ACC 499 – Undergraduate Accounting Capstone © 2013 Str.docx

ACC 499 – Undergraduate Accounting Capstone
© 2013 Strayer University. All Rights Reserved. This document
contains Strayer University Confidential and Proprietary
information
and may not be copied, further distributed, or otherwise
disclosed in whole or in part, without the expressed written
permission of
Strayer University.
ACC 499 Student Version 1136 (1085 7-8-2013) Final Page 1 of
21
(Prerequisite – To be taken last or next to last course in degree
program; a grade of “C” or higher
is required.)
COURSE DESCRIPTION
This course provides students opportunities for analysis,
synthesis, prescription, and application of
accounting concepts. Students will apply critical-thinking and
decision-making skills to real-world business
cases involving complex accounting decisions.
INSTRUCTIONAL MATERIALS
Required Resources
Strayer University (2013). Accounting undergraduate capstone

(2
nd
ed.). Mason, OH: Cengage Learning.
(Note: This is a textbook uniquely created for Strayer and can
only be purchased through the
Strayer Bookstore. The contents of the book differ from the
national title.)
Peregrine Academics access code: Students should follow the
instructions in at the end of the course
guide in order to take the assessment between weeks 9 through
11.
Supplemental Resources
Bartoletti, S. (2012). The missing piece in liquidity
calculations. Journal of Accountancy, 213(4), 34-37.
Petra, S. T., & Dorata, N. T. (2012). Restricted stock awards
and taxes: What employees and employers
should know. Journal of Accountancy, 213(2), 44-48.
Tysiac, K. (2012). Corporate governance best practices 10 years
after SOX. Journal of
Accountancy, 214(1), 24-26.
COURSE LEARNING OUTCOMES
1. Analyze accounting situations to apply the proper accounting
rules and make recommendations
to ensure compliance with generally accepted accounting

principles.
2. Analyze business situations to evaluate organization culture
and internal controls to ensure that
financial statements are presented fairly, not deceptively or
fraudulently.
3. Analyze business situations to determine the appropriateness
of decision making in terms of
professional standards and ethics.
4. Analyze business situations and apply advanced federal
taxation concepts.
5. Use technology and information resources to research issues
in accounting.
6. Write clearly and concisely about accounting using proper
writing mechanics.
WEEKLY COURSE SCHEDULE
The standard requirement for a 4.5 credit hour course is for
students to spend 13.5 hours in weekly work.
This includes preparation, activities, and evaluation regardless
of delivery mode.
Week Preparation, Activities, and Evaluation Points
1 Preparation
o Chapter 1: Accounting for Leases

information
permission of
Strayer University.
21
o Case Study: Leasing Restatements in the Restaurant
Industry
-Activity
o Use the Internet to research the current provisions and
proposed changes reflected in the exposure draft for lease
accounting under generally accepted accounting principles
(GAAP) and international financial reporting standards
(IFRS). Be prepared to discuss.
Activities
Evaluation

20
2 Preparation
o Chapter 2: Contributed Capital
o Case Study: Harley Davidson(B) 2010
-Activity
o Use the Internet to research the accounting treatment of
equity-based compensation under generally accepted
accounting principles (GAAP) and international financial
reporting standards (IFRS). Be prepared to discuss.
Activities
Evaluation
one

20
3 Preparation
o Chapter 3: Intercorporate Investments in Common Stock
-Activity
o Use the Internet to research recent (within the last three
years) mergers and acquisitions of global entities involving
goodwill. Review the financial statements of an entity after
the acquisition involving goodwill impairment. Be prepared to
discuss.
Activities
Evaluation
nd
Financial

Results Analysis
20
240
4 Preparation
o Chapter 4: International Financial Reporting Standards
(IFRS)
o Case Study: Asset Impairments: The Recession of

information
permission of
Strayer University.
21
2008-2009
-Activity
o Research the Internet for several recent articles (within the
last three years) on fair value measurement of assets for
financial accounting reporting. Be prepared to discuss.
Activities
Evaluation
20

5 Preparation
o Chapter 5: Accounting for Post-Employment Benefits
o Case Study: General Motors
-Activity
o Research the Internet for several recent (within the last three
years) articles on financial accounting reporting on pension
plans. Be prepared to discuss.
Activities
Evaluation
20
200

6 Preparation
o Chapter 6: Fraud in e-Commerce
o Case Study: Koss Corporation: Unauthorized Financial
Transactions
-Activity
o Research the Internet for a recent story (within the last five
years) involving a data breach by a publicly traded company.
Research the current disclosure requirements of the
Securities and Exchange Commission (SEC) involving data
breaches by public companies. Be prepared to discuss.
Activities
Evaluation

20
7 Preparation
o Chapter 7: Inventories: Cost Measurement and Flow
Assumptions & Special Valuation Issues
o Case Study: Carton Medical Devices
-Activity
o Use the Internet to research recent articles on the channel
stuffing practice used by a company to increase income by
sending suppliers in the distribution channel more inventory
information

permission of
Strayer University.
21
than they are able to sell. Be prepared to discuss.
Activities
Evaluation
20
280
8 Preparation
o Chapter 8: Judgmental and Ethical Decision-Making
Frameworks and Associated Professional Standards
o Case Study: IBM and Google
-Activity
o Use the Internet to research at least two current cases
involving violations of the AICPA Code of Professional

Conduct. Be prepared to discuss.
Activities
Evaluation
20
9 Preparation
o Chapter 9: Auditing and Internal Control
o Case Study: Apple
-Activity
o Use the Internet or the Strayer Library to research the
internal control requirements under Sarbanes-Oxley Act
(SOX) and the Committee of Sponsoring Organizations of the
Treadway Commission‘s (COSO) guidance on internal
controls. Be prepared to discuss.

Activities
Evaluation
his is the first week the Peregrine
Assessment can be taken.)
20
100
10 Preparation
o Chapter 10: Taxes on the Financial Statements
o Case Study: Bethlehem Steel Corporation’s Deferred Taxes
-Activity
o Use the Internet to research articles on ASC 740 (SFAS 109)

and International Accounting Standard (IAS) 12. Be prepared
to discuss.
Activities
Evaluation
20
information
permission of
Strayer University.

