B6001 – Accounting 1 – Financial Accounting
SOLUTION TO PROBLEM SET 8
Question 1. Tenenhouse
60 1,060
a. The amount paid for the bond is $930.58: PV = + = 930.58 .
1.1 1.12
Balance Sheet Income Statement
Assets = Liabilities + Equity Revenue Expenses
Gain on Bond
Cash Bonds Payable Retained Earnings retirement
($930.58) ($1,000) $69.42 $69.42
The journal entry is:
dr. Bond 1,000
cr. Cash 930.58
cr. Gain on bond retirement 69.42
80 80 1,080
b. The proceeds from the new bond were $950.26: PV = + + = 950.26 .
1.1 1.12 1.13
Balance Sheet Income Statement
Assets = Liabilities + Equity Revenue Expenses
Cash Bonds Payable
$950.26 $1,000.00
Discount on Bonds Payable
($49.74)
The journal entry is:
dr. Cash 950.26
dr. Bond discount 49.74
cr. Bond 1,000
c.
Balance Sheet Income Statement
Assets = Liabilities + Equity Revenue Expenses
Cash Discount on Bonds Payable Retained Earnings Interest Expense
($80) $15.03 ($95.03) $95.03
dr. Interest expense 95.03
cr. Bond discount 15.03
cr. Cash 80.00
Interest expense = 950.26*10% = 95.03
You may only share these materials with current term students
, Question 2. Meta
Required:
a. Describe Meta’s mission in no more than three lines. What products does Meta offer?
“Our mission is to give people the power to build community and bring the world closer
together. All of our products, including our apps, share the vision of helping to bring the
metaverse to life.” Products: Family of Apps (Facebook, Instagram, Messenger, WhatsApp) and
Reality Labs (Page 7).
b. Which companies does Meta view as its main competitors? What resources do those
companies compete over? How does Meta’s five-year stock market performance (2017 to
2021) compare to the S&P 500 and the Nasdaq Composite Index?
“We face significant competition in every aspect of our business, including, but not limited to,
companies that facilitate the ability of users to share, communicate, and discover content and
information online or enable marketers to reach their existing or prospective audiences,
including, for example, Alphabet (Google and YouTube), Amazon, Apple, ByteDance (TikTok),
Microsoft, Snap (Snapchat), Tencent (WeChat), and Twitter.” Meta competes with the above
companies for users, marketers, and developers (Pages 7 and 8). Meta beats the S&P 500
performance and is outperformed by the Nasdaq Composite Index (Page 49).
c. How many people were active (daily) on Meta’s family of apps as of December 31, 2021?
What is the trend in daily active people since December 31, 2019? Is this a concerning
trend?
Daily active People as of December 31, 2021: 2.82 billion. Since 2019, the number of daily
active people has increased every year. The increase appears to become smaller (in absolute and
relative terms) in recent years, hinting at a possible saturation of the market or declining
attractiveness (for new users) (Page 53).
d. Who is Meta’s auditor? What critical matters does the audit report identify? Explain each in
no more than two sentences.
Meta’s auditor is Ernst & Young (since 2007). The two critical audit matters mentioned are: (i);
Loss contingencies (from legal proceedings, claims and regulatory or government inquiries and
investigations); and (ii) Uncertain tax positions (disagreements with the IRS regarding transfer
pricing with foreign subsidiaries). (Pages 75-77)
e. What is the largest asset on Meta’s balance sheet in 2021? What is the main component (in
terms of gross purchase price) of this asset according to the notes? Is this component also
the biggest economic asset of Meta?
Largest asset on the balance sheet: Property and equipment, net ($57,809 million in 2021) (Page
79). Main component: Servers and network assets ($25,584 million in 2021) (Page 98). Largest
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SOLUTION TO PROBLEM SET 8
Question 1. Tenenhouse
60 1,060
a. The amount paid for the bond is $930.58: PV = + = 930.58 .
1.1 1.12
Balance Sheet Income Statement
Assets = Liabilities + Equity Revenue Expenses
Gain on Bond
Cash Bonds Payable Retained Earnings retirement
($930.58) ($1,000) $69.42 $69.42
The journal entry is:
dr. Bond 1,000
cr. Cash 930.58
cr. Gain on bond retirement 69.42
80 80 1,080
b. The proceeds from the new bond were $950.26: PV = + + = 950.26 .
1.1 1.12 1.13
Balance Sheet Income Statement
Assets = Liabilities + Equity Revenue Expenses
Cash Bonds Payable
$950.26 $1,000.00
Discount on Bonds Payable
($49.74)
The journal entry is:
dr. Cash 950.26
dr. Bond discount 49.74
cr. Bond 1,000
c.
Balance Sheet Income Statement
Assets = Liabilities + Equity Revenue Expenses
Cash Discount on Bonds Payable Retained Earnings Interest Expense
($80) $15.03 ($95.03) $95.03
dr. Interest expense 95.03
cr. Bond discount 15.03
cr. Cash 80.00
Interest expense = 950.26*10% = 95.03
You may only share these materials with current term students
, Question 2. Meta
Required:
a. Describe Meta’s mission in no more than three lines. What products does Meta offer?
“Our mission is to give people the power to build community and bring the world closer
together. All of our products, including our apps, share the vision of helping to bring the
metaverse to life.” Products: Family of Apps (Facebook, Instagram, Messenger, WhatsApp) and
Reality Labs (Page 7).
b. Which companies does Meta view as its main competitors? What resources do those
companies compete over? How does Meta’s five-year stock market performance (2017 to
2021) compare to the S&P 500 and the Nasdaq Composite Index?
“We face significant competition in every aspect of our business, including, but not limited to,
companies that facilitate the ability of users to share, communicate, and discover content and
information online or enable marketers to reach their existing or prospective audiences,
including, for example, Alphabet (Google and YouTube), Amazon, Apple, ByteDance (TikTok),
Microsoft, Snap (Snapchat), Tencent (WeChat), and Twitter.” Meta competes with the above
companies for users, marketers, and developers (Pages 7 and 8). Meta beats the S&P 500
performance and is outperformed by the Nasdaq Composite Index (Page 49).
c. How many people were active (daily) on Meta’s family of apps as of December 31, 2021?
What is the trend in daily active people since December 31, 2019? Is this a concerning
trend?
Daily active People as of December 31, 2021: 2.82 billion. Since 2019, the number of daily
active people has increased every year. The increase appears to become smaller (in absolute and
relative terms) in recent years, hinting at a possible saturation of the market or declining
attractiveness (for new users) (Page 53).
d. Who is Meta’s auditor? What critical matters does the audit report identify? Explain each in
no more than two sentences.
Meta’s auditor is Ernst & Young (since 2007). The two critical audit matters mentioned are: (i);
Loss contingencies (from legal proceedings, claims and regulatory or government inquiries and
investigations); and (ii) Uncertain tax positions (disagreements with the IRS regarding transfer
pricing with foreign subsidiaries). (Pages 75-77)
e. What is the largest asset on Meta’s balance sheet in 2021? What is the main component (in
terms of gross purchase price) of this asset according to the notes? Is this component also
the biggest economic asset of Meta?
Largest asset on the balance sheet: Property and equipment, net ($57,809 million in 2021) (Page
79). Main component: Servers and network assets ($25,584 million in 2021) (Page 98). Largest
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