimate the effect that early adoption would have had on Southwest’s net financial expense before tax for the fiscal year that ended on December 31, 2018. Your answer in should be in millions of dollars; and, if the effect causes net financial expense before tax to increase (decrease), you should enter your answer as a positive (negative) amount.

 

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When answering questions 12 through 17, you are to select the correct answer to questions about how various key performance indicators (i.e., KPIs) would change if all of Southwest’s leases were accounted for as finance leases. That is, you are to answer whether a particular KPI calculated using pro forma amounts in which we assume Southwest accounts for all of its leases as finance leases would be higher, lower, or the same as the amount the KPI would equal if we calculated it using Southwest’s reported numbers.

Note that these questions relate to Southwest’s most recent fiscal year. Hence, these questions relate to a fiscal year that is subsequent to the year that Delta adopted ASU 2016-02.

You should:

• Assume that, when preparing Southwest’s most recent financial statements, Southwest’s managers and auditors classified all of its leases as operating leases.
• Ignore tax effects. That is, assume there is no effect on tax expense or any other tax-related amounts.

 

Flag question: Question 12

Question 125 pts

If all of Southwest’s leases were accounted for as finance leases, then:

Group of answer choices

Southwest’s net financial expense for the most recent fiscal year would be higher than the amount we would obtain if we used thereported amounts shown on Southwest’s income statement for that same fiscal year.

Southwest’s net financial expense for the most recent fiscal year would be lower than the amount we would obtain if we used the reported amounts shown on Southwest’s income statement for that same fiscal year.

Southwest’s net financial expense for the most recent fiscal year would be the same as the amount we would obtain if we used the reported amounts shown on Southwest’s income statement for that same fiscal year.

This question cannot be answered with the information given to me.

 

Flag question: Question 13

Question 135 pts

If all of Southwest’s leases were accounted for as finance leases, then:

Group of answer choices

Southwest’s NOPAT for the most recent fiscal year would be higher than the amount we would obtain if we used the reported amounts shown on Southwest’s income statement and balance sheet for that same fiscal year.

Southwest’s NOPAT for the most recent fiscal year would be lower than the amount we would obtain if we used the reported amounts shown on Southwest’s income statement and balance sheet for that same fiscal year.

Southwest’s NOPAT for the most recent fiscal year would be the same as the amount we would obtain if we used the reported amounts shown on Southwest’s income statement and balance sheet for that same fiscal year.

This question cannot be answered with the information given to me.

 

Flag question: Question 14

Question 145 pts

If all of Southwest’s leases were accounted for as finance leases, then:

Group of answer choices

Southwest’s operating liabilities at the end of the most recent fiscal year would be higher than the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

Southwest’s operating liabilities at the end of the most recent fiscal year would be lower than the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

Southwest’s operating liabilities at the end of the most recent fiscal year would be the same as the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

This question cannot be answered with the information given to me.

 

Flag question: Question 15

Question 155 pts

If all of Southwest’s leases were accounted for as finance leases, then:

Group of answer choices

Southwest’s operating assets at the end of its most recent fiscal year would be higher than the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

Southwest’s operating assets at the end of its most recent fiscal year would be lower than the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

Southwest’s operating assets at the end of its most recent fiscal year would be the same as the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

This question cannot be answered with the information given to me.

 

Flag question: Question 16

Question 165 pts

If all of Southwest’s leases were accounted for as finance leases, then:

Group of answer choices

Southwest’s financial obligations at the end of its most recent fiscal year would be higher than the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

Southwest’s financial obligations at the end of its most recent fiscal year would be lower than the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

Southwest’s financial obligations at the end of its most recent fiscal year would be the same as the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

This question cannot be answered with the information given to me.

 

Flag question: Question 17

Question 175 pts

If all of Southwest’s leases were accounted for as finance leases, then:

Group of answer choices

Southwest’s financial assets at the end of its most recent fiscal year would be higher than the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

Southwest’s financial assets at the end of its most recent fiscal year would be lower than the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

Southwest’s financial assets at the end of its most recent fiscal year would be the same as the amount we would obtain if we used the reported amounts shown on Southwest’s balance sheet for that same fiscal year.

This question cannot be answered with the information given to me.

 

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Intercorporate Investments (Questions 18 through 24)

Please refer to the excerpt about acquisitions taken from Analog Devices’ 10-K for the fiscal year that ended on October 30, 2021. Note that, for your convenience, the tables shown in this excerpt are also provided in the Excel workbook. They are in the worksheet named Analog Devices Acq.

When answering questions 18 through 24, please show your supporting calculations in the worksheet named Analog Devices Acq.

 

Flag question: Question 18

Question 185 pts

When Analog Devices acquired Maxim, what was the value of the consideration that Analog Devices transferred to the shareholders of Maxim?