21
week.)
440
11 Preparation
Activities
ssions
Evaluation
week.)
20
200
GRADING SCALE – UNDERGRADUATE

Assignment Total Points
% of
Grade
Assignment 1: Amazon.com Business Combinations and
Financial
Results Analysis
240 15%
Assignment 2: Litigation, Censures, and Fines 280 17%
Assignment 3: Capstone Research Project 440 24%
Midterm Exam (open book with a 2-hour time limit)
Part 1: Chapters 1 and 2; 25 questions, worth 4 points apiece
Part 2: Chapters 3 and 4; 25 questions, worth 4 points apiece
200 12%
Final Exam (open book with a 2-hour time limit)
Part 1: Chapters 5-7; 25 questions, worth 4 points apiece
Part 2: Chapters 8-10; 25 questions, worth 4 points apiece
200 12%
Peregrine Assessment 100 6%
Participation (22 discussions worth 10 points apiece) 220 14%
Totals 1,680 100%

Points Percentage Grade
1,512 – 1,680 90% – 100% A
1,344 – 1,511 80% – 89% B
1,176 – 1,343 70% – 79% C
1,008 – 1,175 60% – 69% D
Below 1,008 Below 60% F
ACC 499 – Assignments and Rubrics
information
permission of
Strayer University.
21
Assignment 1: Amazon.com Business Combinations and
Financial Results Analysis
Due Week 3 and worth 240 points

Search the Internet for acquisitions and equity investments
made by Amazon.com during the last five (5)
years. Review the 10-K of Amazon.com located at
http://www.sec.gov/cgi-bin/browse-
edgar?company=&match=&CIK=AMZN&filenum=&State=&Co
untry=&SIC=&owner=exclude&Find=Find+
Companies&action=getcompany.
Write a three to four (3-4) page paper in which you:
1. Examine how at least three (3) growth strategy alternatives
utilized by Amazon.com in the global
and domestic retail markets influenced profitability, and
indicate if the strategies were successful.
2. Assess the financial value of the acquisitions and investments
made by Amazon.com, and the
influence of the acquisitions and investments on profitability
during the accounting period.
3. Analyze the effect of the equity investments and impairments
resulting from the acquisitions and
investments by Amazon.com on the financial statements, and
indicate whether or not the strategy
was a creatable one. Provide support for your rationale.
4. Create an argument that growth in the European market can
have a significant impact on current
earnings and profit for Amazon.com. Provide support for your
rationale.
5. Use at least two (2) quality academic resources in this
assignment. Note: Wikipedia and other

Websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
12), with one-inch margins on all
sides; citations and references must follow APA or school-
specific format. Check with your
professor for any additional instructions.
the student’s name, the professor’s
name, the course title, and the date. The cover page and the
reference page are not included in
the required assignment page length.
The specific course learning outcomes associated with this
assignment are:
principles.
in accounting.
writing mechanics.
Grading for this assignment will be based on answer quality,
logic / organization of the paper, and
language and writing skills, using the following rubric.

Points: 240 Assignment 1: Amazon.com Business Combinations
and Financial Results
Analysis
Criteria
Unacceptable
Below 60% F
Meets
Minimum
Expectations
60-69% D
Fair
70-79% C
Proficient
80-89% B
Exemplary
90-100% A
1. Examine how at

least three (3) growth
strategy alternatives
utilized by
Did not submit or
incompletely
examined how at
least three (3)
Insufficiently
examined how
at least three
(3) growth
Partially
examined how
at least three
(3) growth
Satisfactorily
examined how
at least three
(3) growth
Thoroughly
examined how
at least three
(3) growth
untry=&SIC=&owner=exclude&Find=Find+Companies&action=
getcompany

getcompany
getcompany
information
permission of
Strayer University.
21
Amazon.com in the
global and domestic
retail markets
influenced profitability,
and indicate if the
strategies were
successful.
Weight: 20%
growth strategy
alternatives
utilized by
Amazon.com in
the global and
domestic retail

markets
influenced
profitability; did
not submit or
incompletely
indicated if the
strategies were
successful.
strategy
alternatives
utilized by
Amazon.com in
the global and
domestic retail
markets
influenced
profitability;
insufficiently
indicated if the
strategies were
successful.
strategy
alternatives
utilized by
Amazon.com in
the global and
domestic retail
markets
influenced
profitability;
partially
indicated if the
strategies were
successful.

strategy
alternatives
utilized by
Amazon.com
in the global
and domestic
retail markets
influenced
profitability;
satisfactorily
indicated if the
strategies
were
successful.
strategy
alternatives
utilized by
Amazon.com
in the global
and domestic
retail markets
influenced
profitability;
thoroughly
indicated if the
strategies were
successful.
2. Assess the financial
value of the
acquisitions and
investments made by
Amazon.com, and the
influence of the

acquisitions and
investments on
profitability during the
accounting period.
Weight: 20%
Did not submit or
incompletely
assessed the
financial value of
the acquisitions
and investments
made by
Amazon.com,
and the influence
of the
acquisitions and
investments on
profitability during
the accounting
period.
Insufficiently
assessed the
financial value
of the
acquisitions
and
investments
made by
Amazon.com,
and the
influence of the
acquisitions

and
investments on
profitability
during the
accounting
period.
Partially
assessed the
financial value
of the
acquisitions
and
investments
made by
Amazon.com,
and the
influence of the
acquisitions
and
investments on
profitability
during the
accounting
period.
Satisfactorily
assessed the
financial
value of the
acquisitions
and
investments
made by

Amazon.com,
and the
influence of
the
acquisitions
and
investments on
profitability
during the
accounting
period.
Thoroughly
assessed the
financial value
of the
acquisitions
and
investments
made by
Amazon.com,
and the
influence of the
acquisitions
and
investments on
profitability
during the
accounting
period.
3. Analyze the effect of
the equity investments
and impairments
resulting from the

acquisitions and
investments by
Amazon.com on the
financial statements,
and indicate if it was a
creatable strategy.
Provide support for
your rationale.
Weight: 20%
Did not submit or
incompletely
analyzed the
effect of the
equity
investments and
impairments
resulting from the
acquisitions and
investments by
Amazon.com on
the financial
statements; did
not submit or
incompletely
indicated if it was
a creatable
strategy. Did not
submit or
incompletely
provided support
for your rationale.
Insufficiently
analyzed the
effect of the

equity
investments
and
impairments
resulting from
the acquisitions
and
investments by
Amazon.com
on the financial
statements;
insufficiently
indicated if it
was a
creatable
strategy.
Insufficiently
provided
support for
your rationale.
Partially
analyzed the
effect of the
equity
investments
and
impairments
resulting from
the acquisitions
and
investments by
Amazon.com
on the financial
statements;
partially

indicated if it
was a creatable
strategy.
Partially
provided
support for your
rationale.
Satisfactorily
analyzed the
effect of the
equity
investments
and
impairments
resulting from
the
acquisitions
and
investments by
Amazon.com
on the financial
statements;
satisfactorily
indicated if it
was a
creatable
strategy.
Satisfactorily
provided
support for
your rationale.
Thoroughly
analyzed the
effect of the

equity
investments
and
impairments
resulting from
the
acquisitions
and
investments by
Amazon.com
on the financial
statements;
thoroughly
indicated if it
was a
creatable
strategy.
Thoroughly
provided
support for
your rationale.
4. Create an argument
that growth in the
European market can
have a significant
Did not submit or
incompletely
created an
argument that
Insufficiently
created an
argument that
growth in the

Partially
created an
argument that
growth in the
Satisfactorily
created an
argument that
growth in the
Thoroughly
created an
argument that
growth in the
information
permission of
Strayer University.
21
impact on current
earnings and profit for
Amazon.com. Provide
support for your

rationale.
Weight: 25%
growth in the
European market
can have a
significant impact
on current
earnings and
profit for
Amazon.com. Did
not submit or
incompletely
provided support
for your rationale.
European
market can
have a
significant
impact on
current
earnings and
profit for
Amazon.com.
Insufficiently
provided
support for
your rationale.
European
market can
have a
significant
impact on
current

earnings and
profit for
Amazon.com.
Partially
provided
support for your
rationale.
European
market can
have a
significant
impact on
current
earnings and
profit for
Amazon.com.
Satisfactorily
provided
support for
your rationale.
European
market can
have a
significant
impact on
current
earnings and
profit for
Amazon.com.
Thoroughly
provided
support for
your rationale.

