Accounting 301 MC

A company has just purchased a machine for $100,000 that has a 5-year estimated useful life and a zero estimated salvage value. It is expected to be used to produce 250,000 units of output, and 75,000 of those units are expected to be produced in the first year. Which of the following depreciation methods will result in the greatest amount of depreciation expense for this machine in its :first year? A. Straight-line B. Activity method based on units of production. C. Sum-of-the-years' - digits. D. 150% Declining-balance method .

C

At the beginning of 2018, Pitman Co. purchased an asset for $1,800,000 with an estimated useful life of 5 years and an estimated salvage value of $150,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.'s tax rate is 40% for 2018 and all future years. At the end of 2018, what are the book basis and the tax basis of the asset? Book basis Tax basis a. $1,320,000 $ 930,000 b. $1,470,000 $ 930,000 c. $1,470,000 $1,080,000 d. $1,320,000 $1,080,000

C

On its December 31, 2017 balance sheet, Calhoun Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment account. There was no change during 2018 in the composition of Calhoun's portfolio of debt investments held as available-for-sale debt securities. The following information pertains to that portfolio: Security Cost Fair value at 12/31/18 X $130,000 $160,000 Y 100,000 90,000 Z 175,000 125,000 $405,000 $375,000 The amount of unrealized loss to appear as a component of comprehensive income for the year ending December 31, 2018 is a. $40,000. b. $30,000. c. $20,000. d. $0.

A

Porter Corp. purchased its own par value stock on January 1, 2017 for $20,000 and debited the treasury stock account for the purchase price. The stock was subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from a. additional paid-in capital to the extent that previous net "increases" from sales of the same class of stock are included therein; otherwise, from retained earnings. b. additional paid-in capital without regard as to whether or not there have been previous net "increases" from sales of the same class of stock included therein. c. retained earnings. d. net income.

A

The stockholders' equity section of Gunkel Corporation as of December 31, 2017, was as follows: Common stock, par value $2; authorized 20,000 shares; issued and outstanding 10,000 shares $ 20,000 Paid-in capital in excess of par 30,000 Retained earnings 85,000 $135,000 On March 1, 2018, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2018, the fair value of the stock was $6 per share. For the two months ended February 28, 2018, Gunkel sustained a net loss of $15,000. What amount should Gunkel report as retained earnings as of March 1, 2015? a. $61,000. b. $67,000. c. $71,000. d. $77,000.

A

8. The Poirot Company began operations on January 1 of the year before last and uses the FIFO method in costing its raw material inventory. Management is contemplating a change to the LIFO method and.is interested in determining what effect such a change will have on net income. Accordingly, the following information has been developed: Final Inventory FIFO Year 1 $240,000 Year 2 $270,000 LIFO Year 1 200,000 Year 2 210,000 Net Income (per FIFO) Year 1 $120,000 Year 2 $170,000 Based upon the above information, a change to the LIFO method in Year 2 results in net income for Year 2 of A. $110,000 B. $150,000 C. $170,000 D. $230,000

B

A machine with a 5-year estimated useful life and an estimated 10% salvage value was acquired on January 1 , Year 1. On December 31 , Year 4, accumulated depreciation using , the sum-of-the-years'-digits method is A. (Original cost - salvage value) x (1 ÷ 15). B. (Original cost - salvage value) x (14 ÷ 15). C. Original cost x (14 ÷ 15). D. Original cost x (1 ÷ 15).

B

At December 31, 2018, Atlanta Company has an equity portfolio valued at $160,000. Its cost was $132,000. If the Securities Fair Value Adjustment has a debit balance of $8,000, which of the following journal entries is required at December 31, 2018? a. DR Fair Value Adjustment 28,000 CR Unrealized Holding Gain or Loss-Income 28,000 b. DR Fair Value Adjustment 20,000 CR Unrealized Holding Gain or Loss-Income 20,000 c. DR Unrealized Holding Gain or Loss-Income 28,000 CR Fair Value Adjustment 28,000 d. DR Unrealized Holding Gain or Loss-Income 20,000 CR Fair Value Adjustment 20,000

B

At the beginning of 2018, Pitman Co. purchased an asset for $1,800,000 with an estimated useful life of 5 years and an estimated salvage value of $150,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.'s tax rate is 40% for 2018 and all future years. At the end of 2018, which of the following deferred tax accounts and balances is reported on Pitman's balance sheet? Account Balance a. Deferred tax asset $156,000 b. Deferred tax liability $156,000 c. Deferred tax asset $234,000 d. Deferred tax liability $234,000