Your answer should be in thousands of dollars.

 

Flag question: Question 19

Question 195 pts

On the day it acquired Maxim, how much goodwill did Analog Devices recognize?

Your answer should be in thousands of dollars.

 

Flag question: Question 20

Question 205 pts

On the day it acquired Maxim, how much did Analog Devices’ assets increase as a result of the consolidation of Maxim?

Your answer should be in thousands of dollars.

 

Flag question: Question 21

Question 215 pts

On the day it acquired Maxim, how much did Analog Devices’ liabilities increase as a result of the consolidation of Maxim?

Your answer should be in thousands of dollars.

 

Flag question: Question 22

Question 225 pts

On the day it acquired Maxim, how much did Analog Devices’ equity increase as a result of the consolidation of Maxim?

Your answer should be in thousands of dollars.

 

Flag question: Question 23

Question 235 pts

Suppose that, in the fiscal year that will end on October 30, 2022, Analog Devices impairs (and thus reduces the balance of) the goodwill relating to the Maxim acquisition by 99 thousand U.S. dollars. Further suppose that the applicable tax rate is 21 percent.

What effect will this impairment have on Analog Devices GAAP pre-tax income for the fiscal year that ended on October 30, 2022?

Your answer should be in thousands of dollars; and, if the effect will increase (reduce) pre-tax income, you should enter your answer as a positive (negative) amount.

 

Flag question: Question 24

Question 245 pts

Suppose that, in the fiscal year that will end on October 30, 2022, Analog Devices impairs (and thus reduces the balance of) the goodwill relating to the Maxim acquisition by 99 thousand U.S. dollars. Further suppose that the applicable tax rate is 21 percent.

What effect will this impairment have on Analog Devices’ GAAP provision for income taxes (i.e., GAAP tax expense) for the fiscal year that ended on October 30, 2022? (Note in the Supplement the reference to tax deductibility of goodwill)

Your answer should be in thousands of dollars; and, if the effect will increase (reduce) the GAAP provision for income taxes, you should enter your answer as a positive (negative) amount.

 

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Employee Stock Options (Questions 25 through 29)

Please refer to the excerpts about Netflix’s stock option plan that are taken from Netflix’s 10-K for the fiscal year that ended on December 31, 2020. Note that, for your convenience, the table shown in this excerpt is also provided in the Excel workbook. It is in the worksheet named Netflix ESOs.

When answering questions 25 through 29, please show your supporting calculations in the worksheet named Netflix ESOs. Please make the following assumptions:

• The weighted average fair value of an option outstanding on December 31, 2019 was $225.
• All the options that were exercised during the fiscal year that ended on December 31, 2020 were about to expire. That is, employees waited until the very last moment, and then they exercised their options. The total intrinsic value of options exercised for the year ended December 31, 2020 was $1,600 million.
• The weighted average fair value of an option granted by Netflix to an employee during 2020 was $210.00.
• The weighted average fair value of an option outstanding on December 31, 2020 was $400.00

 

Flag question: Question 25

Question 255 pts

What was Netflix’s pro forma (i.e., unrecognized) employee stock option (i.e., ESO) obligation on December 31, 2019?

Your answer should be in millions of dollars.

 

Flag question: Question 26

Question 265 pts

What was the fair value of the ESOs that were exercised by Netflix’s employees during the fiscal year that ended on December 31, 2020?

Your answer should be in millions of dollars.

 

Flag question: Question 27

Question 275 pts

What was the fair value of the ESOs that were granted by Netflix to its employees during the fiscal year that ended on December 31, 2020?

Your answer should be in millions of dollars.

 

Flag question: Question 28

Question 285 pts

What was Netflix’s pro forma ESO obligation on December 31, 2020?

Your answer should be in millions of dollars.

 

Flag question: Question 29

Question 295 pts

Based on your answers to 25 through 28, what was the pro forma revaluation gain or loss that Netflix would have recognized on its ESO obligation in the fiscal year that ended on December 31, 2020.

Your answer should be in millions of dollars; and, if your answer is that Netflix would have recognized a gain (loss), you should enter your answer as a positive (negative) amount.

 

 

 

 

Excerpt about revenue recognition taken from Accenture’s 10-K for the fiscal year that ended on August 31, 2021.

 

We account for revenue in accordance with FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).

 

Performance Obligations

 

A performance obligation is a promise in a contract to transfer a distinct good or service to the client. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on the relative standalone selling price.

 

Our revenues are derived from contracts for outsourcing services, technology integration consulting services, and non-technology integration consulting services. These contracts have different terms based on the scope, performance obligations, and complexity of the engagement, which frequently require us to make judgments and estimates in recognizing revenues.