5. 2 references
Weight: 5%
No references
provided
Does not meet
the required
number of
references; all
references
poor quality
choices.
Does not meet
the required
number of
references;
some
references poor
quality choices.
Meets number
of required
references; all
references
high quality
choices.
Exceeds
number of
required
references; all
references
high quality
choices.

6. Clarity, writing
mechanics, and
formatting
requirements
Weight: 10%
More than 8
errors present
7-8 errors
present
5-6 errors
present
3-4 errors
present
0-2 errors
present
information
permission of
Strayer University.

21
Assignment 2: Litigation, Censures, and Fines
Research the Internet for recent litigation, censures, and fines
involving national public accounting firms.
Examples of litigation cases against national public accounting
firms include fines by regulatory
authorities and censures by professional societies.
Write a three to four (3-4) page paper in which you:
1. Analyze the primary accounting issues which form the crux
of the litigation or fine for the firm, and
indicate the impact to the firm as a result of litigation or fine.
Provide support for your rationale.
2. Examine the key inferences of corporate ethics related to
internal controls and accounting
principles which lead to the litigation or fine for the accounting
firm.
3. Evaluate the primary ethical standards of the accounting
organization’s leadership and values
which contributed to approval of the accounting issues and thus
created the litigation or fines in
question.
4. Identify specific conduct violations committed by the
organization and accounting firm in question.
Next, create an argument supporting the actions against the
organization and accounting firm,

based on the current professional code of conduct for
independent auditors and management
accountants.
5. Make a recommendation as to how regulators and
professional societies may prevent this type of
behavior in question for the future. Provide support for your
rationale.
6. Use two (2) quality academic resources in this assignment.
Note: Wikipedia and other Websites
do not qualify as academic resources.
Roman font (size
assignment are:
ze business situations to determine the appropriateness
professional standards and ethics.

in accounting.
proper
writing mechanics.
Points: 280 Assignment 2: Litigation, Censures, and Fines
Criteria
Unacceptable
Below 60% F
Meets
Minimum
Expectations
60-69% D
Fair
70-79% C
Proficient

80-89% B
Exemplary
90-100% A
1. Analyze the
primary accounting
Did not submit or
incompletely
Insufficiently
analyzed the
Partially
analyzed the
Satisfactorily
analyzed the
Thoroughly
analyzed the
information
permission of

Strayer University.
ACC 499 Student Version 1136 (1085 7-8-2013) Final Page 10
of 21
issues which form
the crux of the
litigation or fine for
the firm, and
indicate the impact
to the firm as a
result of litigation
or fine. Provide
support for your
rationale.
Weight: 15%
analyzed the
primary
accounting
issues which
form the crux of
the litigation or
fine for the firm,
and indicate the
impact to the
firm as a result
of litigation or
fine. Did not
submit or
incompletely
provided support
for your
rationale.
primary

accounting
issues which
form the crux of
the litigation or
fine for the firm,
and indicate the
impact to the
firm as a result
of litigation or
fine.
Insufficiently
provided support
for your
rationale.
primary
accounting
issues which
form the crux of
the litigation or
fine for the firm,
and indicate the
impact to the
firm as a result
of litigation or
fine. Partially
provided support
for your
rationale.
primary
accounting
issues which
form the crux of
the litigation or
fine for the firm,

and indicate the
impact to the
firm as a result
of litigation or
fine.
Satisfactorily
provided support
for your
rationale.
primary
accounting
issues which
form the crux of
the litigation or
fine for the firm,
and indicate the
impact to the
firm as a result
of litigation or
fine. Thoroughly
provided support
for your
rationale.
2. Examine the key
inferences of
corporate ethics
related to internal
controls and
accounting
principles which
lead to the
litigation or fine for
the accounting
firm.

Weight: 15%
Did not submit or
incompletely
examined the
key inferences of
corporate ethics
related to
internal controls
and accounting
principles which
lead to the
litigation or fine
for the
accounting firm.
Insufficiently
examined the
key inferences
of corporate
ethics related to
internal controls
and accounting
principles which
lead to the
litigation or fine
for the
accounting firm.
Partially
examined the
key inferences
of corporate
ethics related to
internal controls
and accounting

principles which
lead to the
litigation or fine
for the
accounting firm.
Satisfactorily
examined the
key inferences
of corporate
ethics related to
internal controls
and accounting
principles which
lead to the
litigation or fine
for the
accounting firm.
Thoroughly
examined the
key inferences
of corporate
ethics related to
internal controls
and accounting
principles which
lead to the
litigation or fine
for the
accounting firm.
3. Evaluate the
primary ethical
standards of the
accounting

organization’s
leadership and
values which
contributed to
approval of the
accounting issues
and thus created
the litigation or
fines in question.
Weight: 15%
Did not submit or
incompletely
evaluated the
primary ethical
standards of the
accounting
organization’s
leadership and
values which
contributed to
approval of the
accounting
issues and thus
created the
litigation or fines
in question.
Insufficiently
evaluated the
primary ethical
standards of the
accounting
organization’s
leadership and
values which

contributed to
approval of the
accounting
issues and thus
created the
litigation or fines
in question.
Partially
evaluated the
primary ethical
standards of the
accounting
organization’s
leadership and
values which
contributed to
approval of the
accounting
issues and thus
created the
litigation or fines
in question.
Satisfactorily
evaluated the
primary ethical
standards of the
accounting
organization’s
leadership and
values which
contributed to
approval of the
accounting
issues and thus

created the
litigation or fines
in question.
Thoroughly
evaluated the
primary ethical
standards of the
accounting
organization’s
leadership and
values which
contributed to
approval of the
accounting
issues and thus
created the
litigation or fines
in question.
4. Identify specific
conduct violations
committed by the
organization and
accounting firm in
question. Next,
create an
argument
supporting the
actions against the
organization and
accounting firm,
based on the
current
professional code

Did not submit or
incompletely
identified specific
conduct
violations
committed by the
organization and
accounting firm
in question. Did
not submit or
incompletely
created an
argument
supporting the
actions against
Insufficiently
identified
specific conduct
violations
committed by
the organization
and accounting
firm in question.
Insufficiently
created an
argument
supporting the
actions against
the organization
and accounting
Partially
identified
specific conduct
violations

committed by
the organization
and accounting
firm in question.
Partially created
an argument
supporting the
actions against
the organization
and accounting
firm, based on
Satisfactorily
identified
specific conduct
violations
committed by
the organization
and accounting
firm in question.
Satisfactorily
created an
argument
supporting the
actions against
the organization
and accounting
Thoroughly
identified
specific conduct
violations
committed by
the organization
and accounting
firm in question.