B

Flex Company owns a machine purchased on January 2, Year 1, for $94,000. The machine was estimated to have a useful life of 5 years and a salvage value of $6,000. Flex uses the sum-of-the-years' -digits method of depreciation. At the beginning of Year 4, Flex determined that the useful life of the machine should have been 4 years and the salvage value $8,800. For Year 4, Flex should record depreciation expense on this machine of A. $11,733 B. $14,800 C. $17,600 D. $21,300

B

Gannon Company acquired 20,000 shares of its own common stock at $20 per share on February 5, 2017, and sold 10,000 of these shares at $27 per share on August 9, 2018. The fair value of Gannon's common stock was $24 per share at December 31, 2017, and $25 per share at December 31, 2018. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2018 to record the sale of 10,000 shares? a. Treasury Stock for $270,000. b. Treasury Stock for $200,000 and Paid-in Capital from Treasury Stock for $70,000. c. Treasury Stock for $200,000 and Retained Earnings for $70,000. d. Treasury Stock for $240,000 and Retained Earnings for $30,000.

B

In January, 2013, Findley Corporation purchased a patent for a new consumer product for $960,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2018 the product was determined to be obsolete due to a competitor's new product. What amount should Findley charge to expense during 2018, assuming amortization is recorded at the end of each year? a. $640,000. b. $480,000. c. $96,000. d. $64,000.

B

In January, Manila Co., a calendar-year entity, purchased a mineral mine for $2,640,000 with removable ore estimated at 1.2 million tons. After it has extracted all the ore, Manila will be required by law to restore the land to its original condition at an estimated PV of $180,000. Manila believes it will be able to sell the property afterwards for $300,000. During the year, Manila incurred $360,000 of development costs preparing the mine for production and removed and sold 60,000 tons of ore. In its annual income statement, what amount should Manila report as depletion? A. $135,000 B. $144,000 C. $150,000 D. $159,000

B

On February 1, 2017, Henson Company factored receivables with a carrying amount of $700,000 to Agee Company. Agee Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables for adjustments. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Henson Company for February. Assume that Henson factors the receivables on a without recourse basis. The loss to be reported is a. $0. b. $21,000. c. $35,000. d. $56,000.

B

On January 1, 2018, Culver Corporation had 110,000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10,000 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $15, the corporation declared a 15% stock dividend to be issued to stockholders of record on December 16, 2018. What was the impact of the 15% stock dividend on the balance of the retained earnings account? a. $82,500 decrease b. $225,000 decrease c. $247,500 decrease d. No effect

B

On its December 31, 2017 balance sheet, Calhoun Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment account. There was no change during 2018 in the composition of Calhoun's portfolio of debt investments held as available-for-sale debt securities. The following information pertains to that portfolio: Security Cost Fair value at 12/31/18 X $130,000 $160,000 Y 100,000 90,000 Z 175,000 125,000 $405,000 $375,000 76. What amount of unrealized loss on these debt securities should be included in Calhoun's stockholders' equity section of the balance sheet at December 31, 2018? a. $40,000. b. $30,000. c. $20,000. d. $0.

B

The 10% bonds payable of Nixon Company had a net carrying amount of $2,850,000 on December 31, 2017. The bonds, which had a face value of $3,000,000, were issued at a discount to yield 12%. The amortization of the bond discount was recorded under the effective-interest method. Interest was paid on January 1 and July 1 of each year. On July 2, 2018, several years before their maturity, Nixon retired the bonds at 102. The interest payment on July 1, 2018 was made as scheduled. What is the loss that Nixon should record on the early retirement of the bonds on July 2, 2018? Ignore taxes. a. $60,000. b. $189,000. c. $168,000. d. $210,000.

B

Boron Co. is a calendar-year firm. On January 1, Year 1, it borrowed $8 million at 15% to finance construction of a new building. Payments on the loan are to commence the month following completion of the project During Year 1, expenditures for the partially completed building were $4 million. These expenditures were incurred evenly throughout the year. Boron had invested the unexpended portion of the loan in a money market fund that generated interest revenue of $300,000 during the year. What should be. the amount of capitalized interest disclosed on Boron' s Year 1 financial statements? A. $0 B. $200,000 C. $300,000 $1,200,000

C

Campbell Corp. exchanged delivery trucks with Highway, Inc. Campbell's truck originally cost $23,000, its accumulated depreciation was $20,000, and its fair value was $5,000. Highway's truck originally cost $23,500, its accumulated depreciation was $19,900, and its fair value was $5,700. Campbell also paid Highway $700 in cash as part of the transaction. The transaction lacks commercial substance. What amount is the new book value for the truck Campbell received? A. $5,700 B. $5,000 C. $3,700 D. $3,000

C

Yurman Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to unearned service contract revenues. This account had a balance of $960,000 at December 31, 2016 before year-end adjustment. Service contract costs are charged as incurred to the service contract expense account, which had a balance of $240,000 at December 31, 2016. Outstanding service contracts at December 31, 2016 expire as follows: During 2017 $200,000 During 2018 $320,000 During 2019 $140,000 What amount should be reported as unearned service contract revenues in Yurman's December 31, 2016 balance sheet? a. $720,000. b. $660,000. c. $480,000. d. $440,000.

