You are the Controller for a large publicly traded company which has three major components of its business: a manufacturing arm, a merchandising arm which focuses on sales of the internally-manufactured

Mini-Case 2 (50 Points)

BUS1 121A-005 Intermediate Accounting I

Due: Wednesday October 23, 2024 at the beginning of class

Answer the following questions.  Assume each question is independent from the last.  Please type using a word processing program and bring a printed copy to class.  Write as much or as little as you feel necessary to answer each question to the best of your ability.  You may use all available resources to complete this case – e.g., lecture slides, notes, your book, and the Accounting Standards Codification.  Collaboration with others in your group is allowed to the extent that it is helpful.  How you work together is up to you – however, I encourage everyone in the group to take at least some part for every question.  Please turn in only one finished assignment for each group.

Use appropriate citations where relevant and according to your professional judgment.  For questions requiring use of the codification, please use the following style:

1)     Cite the ASC down to the Paragraph.  For example, (ASC 330-10-05-01)

2)     Interpret the codification paragraph into ‘plain English’ as best you can.  In other words, how would you explain the appropriate accounting treatment to a colleague, boss, or business partner who has a basic understanding of accounting?  You may (and are encouraged to) use debits and credits or “T-accounts” to illustrate the accounting if appropriate.

Question 1 (ASC Required – 10 points):

Under U.S. GAAP, how should a corporation account for the repurchase of its own stock?

Question 2 (ASC Required – 20 points):

You are the Controller for a large publicly traded company which has three major components of its business: a manufacturing arm, a merchandising arm which focuses on sales of the internally-manufactured products, and a capital financing arm which previously focused on providing financing to purchasers of the company’s products, but has since moved into consumer financing on a wide scale as a way to leverage the company’s cash resources.  Previously, all of these operations were aggregated on the firm’s financial statements.  However, your auditor has expressed concern and recommended that you reconsider how you report these segments.  You don’t remember anything about this from your accounting classes.  Use the ASC to determine how to differently report the firm’s financials in the future.

Question 3 (ASC Required – 20 points):

You decide to get into the mining business after graduation.  You purchase a large tract of land in the foothills of the Sierra Nevada mountains to search for precious minerals.  However, as part of the land purchase and in order to begin mining, you agree with the state of California to return the land back to its original appearance once you are done mining.   Find and interpret ASC guidance for how to account for this circumstance.  (You may need to cite more than one paragraph.)