Thoroughly
created an
argument
supporting the
actions against
the organization
and accounting
information
permission of
Strayer University.
of 21
of conduct for
independent
auditors and
management
accountants.
Weight: 20%
the organization
and accounting
firm, based on
the current
professional

code of conduct
for independent
auditors and
management
accountants.
firm, based on
the current
professional
code of conduct
for independent
auditors and
management
accountants.
the current
professional
code of conduct
for independent
auditors and
management
accountants.
firm, based on
the current
professional
code of conduct
for independent
auditors and
management
accountants.
firm, based on
the current
professional
code of conduct

for independent
auditors and
management
accountants.
5. Make a
recommendation
as to how
regulators and
professional
societies may
prevent this type of
behavior in
question for the
future. Provide
support for your
rationale.
Weight: 20%
Did not submit or
incompletely
made a
recommendation
as to how
regulators and
professional
societies may
prevent this type
of behavior in
question for the
future. Did not
submit or
incompletely
provided support
for your
rationale.

Insufficiently
made a
recommendation
as to how
regulators and
professional
societies may
prevent this type
of behavior in
question for the
future.
Insufficiently
provided support
for your
rationale.
Partially made a
recommendation
as to how
regulators and
professional
societies may
prevent this type
of behavior in
question for the
future. Partially
provided support
for your
rationale.
Satisfactorily
made a
recommendation
as to how
regulators and

professional
societies may
prevent this type
of behavior in
question for the
future.
Satisfactorily
provided support
for your
rationale.
Thoroughly
made a
recommendation
as to how
regulators and
professional
societies may
prevent this type
of behavior in
question for the
future.
Thoroughly
provided support
for your
rationale.
6. 2 references
Weight: 5%
No references
provided
Does not meet
the required
number of

references; all
references poor
quality choices.
Does not meet
the required
number of
references;
some references
poor quality
choices.
Meets number
of required
references; all
references high
quality choices.
Exceeds
number of
required
references; all
references high
quality choices.
7. Clarity, writing
mechanics, and
formatting
requirements
Weight: 10%
More than 8
errors present
7-8 errors
present

5-6 errors
present
3-4 errors
present
0-2 errors
present
information
permission of
Strayer University.
of 21
Assignment 3: Capstone Research Project
Assume you are the partner in an accounting firm hired to
perform the audit on a fortune 1000 company.

Assume also that the initial public offering (IPO) of the
company was approximately five (5) years ago and
the company is concerned that, in less than five (5) years after
the IPO, a restatement may be necessary.
During your initial evaluation of the client, you discover the
following information:
examination by the Internal
Revenue Service (IRS). A significant issue involved in the IRS
audit encompasses inventory
write-downs on the tax returns that are not included in the
financial statements. Because of the
concealment of the transaction, the IRS is labeling the treatment
of the write-down as fraud.
-based compensation plan for top-
level executives consisting of stock
options. The value of the options exercised during the year was
not expensed or disclosed in the
financial statements.
place, and the CFO is considering
leasing a substantial portion of the assets for future use. The
current leases in place are arranged
using special purpose entities (SPEs) and operating leases.

require IFRS reporting.
and Exchange Commission (SEC)
requesting additional supplemental information regarding the
financial statements submitted with
the IPO.
Write an eight to ten (8-10) page paper in which you:
1. Evaluate any damaging financial and ethical repercussions of
failure to include the inventory
write-downs in the financial statements. Prepare a
recommendation to the CFO, evaluating the
negative impact of a civil fraud penalty on the corporation as a
result of the IRS audit. In the
recommendation, include essential internal control procedures
to prevent fraudulent financial
reporting from occurring, as well as the major obligation of the
CEO and CFO to ensure
compliance.
2. Examine the negative results on stakeholders and the
financial statements of an IRS audit which
generates additional tax and penalties or subsequent audits.
Assume that the subsequent audit
and / or additional tax and penalties result from the taxpayer’s
use of an inventory reserve
account, applying a 10 percent reduction to inventory over three
(3) years.
3. Discuss the applicable federal tax laws, regulations, rulings,
and court cases related to the

inventory write-downs, and explain the specific relevance of
each to the write-down.
4. Research the current generally accepted accounting principles
(GAAP) regarding stock option
accounting. Evaluate the current treatment of the company’s
share-based compensation plan
based on GAAP reporting. Contrast the financial benefits and
risks of the share-based
compensation stock option plan with the financial benefits and
risks of a share-based stock-
appreciation rights plan (SARS). Recommend to the CFO which
plan the company should use,
and provide the correct accounting treatment for each.
5. Research the reporting requirements for lease reporting under
GAAP and International Financial
Reporting Standards (IFRS). Based on your research, create a
proposal for future lease
transactions to the CFO. Within the proposal, discuss the use of
off-the-balance sheet financing
arrangements, capital leases, and operating leases, and indicate
the related business and
financial risks of each.
6. Create an argument for or against a single set of international
accounting standards related to
lease accounting based on the global market and cross border
leases of assets. Examine the
benefits and risks of your chosen position.

information
permission of
Strayer University.
of 21
7. Examine the major implications of SAS 99 based on the
factors you discovered during the initial
evaluation of the company. Provide support for your rationale.
8. Analyze the potential for a material misstatement in the
financial statements based on the issues
identified in your initial evaluation. Make a recommendation to
the CFO for the issuance of
restated financial statement restatement. Identify at least three
(3) significant issues that can
result from the failure to issue restated financial statements.
9. Examine the economic effect of restatement of the financial
statements on investors, employees,
customers, and creditors.
10. Use five (5) quality academic resources in this assignment.
Note: Wikipedia and other Websites
do not qualify as academic resources.
uble spaced, using Times New Roman font (size

title of the assignment,
assignment are:
principles.
professional standards and ethics
taxation concepts.
in accounting.
accounting using proper
writing mechanics.

Points: 440 Assignment 3: Capstone Research Project
Criteria
Unacceptable
Below 60% F
Meets
Minimum
Expectations
60-69% D
Fair
70-79% C
Proficient
80-89% B
Exemplary
90-100% A
1. Evaluate any
damaging
financial and

ethical
repercussions of
failure to include
the inventory
write-downs in
the financial
statements.
Prepare a
recommendation
to the CFO,
evaluating the
negative impact
Did not submit or
incompletely
evaluated any
damaging
financial and
ethical
repercussions of
failure to include
the inventory
write-downs in
the financial
statements. Did
not submit or
incompletely
prepared a
Insufficiently
evaluated any
damaging
financial and
ethical
repercussions of
failure to include

the inventory
write-downs in
the financial
statements.
Insufficiently
prepared a
recommendation
to the CFO,
Partially
evaluated any
damaging
financial and
ethical
repercussions of
failure to include
the inventory
write-downs in
the financial
statements.
Partially
prepared a
recommendation
to the CFO,
Satisfactorily
evaluated any
damaging
financial and
ethical
repercussions of
failure to include
the inventory
write-downs in
the financial
statements.