B

8. A company carries two types of goods in its inventory, X and Y. The following unit data were available at the end of the current month: Replacement cost X $22 Y $36 Net realizable value X 35 Y 34 Net realizable value minus a normal profit margin X 29 Y 30 Cost X 28 Y 35 At what amount should these products be valued under the lower-of-cost-or-Market rule applied on an individual product basis? A. X $35 Y $35 B. X $22 Y $30 C. X $28 Y $34 D. X $29 Y $36

C

8. Heidelberg Co.'s beginning inventory at January 1 was understated by $52,000, and its ending inventory on Dec. 31 was overstated by $104,000. As a result Heidelberg's cost of goods sold for the year was A. Understated by $52,000. B. Overstated by $52,000 C. Understated by $156,000. D. Overstated by $156,000.

C

8. Minsk Company adopted the dollar-value last-in, first-out (LIFO) method of inventory valuation at December 31, Year 1. Inventory balances and price indices are shown below. December 31 Year 1 Ending Inventory at End-of-Year Prices $240,000 Price index at December 31 100 Year 2 Ending Inventory at End-of-Year 275,000 Price index at December 31 110 Year 3 Ending Inventory at End-of-Year 300,000 Price index at December 31 120 Minsk Company's ending inventory as of December 31, Year 2, computed by the dollar-value LIFO method was A. $240,000 B. $250,000 C. $251,000 D. $275,000

C

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? a. Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value. b. Paid-in capital in excess of par for the purchase price. c. Treasury stock for the purchase price. d. Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value.

C

Core Trading Stamp Co. records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Core's past experience indicates that only 75% of the stamps sold to licensees will be redeemed. Core's liability for the cost of stamp redemptions was $7,500,000 at December 31, 2017. Additional information for 2018 is as follows: Stamp service revenue from stamps sold to licensees $6,000,000 Cost of redemptions 4,980,000 If all the stamps sold in 2018 were presented for redemption in 2019, the redemption cost would be $4,500,000. What amount should Core report as a liability for stamp redemptions at December 31, 2018? a. $12,480,000. b. $8,520,000. c. $5,895,000. d. $7,020,000.

C

Creon Corp. is constructing an asset for its own use 'during the second quarter of a calendar year. The following qualifying expenditures related to the asset were made during the year: $60,000 on April 1, $90,000 on June 1, and $100,000 uniformly during the period. The average amount of accumulated expenditures for this quarterly accounting period was A. $250,000 B. $190,000 C. $140,000 D. $130,000

C

During 2018, Leon Co. incurred the following costs: Testing in search for process alternatives $ 380,000 Costs of marketing research for new product 250,000 Modification of the formulation of a process 560,000 Research and development services performed by Beck Corp. for Leon 475,000 In Leon's 2018 income statement, research and development expense should be a. $560,000. b. $1,035,000. c. $1,415,000. d. $1,635,000.

C

Falmouth Company uses a special machine to fill certain customer needs. This machine is used only to produce a specific product that differs from the output of other machines. In addition, the customers served generally do not order other products from Falmouth. Because of the opening of a competitor that uses more modern equipment, orders for the output of this machine have materially decreased. Because of the change in circumstances, Falmouth bas gathered the following information to determine whether to recognize an impairment loss: Carrying Amount $525,000 Undiscounted Future Cash Flows $450,000 Discounted Future Cash Flows $245,000 Fair Value $295,000 What amount of impairment loss should Falmouth recognize? A. $0 B. $75,000 C. $230,000 D. $280,000

C

Geary Co. assigned $1,600,000 of accounts receivable to Kwik Finance Co. as security for a loan of $1,340,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Geary collected $440,000 on assigned accounts after deducting $1,520 of discounts. Geary accepted returns worth $5,400 and wrote off assigned accounts totaling $11,920. Entries during the first month would include a a. debit to Cash of $441,520. b. debit to Bad Debt Expense of $11,920. c. debit to Allowance for Doubtful Accounts of $11,920. d. debit to Accounts Receivable of $458,840.

C

Geary Co. assigned $1,600,000 of accounts receivable to Kwik Finance Co. as security for a loan of $1,340,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Geary collected $440,000 on assigned accounts after deducting $1,520 of discounts. Geary accepted returns worth $5,400 and wrote off assigned accounts totaling $11,920. The amount of cash Geary received from Kwik at the time of the assignment was a. $1,206,000. b. $1,308,000. c. $1,313,200. d. $1,340,000.

