For each of the items below, indicate whether the item should be reflected in the 2002 financial

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For each of the items below, indicate whether the item should be reflected in the 2002 financial statements for Rutherford Company. If the item should be reflected, indicate whether it should be reponed in the financial statements themselves or by note disclosure.

(a) During 2002. the company had a gain on the sale of manufacturing assets.

(b) As of December 31. 2002. the company was in violation of certain loan covenants.The violation does not cause the loans to be callable immediately but does increase the interest charge by 1.5%.

(c) The company uses straight-line depreciation for all tangible, long-term assets.

(d) As of December 31. 2002. accounts receivable in the amount of \($6.7\) million are estimated to be uncollectible.

(e) The Environmental Protection Agency is investigating the company's procedures for disposing of toxic waste. Outside consultants have estimated that the company may be liable for fines of up to 58 million

(f) The company's reponed Provision for Income Taxes includes \($3.6\) million in current taxes and \($7.3\) million in deferred taxes.

(g) During 2002. a long-term insurance agreement was signed. The company paid 5 years of insurance premiums in advance.

(h) As of December 31 . 2002. the company holds \($11.2\) million of its own stock that it purchased in the open market and is holding for possible reissuance.

(i) During 2002. the company hired three prominent research chemists away from its chief competitor

(j) Reported long-term debt is composed of senior subordinated bonds payable.
convertible bonds payable, junior subordinated bonds pa)able, and capital lease obligations.

(k) Early in 2003, a significant drop in raw material prices caused the company s stock price to rise in anticipation of sharply increased profits for the year.

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Intermediate Accounting

ISBN: 9780324013078

14th Edition

Authors: Fred Skousen, James Stice, Earl Kay Stice

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