Satisfactorily
prepared a
recommendation
to the CFO,
Thoroughly
evaluated any
damaging
financial and
ethical
repercussions of
failure to include
the inventory
write-downs in
the financial
statements.
Thoroughly
prepared a
recommendation
to the CFO,
information
permission of
Strayer University.
of 21

of a civil fraud
penalty on the
corporation as a
result of the IRS
audit. In the
recommendation
, include
essential internal
control
procedures to
prevent
fraudulent
financial
reporting from
occurring, as
well as the major
obligation of the
CEO and CFO to
ensure
compliance.
Weight: 10%
recommendation
to the CFO,
evaluating the
negative impact
of a civil fraud
penalty on the
corporation as a
result of the IRS
audit. In the
recommendation
, did not submit
or incompletely
included

essential internal
control
procedures to
prevent
fraudulent
financial
reporting from
occurring, as
well as the major
obligation of the
CEO and CFO to
ensure
compliance.
evaluating the
negative impact
of a civil fraud
penalty on the
corporation as a
result of the IRS
audit. In the
recommendation
, insufficiently
included
essential internal
control
procedures to
prevent
fraudulent
financial
reporting from
occurring, as
well as the major
obligation of the
CEO and CFO to
ensure

compliance.
evaluating the
negative impact
of a civil fraud
penalty on the
corporation as a
result of the IRS
audit. In the
recommendation
, partially
included
essential internal
control
procedures to
prevent
fraudulent
financial
reporting from
occurring, as
well as the major
obligation of the
CEO and CFO to
ensure
compliance.
evaluating the
negative impact
of a civil fraud
penalty on the
corporation as a
result of the IRS
audit. In the
recommendation
, satisfactorily
included

essential internal
control
procedures to
prevent
fraudulent
financial
reporting from
occurring, as
well as the major
obligation of the
CEO and CFO to
ensure
compliance.
evaluating the
negative impact
of a civil fraud
penalty on the
corporation as a
result of the IRS
audit. In the
recommendation
, thoroughly
included
essential internal
control
procedures to
prevent
fraudulent
financial
reporting from
occurring, as
well as the major
obligation of the
CEO and CFO to
ensure

compliance.
2. Examine the
negative results
on stakeholders
and the financial
statements of an
IRS audit which
generates
additional tax
and penalties or
subsequent
audits. Assume
that the
subsequent audit
and / or
additional tax
and penalties
result from the
taxpayer’s use of
an inventory
reserve account,
applying a 10
percent
reduction to
inventory over
three (3) years.
Weight: 10%
Did not submit or
incompletely
examined the
negative results
on stakeholders
and the financial
statements of an

IRS audit which
generates
additional tax
and penalties or
subsequent
audits. Did not
submit or
incompletely
assumed that
the subsequent
audit and / or
additional tax
and penalties
result from the
taxpayer’s use of
an inventory
reserve account,
applying a 10
percent
reduction to
inventory over
three (3) years.
Insufficiently
examined the
negative results
on stakeholders
and the financial
statements of an
IRS audit which
generates
additional tax
and penalties or
subsequent
audits.
Insufficiently

assumed that
the subsequent
audit and / or
additional tax
and penalties
result from the
taxpayer’s use of
an inventory
reserve account,
applying a 10
percent
reduction to
inventory over
three (3) years.
Partially
examined the
negative results
on stakeholders
and the financial
statements of an
IRS audit which
generates
additional tax
and penalties or
subsequent
audits. Partially
assumed that
the subsequent
audit and / or
additional tax
and penalties
result from the
taxpayer’s use of
an inventory
reserve account,

applying a 10
percent
reduction to
inventory over
three (3) years.
Satisfactorily
examined the
negative results
on stakeholders
and the financial
statements of an
IRS audit which
generates
additional tax
and penalties or
subsequent
audits.
Satisfactorily
assumed that
the subsequent
audit and / or
additional tax
and penalties
result from the
taxpayer’s use of
an inventory
reserve account,
applying a 10
percent
reduction to
inventory over
three (3) years.
Thoroughly
examined the

negative results
on stakeholders
and the financial
statements of an
IRS audit which
generates
additional tax
and penalties or
subsequent
audits.
Thoroughly
assumed that
the subsequent
audit and / or
additional tax
and penalties
result from the
taxpayer’s use of
an inventory
reserve account,
applying a 10
percent
reduction to
inventory over
three (3) years.
3. Discuss the
applicable
federal tax laws,
regulations,
rulings, and
court cases
Did not submit or
incompletely
discussed the

applicable
federal tax laws,
regulations,
Insufficiently
discussed the
applicable
federal tax laws,
regulations,
rulings, and
Partially
discussed the
applicable
federal tax laws,
regulations,
rulings, and
Satisfactorily
discussed the
applicable
federal tax laws,
regulations,
rulings, and
Thoroughly
discussed the
applicable
federal tax laws,
regulations,
rulings, and

information
permission of
Strayer University.
of 21
related to the
inventory write-
downs, and
explain the
specific
relevance of
each to the
write-down.
Weight: 10%
rulings, and
court cases
related to the
inventory write-
downs; did not
submit or
incompletely
explained the
specific
relevance of
each to the
write-down.
court cases

related to the
inventory write-
downs;
insufficiently
explained the
specific
relevance of
each to the
write-down.
court cases
related to the
inventory write-
downs; partially
explained the
specific
relevance of
each to the
write-down.
court cases
related to the
inventory write-
downs;
satisfactorily
explained the
specific
relevance of
each to the
write-down.
court cases
related to the
inventory write-
downs;
thoroughly

explained the
specific
relevance of
each to the
write-down.
4. Research the
current generally
accepted
accounting
principles
(GAAP)
regarding stock
option
accounting.
Evaluate the
current treatment
of the company’s
share-based
compensation
plan based on
GAAP reporting.
Contrast the
financial benefits
and risks of the
share-based
compensation
stock option plan
with the financial
benefits and
risks of a share-
based stock-
appreciation
rights plan
(SARS).
Recommend to

the CFO which
plan the
company should
use, and provide
the correct
accounting
treatment for
each.
Weight: 10%
Did not submit or
incompletely
researched the
current generally
accepted
accounting
principles
(GAAP)
regarding stock
option
accounting. Did
not submit or
incompletely
evaluated the
current treatment
of the company’s
share-based
compensation
plan based on
GAAP reporting.
Did not submit or
incompletely
contrasted the
financial benefits
and risks of the
share-based

compensation
stock option plan
with the financial
benefits and
risks of a share-
based stock-
appreciation
rights plan
(SARS). Did not
submit or
incompletely
recommended to
the CFO which
plan the
company should
use, and
provided the
correct
accounting
treatment for
each.
Insufficiently
researched the
current generally
accepted
accounting
principles
(GAAP)
regarding stock
option
accounting.
Insufficiently
evaluated the
current treatment
of the company’s

share-based
compensation
plan based on
GAAP reporting.
Insufficiently
contrasted the
financial benefits
and risks of the
share-based
compensation
stock option plan
with the financial
benefits and
risks of a share-
based stock-
appreciation
rights plan
(SARS).
Insufficiently
recommended to
the CFO which
plan the
company should
use, and
provided the
correct
accounting
treatment for
each.
Partially
researched the
current generally
accepted
accounting
principles

(GAAP)
regarding stock
option
accounting.
Partially
evaluated the
current treatment
of the company’s
share-based
compensation
plan based on
GAAP reporting.
Partially
contrasted the
financial benefits
and risks of the
share-based
compensation
stock option plan
with the financial
benefits and
risks of a share-
based stock-
appreciation
rights plan
(SARS). Partially
recommended to
the CFO which
plan the
company should
use, and
provided the
correct
accounting
treatment for
each.