 

The nature of our contracts gives rise to variable consideration. Many contracts include incentives or penalties related to costs incurred, benefits produced, or adherence to schedules that may increase the variability in revenues and margins earned on such contracts. These variable amounts generally are awarded or refunded upon achievement of or failure to achieve certain performance metrics, milestones, or cost targets. We include these variable fees in the estimated transaction price when it is not probable a significant reversal of revenue will occur. These estimates reflect the expected value of the variable fee and are based on an assessment of our anticipated performance, historical experience, and other information available at the time.

 

Our performance obligations are satisfied over time as work progresses or at a point in time. The majority of our revenues are recognized over time based on the extent of progress towards satisfying our performance obligations.

 

Technology Integration Consulting Services

 

Technology integration consulting services relate to contracts in which we design, build, and implement systems and related processes for our clients. Contracts for technology integration consulting services generally span six months to two years. We use the ratio of costs incurred to total estimated costs at completion to measure progress toward satisfying our performance obligations.

 

 

 

Excerpts from Kroger’s 10-K for the fiscal year that ended on January 30, 2021.

 

KROGER EXCERPTS CONTINUE ON THE NEXT PAGE

 

 

 

 

Excerpt about leases taken from Southwest’s 10-K for the fiscal year that ended on December 31, 2019.

 

The Company enters into leases for aircraft, property, and other types of equipment in the normal course of business. The accounting for these leases follows the requirements of the New Lease Standard, which the Company adopted as of January 1, 2019.

 

The following table summarizes our minimum rental commitments under noncancelable operating leases for the years subsequent to December 31, 2018:

 

 

 

 

Excerpt about acquisitions taken from Analog Device’s 10-K for the fiscal year that ended on October 30, 2021.

 

Maxim Integrated Products, Inc.

 

On the Acquisition Date, the acquired all of the voting interests of Maxim, an independent manufacturer of innovative analog and mixed-signal products and technologies. Under the terms of the agreement pursuant to which the Company acquired Maxim (Merger Agreement), Maxim stockholders received, for each outstanding share of Maxim common stock, 0.6300 of a share of the Company's common stock at the closing. The Company believes the combination creates an expanded suite of top-performing mixed-signal and power management technology offerings and complements the Company's legacy offerings. The results of operations of Maxim from the Acquisition Date are included in the Company’s Consolidated Statement of Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows and Consolidated Statement of Shareholders’ Equity for fiscal 2021.

 

The Acquisition Date fair value of the consideration transferred in the Acquisition consisted of the following. All amounts are in thousands of U.S. dollars.

 

Cash consideration	47
Issuance of common stock	27,950,000
Total purchase consideration	27,950,047

 

ANALOG DEVICES EXCERPTS CONTINUE ON THE NEXT PAGE

 

 

 

The fair values of assets acquired and liabilities assumed as of the Acquisition Date are set forth in the table below. The excess of the purchase consideration over the aggregate Acquisition Date value of identifiable net assets acquired was recorded as goodwill. None of the goodwill is deductible for tax purposes. All amounts are in thousands of U.S. dollars.

 

Cash and cash equivalents	2,450,597
Accounts receivable	609,245
Inventories	858,300
Prepaid expenses and other current assets	59,310
Property, plant and equipment	759,544
Intangible assets	12,429,000
Other long-term assets	80,373
Fair value of identifiable assets	17,246,369
Accounts payable	112,828
Income taxes payable	137,590
Accrued liabilities	590,855
Long-term debt	1,072,150
Deferred income taxes	1,665,356
Other non-current liabilities	363,900
Fair value of assumed liabilities	3,942,679
Fair value of net identifiable assets	13,303,690

 

 

 

Excerpts about Netflix’s stock option plan that are taken from Netflix’s 10-K for the fiscal year that ended on December 31, 2020.

 

Stock Option Plan

 

On June 4, 2020, the Company's stockholders approved the 2020 Stock Plan, which was adopted by the Company's Board of Directors on March 4, 2020 subject to stockholder approval. The 2020 Stock Plan authorized 17,500,000 new shares to be available for award grants.

 

A summary of the activities related to the Company’s stock option plans is as follows:

 

	Options Outstanding
	Number	Weighted-Average Exercise Price (USD)
Balances as of December 31, 2017	21,647,350	61.13
Granted	2,039,974	311.66
Exercised	-3,208,046	38.63
Balances as of December 31, 2018	20,479,278	89.61
Granted	2,588,380	320.66
Exercised	-2,208,332	32.88
Balances as of December 31, 2019	20,859,326	124.28
Granted	1,909,476	432.34
Exercised	-4,091,992	58.30
Balances as of December 31, 2020	18,676,810	170.23

 

The aggregate intrinsic value of the Company's outstanding stock options as of December 31, 2020 was $6,922 million The total intrinsic value of options exercised for the year ended December 31, 2020 was $1,600 million.