Satisfactorily
researched the
current generally
accepted
accounting
principles
(GAAP)
regarding stock
option
accounting.
Satisfactorily
evaluated the
current treatment
of the company’s
share-based
compensation
plan based on
GAAP reporting.
Satisfactorily
contrasted the
financial benefits
and risks of the
share-based
compensation
stock option plan
with the financial
benefits and
risks of a share-
based stock-
appreciation
rights plan
(SARS).
Satisfactorily
recommended to
the CFO which

plan the
company should
use, and
provided the
correct
accounting
treatment for
each.
Thoroughly
researched the
current generally
accepted
accounting
principles
(GAAP)
regarding stock
option
accounting.
Thoroughly
evaluated the
current treatment
of the company’s
share-based
compensation
plan based on
GAAP reporting.
Thoroughly
contrasted the
financial benefits
and risks of the
share-based
compensation
stock option plan
with the financial
benefits and

risks of a share-
based stock-
appreciation
rights plan
(SARS).
Thoroughly
recommended to
the CFO which
plan the
company should
use, and
provided the
correct
accounting
treatment for
each.
5. Research the
reporting
Did not submit or
incompletely
Insufficiently
researched the
Partially
researched the
Satisfactorily
researched the
Thoroughly
researched the

information
permission of
Strayer University.
of 21
requirements for
lease reporting
under GAAP and
International
Financial
Reporting
Standards
(IFRS). Based
on your
research, create
a proposal for
future lease
transactions to
the CFO. Within
the proposal,
discuss the use
of off-the-
balance sheet
financing
arrangements,
capital leases,

and operating
leases, and
indicate the
related business
and financial
risks of each.
Weight: 10%
researched the
reporting
requirements for
lease reporting
under GAAP and
International
Financial
Reporting
Standards
(IFRS). Based
on your
research, did not
submit or
incompletely
created a
proposal for
future lease
transactions to
the CFO. Within
the proposal, did
not submit or
incompletely
discussed the
use of off-the-
balance sheet
financing
arrangements,
capital leases,

and operating
leases, and
indicate the
related business
and financial
risks of each.
reporting
requirements for
lease reporting
under GAAP and
International
Financial
Reporting
Standards
(IFRS). Based
on your
research,
insufficiently
created a
proposal for
future lease
transactions to
the CFO. Within
the proposal,
insufficiently
discussed the
use of off-the-
balance sheet
financing
arrangements,
capital leases,
and operating
leases, and
indicate the
related business

and financial
risks of each.
reporting
requirements for
lease reporting
under GAAP and
International
Financial
Reporting
Standards
(IFRS). Based
on your
research,
partially created
a proposal for
future lease
transactions to
the CFO. Within
the proposal,
partially
discussed the
use of off-the-
balance sheet
financing
arrangements,
capital leases,
and operating
leases, and
indicate the
related business
and financial
risks of each.
reporting
requirements for

lease reporting
under GAAP and
International
Financial
Reporting
Standards
(IFRS). Based
on your
research,
satisfactorily
created a
proposal for
future lease
transactions to
the CFO. Within
the proposal,
satisfactorily
discussed the
use of off-the-
balance sheet
financing
arrangements,
capital leases,
and operating
leases, and
indicate the
related business
and financial
risks of each.
reporting
requirements for
lease reporting
under GAAP and
International
Financial

Reporting
Standards
(IFRS). Based
on your
research,
thoroughly
created a
proposal for
future lease
transactions to
the CFO. Within
the proposal,
thoroughly
discussed the
use of off-the-
balance sheet
financing
arrangements,
capital leases,
and operating
leases, and
indicate the
related business
and financial
risks of each.
6. Create an
argument for or
against a single
set of
international
accounting
standards
related to lease
accounting
based on the

global market
and cross border
leases of assets.
Examine the
benefits and
risks of your
chosen position.
Weight: 10%
Did not submit or
incompletely
created an
argument for or
against a single
set of
international
accounting
standards
related to lease
accounting
based on the
global market
and cross border
leases of assets.
Did not submit or
incompletely
examined the
benefits and
risks of your
chosen position.
Insufficiently
created an
argument for or
against a single
set of

international
accounting
standards
related to lease
accounting
based on the
global market
and cross border
leases of assets.
Insufficiently
examined the
benefits and
risks of your
chosen position.
Partially created
an argument for
or against a
single set of
international
accounting
standards
related to lease
accounting
based on the
global market
and cross border
leases of assets.
Partially
examined the
benefits and
risks of your
chosen position.
Satisfactorily
created an

argument for or
against a single
set of
international
accounting
standards
related to lease
accounting
based on the
global market
and cross border
leases of assets.
Satisfactorily
examined the
benefits and
risks of your
chosen position.
Thoroughly
created an
argument for or
against a single
set of
international
accounting
standards
related to lease
accounting
based on the
global market
and cross border
leases of assets.
Thoroughly
examined the
benefits and
risks of your

chosen position.
7. Examine the
major
implications of
SAS 99 based
on the factors
you discovered
Did not submit or
incompletely
examined the
major
implications of
SAS 99 based
Insufficiently
examined the
major
implications of
SAS 99 based
on the factors
Partially
examined the
major
implications of
SAS 99 based
on the factors
Satisfactorily
examined the
major

implications of
SAS 99 based
on the factors
Thoroughly
examined the
major
implications of
SAS 99 based
on the factors
information
permission of
Strayer University.
of 21
during the initial
evaluation of the
company.
Provide support
for your
rationale.
Weight: 10%

on the factors
you discovered
during the initial
evaluation of the
company. Did
not submit or
incompletely
provided support
for your
rationale.
you discovered
during the initial
evaluation of the
company.
Insufficiently
provided support
for your
rationale.
you discovered
during the initial
evaluation of the
company.
Partially
provided support
for your
rationale.
you discovered
during the initial
evaluation of the
company.
Satisfactorily
provided support
for your

rationale.
you discovered
during the initial
evaluation of the
company.
Thoroughly
provided support
for your
rationale.
8. Analyze the
potential for a
material
misstatement in
the financial
statements
based on the
issues identified
in your initial
evaluation. Make
a
recommendation
to the CFO for
the issuance of
restated financial
statement
restatement.
Identify at least
three (3)
significant issues
that can result
from the failure
to issue restated
financial
statements.

Weight: 10%
Did not submit or
incompletely
analyzed the
potential for a
material
misstatement in
the financial
statements
based on the
issues identified
in your initial
evaluation. Did
not submit or
incompletely
made a
recommendation
to the CFO for
the issuance of
restated financial
statement
restatement. Did
not submit or
incompletely
identified at least
three (3)
significant issues
that can result
from the failure
to issue restated
financial
statements.
Insufficiently
analyzed the

potential for a
material
misstatement in
the financial
statements
based on the
issues identified
in your initial
evaluation.
Insufficiently
made a
recommendation
to the CFO for
the issuance of
restated financial
statement
restatement.
Insufficiently
identified at least
three (3)
significant issues
that can result
from the failure
to issue restated
financial
statements.
Partially
analyzed the
potential for a
material
misstatement in
the financial
statements
based on the
issues identified

in your initial
evaluation.
Partially made a
recommendation
to the CFO for
the issuance of
restated financial
statement
restatement.
Partially
identified at least
three (3)
significant issues
that can result
from the failure
to issue restated
financial
statements.
Satisfactorily
analyzed the
potential for a
material
misstatement in
the financial
statements
based on the
issues identified
in your initial
evaluation.
Satisfactorily
made a
recommendation
to the CFO for
the issuance of
restated financial

statement
restatement.
Satisfactorily
identified at least
three (3)
significant issues
that can result
from the failure
to issue restated
financial
statements.
Thoroughly
analyzed the
potential for a
material
misstatement in
the financial
statements
based on the
issues identified
in your initial
evaluation.
Thoroughly
made a
recommendation
to the CFO for
the issuance of
restated financial
statement
restatement.
Thoroughly
identified at least
three (3)
significant issues
that can result

from the failure
to issue restated
financial
statements.
9. Examine the
economic effect
of restatement of
the financial
statements on
investors,
employees,
customers, and
creditors.
Weight: 5%
Did not submit or
incompletely
examined the
economic effect
of restatement of
the financial
statements on
investors,
employees,
customers, and
creditors.
Insufficiently
examined the
economic effect
of restatement of
the financial
statements on
investors,
employees,

customers, and
creditors.
Partially
examined the
economic effect
of restatement of
the financial
statements on
investors,
employees,
customers, and
creditors.
Satisfactorily
examined the
economic effect
of restatement of
the financial
statements on
investors,
employees,
customers, and
creditors.
Thoroughly
examined the
economic effect
of restatement of
the financial
statements on
investors,
employees,
customers, and
creditors.

10. 5 references
Weight: 5%
No references
provided
Does not meet
the required
number of
references; all
references poor
quality choices.
Does not meet
the required
number of
references;
some references
poor quality
choices.
Meets number of
required
references; all
references high
quality choices.
Exceeds number
of required
references; all
references high
quality choices.
11. Clarity,
writing

More than 8
errors present
7-8 errors
present
5-6 errors
present
3-4 errors
present
0-2 errors
present
information
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ACC 499 – Student Notes
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Weekly Course Schedule
The purpose of the course schedule is to give you, at a glance,
the required preparation, activities, and
evaluation components of your course. For more information
about your course, whether on-ground or
online, access your online course shell.
The expectations for a 4.5 credit hour course are for students to
spend 13.5 hours in weekly work. This
time estimate includes preparation, activities, and evaluation
regardless of the delivery mode.
Instructional Materials
In order to be fully prepared, obtain a copy of the required
textbooks and other instructional materials
prior to the first day of class. When available, Strayer
University provides a link to the first three (3)
chapters of your textbook(s) in eBook format. Check your

online course shell for availability.
Review the online course shell or check with your professor to
determine whether Internet-based
assignments and activities are used in this course.
Strayer students are encouraged to purchase their course
materials through our designated Strayer
Bookstore. http://www.strayerbookstore.com If a lab is
required for the course, the Strayer Bookstore is
the only vendor that sells the correct registration code so that
Strayer students may access labs
successfully.
Discussions
To earn full credit in an online threaded discussion, students
must have one original post and a minimum
of one other post per discussion thread.
Please note: Material in the online class will be made available
on the previous Thursday. As it is always
possible that students could lose their work due to unforeseen
circumstances, it is a best practice to
routinely save a working draft in a separate file before posting
in the course discussion area.
Professors hold discussions during class time for on-ground
students. Check with your professor if any
additional discussion participation is required in the online
course shell outside of class hours.
Tests
Tests (quizzes, midterm and final exams, essay exams, lab tests,
etc.) are available for student access

and completion through the online course shell. Check the
online course shell to determine how you are
expected to take the tests.
lete the test by Sunday midnight
the week the test is due.
-ground students are to complete the tests after the
material is covered and before the next
class session.
Assignments
A standardized performance grading rubric is a tool your
professor will use to evaluate your written
assignments. Review the rubric before submitting assignments
that have grading rubrics associated with
them to ensure you have met the performance criteria stated on
the rubric.
Grades are based on individual effort. There is no group
grading; however, working in groups in the
online or on-ground classroom is acceptable.
Assignments for online students are always submitted through
the online course shell. On-ground
professors will inform students on how to submit assignments,
whether in paper format or through the
online course shell.
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Resources
The Resource Center navigation button in the online course
shell contains helpful links. Strayer University
Library Resources are available here as well as other important
information. You should review this area
to find resources and answers to common questions.
Technical support is available for the following:
Technical Support by logging in to your
iCampus account at https://icampus.strayer.edu/login and
submitting a case under “Student
Center,” then “Submit Help Ticket.” If you are unable to log in
to your iCampus account, please
contact Technical Support via phone at (877) 642-2999.

Solution
Center by logging in to your iCampus
account at https://icampus.strayer.edu/login and submitting a
case under “Student Center,” then
“Submit Help Ticket.” If you are unable to log in to your
iCampus account, please contact the IT
Help Desk at (866) 610-8123 or at mailto:[email protected]
TurnItIn.com is an optional online tool to assess the originality
of student written work. Check with your
professor for access and use instructions.
The Strayer Policies link on the navigation bar in the online
course shell contains academic policies. It is
important that students be aware of these policies.
https://icampus.strayer.edu/login
https://icampus.strayer.edu/login
mailto:[email protected]

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Bachelors Student Registration Instructions:
1. Select http://www.peregrineacademics.com/strayer.
2. Enter case-sensitive password STRAYERB-1001 (on right
side of screen under Self-Registration
for Access Key(s)).
3. Select View Registration.

4. Select the appropriate exam as directed by your school.
5. Select Review Your Selection(s) and Proceed with
Registration.
6. Select Proceed with Self-Registration.
7. Enter First Name, Last Name, and your E-mail address.
8. Select Review Registration(s).
9. Select Complete Registration.
10. To take exam:
a. Select the hyperlink under Course/Exam heading.
b. When finished, save/print completion certificate and return to
your instructor.
http://www.peregrineacademics.com/strayer
Sheet1SECTION I: MULTIPLE-CHOICE (30 possible

points)Please complete the following statements or questions by
placing the appropriate letter in the blank adjacent to theitem
number. The value of each correct answer is 2 points.____
1.What is the name of the branch of accounting concerned with
providing managers and administrators with information to
facilitate the planning and control of business operations?A.
Management accountingB. AuditingC. Financial
AccountingD. Bookkeeping____ 2.Which of the following
invests funds into a business and is considered an owner?A. A
stockholderB. A creditorC. A bankD. A lender____ 3.Which
one of the following is not an external user of financial
statements?A. SuppliersB. CreditorsC. Financial analystsD.
The controller____ 4.Which financial statement would you
refer to in order to determine whether a company owed funds
tocreditors?A. Balance sheetB. Statement of retained
earningsC. Income statementD. Both the balance sheet and the
income statement____ 5.If an investor can use accounting
information for two different companies to evaluate the types
and amounts of expenses, the information is said to have the
quality ofA. ConsistencyB. ComparabilityC. NeutralityD.
Understandability____ 6.Walsh Company applies the
consistency convention. What does this mean?A. Walsh uses
the same names for all its expenses as its competitors.B.
Walsh has selected particular accounting principles that can
never be changed.C. Walsh applies the same accounting

principles each accounting period.D. Walsh applies the same
accounting principles as its competitors.____ 7.Which one of
the following items is reported as a current asset on a classified
balance sheet?A. InventoryB. Accounts PayableC.
Common StockD. LandBSC401 MIDTERM EXAMPage
2SECTION I: MULTIPLE-CHOICE (Cont.)____ 8.Which one
of the following is a correct expression of the accounting
equation?A. Assets + Liabilities = Owners’ EquityB. Assets
= Liabilities – Owners’ EquityC. Assets + Owners’ Equity =
LiabilitiesD. Assets = Liabilities + Owners’ Equity____
9.Which of the following would not be considered to be an
intangible asset?A. FranchisesB. CopyrightsC. InvestmentsD.
Goodwill____10.A computer is purchased on credit by signing a
5-year note. Identify the effects on the accounting equation.A.
Assets increase and liabilities increaseB. Assets increase and
owners’ equity increasesC. Liabilities increase and owners’
equity decreasesD. Liabilities decrease and assets
decrease____11.The term credit refers to which of the
following?A. An entry to decrease an account.B. An event is
unfavorableC. An entry to increase an accountD. The right
hand side of an account____12.Which of the following is an
attribute used to measure many assets that are recognized on a
balance sheet because it is more objective and verifiable?A.
Market valueB. Historical costC. Liquidation valueD. Current
replacement cost____13.Effective cash management and control

includes all of the following exceptA. The use of a petty cash
fundB. Bank reconciliationsC. Short-term investments of
excess cashD. Purchase of stocks and bonds____14.Among the
assets listed below, which one is considered the most liquid? A.
Short-term investmentsB. Accounts receivableC. Merchandise
inventoryD. Prepaid expenses____15.What is the distinguishing
characteristic between accounts receivable and notes
receivable?A. Accounts receivable are usually current assets
while notes receivable are usually long-term assetsB. Accounts
receivable require payment of interest if not paid within the
usual credit termsC. Notes receivable result from credit sale
transactions for merchandising companies, while accounts
receivable result from credit sale transactions for service
companies.D. Notes receivable result from a written promise to
pay within a specified amount of timeBSC401 MIDTERM
EXAMPage 3SECTION II: MATCHING (10 possible
points)Please match the numbered terms with their definitions
by placing the letter that identifies the best definition in
theblank space next to the term. The value of each correct
answer is 1 point.____ 1. Credit____ 2. Debit ____ 3.
Generally Accepted Accounting Principles (GAAP)____ 4.
General Ledger____ 5. Internal Control System____ 6.
Journal____ 7. Matching Principle____ 8. Materiality____
9.Recognition____10.Trial BalanceA. The various methods,
rules, practices, and other procedures that have evolved over

time in response to the need to regulate the preparation of
financial statements. B. The magnitude of an omission or
misstatement in accounting information that will affect the
judgment of someone relying on the information.C. A
book, file, hard drive, or other device containing all of a
company’s accounts.D. An entry on the left side of an
account.E. An entry on the right side of an account.F. A
chronological record of transactions, also known as the book of
original entry.G. A list of each account and its balance at a
specific point in time; used to prove the equality of debits and
credits.H. The process of recording an item in the financial
statements as an asset, liability, revenue, or the like.I. The
association of revenue of a period with all of the costs
necessary to generate the revenue.J. Policies and procedures
necessary to ensure the safeguarding of an entity’s assets, the
reliability of its accounting records, and the
accomplishment of overall company objectives.BSC401
MIDTERM EXAMPage 4SECTION III. SHORT-ANSWER (20
possible points)Please give a brief answer to each of the
following questions. Each question is worth a possible 5
points.1. Explain the difference between internal and external
users of a corporation’s financial information. Give two
examples of internal users and two of external users2. Briefly
explain the purpose of a Trial Balance.3. Explain briefly the
Revenue Recognition Principle. When should a publisher of

magazines recognize revenue?4. An effective system of
internal control is critical to protecting a company’s investment
in three of its major assets: cash, accounts receivable, and
inventory. For each of the three assets, describe briefly how
a company might protect that asset.BSC401 MIDTERM
EXAMPage 5SECTION IV: PROBLEMS (40 possible
points)Please show all of your work for each
problem.PROBLEM 1 (15 possible points)The accountant for
Farly Corporation prepared the following list from the
company’s accounting recordsfor the year ended December 31,
2012:Sales Revenue$165,000Cash$30,000Accounts
receivable$14,000Selling
expenses$44,000Equipment$42,000Common
stock$17,000Accounts payable$12,000Interest
income$3,000Salaries and wages expense$40,000Cost of goods
sold$51,000Inventories $22,000Prepaid expenses$2,000Income
taxes payable$5,000Income taxes expense$18,000Notes
payable$20,000Retained earnings ??REQUIREMENTS:A.
Prepare an Income Statement for Farly Corporation for Year
Ended December 31, 2012.B. Prepare a Balance Sheet for Farly
Corporation as of December 31, 2012.C. What was the amount
of Retained earnings for Farly Corporation at the end of
2012?BSC401 MIDTERM EXAMPage 6SECTION IV:
PROBLEMS (Cont.)PROBLEM 2 (15 possible points)Hana,
Inc. reported $52,000 of net income for 2011. Hana’s balance

sheet at December 31, 2012, includes thefollowing
amounts:Wages payable$1,000Inventory$26,000Prepaid
rent$3,000Land$40,000Cash$15,000Accounts
receivable$22,000Accounts payable$25,000Capital
stock$40,000Retained earnings$29,000Income taxes
payable$11,000REQUIREMENTS:A. Determine the current
ratio and working capital of Hana.B. Beyond the information
provided in your answer to part A, what does the composition of
the current assets tell you about Hana’s liquidity?C. What
other information do you need to fully assess Hana’s liquidity?
Why is liquidity important?BSC401 MIDTERM EXAMPage
7SECTION IV: PROBLEMS (Cont.)PROBLEM 3: (10 possible
points)Several transactions are listed below. Use the
identification codes below (I, D, NE) to indicate the effects of
eachtransaction on the accounting equation, Assets = Liabilities
+ Owners' Equity. Write your answers inthe space provided
under the accounting equation. An example is given before the
first transaction.I - IncreaseD – DecreaseNE – No
EffectOwners'TransactionsAssets =Liabilities +EquityExample:
Capital stock is issued to investors in the company.INE Ia.
Cash sales are madeb. Equipment is purchased on creditc.
Payment is made for the equipment that was purchased on
credit.d. Sales are made on account.e. Cash is collected from
customers for accounts receivable balances.f. Dividends are
declared and paid to stockholders.g. A utility bill is received

and recorded; the payment will be made later.
Sheet2
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