C

Horn Co. and Book Co. exchanged nonmonetary assets in a transaction that did not have commercial substance for either party. Horn paid cash to Book that was equal to 15% of the fair value of the exchange. A realized gain on the exchange should be recognized by A. Horn Yes Book Yes B. Horn Yes Book No C. Horn No Book Yes D. Horn No Book No

C

In March 2018, an explosion occurred at Kirk Co.'s plant, causing damage to area properties. By May 2018, no claims had yet been asserted against Kirk. However, Kirk's management and legal counsel concluded that it was reasonably possible that Kirk would be held responsible for negligence, and that $5,000,000 would be a reasonable estimate of the damages. Kirk's $6,000,000 comprehensive public liability policy contains a $500,000 deductible clause. In Kirk's December 31, 2017 financial statements, for which the auditor's fieldwork was completed in April 2018, how should this casualty be reported? a. As a note disclosing a possible liability of $5,000,000. b. As an accrued liability of $500,000. c. As a note disclosing a possible liability of $500,000. d. No note disclosure of accrual is required for 2017 because the event occurred in 2018.

C

Luther Inc., has 4,000 shares of 5%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2018, and December 31, 2017. The board of directors declared and paid an $8,000 dividend in 2017. In 2018, $40,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2018? a. $28,000 b. $20,000 c. $12,000 d. $10,000

C

On April 2, Kelvin sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 sales was received on April 8 and the remaining payment on $16,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts, the entry recorded on April 27 would include a: a. debit to Cash and credit to Accounts Receivable for $15,840. b. debit to Accounts Receivable and credit to Sales Revenue for $40,000. c. debit to Accounts Receivable and credit to Sales Discounts Forfeited for $160. d. debit to Cash and credit to Sales Discounts Forfeited for $400.

C

On January 2, Year 1, Clarinette Co, purchased assets for $400,000 that were to be depreciated over 5 years using the straight-line method with no salvage value. Taken together, these assets have identifiable cash flows that are largely independent of the cash flows of other asset groups. At the end of Year 2, Clarinette, as the result of certain changes in circumstances indicating that the carrying amount of these assets may not be recoverable, tested them for impairment. It estimated that it will receive net future cash inflows (undiscounted) of $100,000 as a result of continuing to hold and use these assets, which had a fair value of $80,000 at the end of Year 2. Thus, the impairment loss to be .reported at December 31, Year 2, is A. $0 B. $140,000 C. $160,000 D. $400,000

C

On July 1, Year 1, Colman Company sold land with a carrying amount of $75,000 to Monte Company in exchange for $50,000 in cash and a note calling for five annual $10,000 payments beginning on June 30, Year 2, and ending on June 30, Year 6. The fair value of the land is uncertain, and Monte can borrow long-term funds at 11%. What should be the amount capitalized as acquisition cost of the land by Monte Company? A. $55,935 B. $75,000 C. $86,959 D. $100,000

C

On May 1, Year 1, a company issued, at 103 plus accrued interest, 500 of its 12%, $1,000 bonds. The bonds are dated January 1, Year 1, and mature on January 1, Year 5. Interest is payable semiannually on January 1 and July 1. The journal entry to record the issuance of the bonds and the receipt of the cash proceeds is A. Cash $515,000 Interest payable 20,000 Bonds payable $500,000 Premium on BP 35,000 B. Cash $525,000 Bonds Payable 500,000 Premium on BP 15,000 Interest payable 10,000 C. Cash $535,000 Bonds Payable $500,000 Premium on bonds payable 15,000 Interest payable 20,000 D. Cash 535,000 Bonds payable 500,000 Premium on BP 35,000

C

Piazza Co. purchased a machine on July 1, 2017, for $1,000,000. The machine has an estimated useful life of five years and a salvage value of $200,000. The machine is being depreciated from the date of acquisition by the 150% declining-balance method. For the year ended December 31, 2017, Piazza should record depreciation expense on this machine of a. $300,000. b. $200,000. c. $150,000. d. $120,000

C

Pierson Corporation owned 15,000 shares of Hunter Corporation. These shares were purchased in 2014 for $135,000. On November 15, 2018, Pierson declared a property dividend of one share of Hunter for every ten shares of Pierson held by a stockholder. On that date, when the market price of Hunter was $28 per share, there were 135,000 shares of Pierson outstanding. What gain and net reduction in retained earnings would result from this property dividend? Gain Net Reduction in Retained Earnings a. $0 $378,000 b. $0 $121,500 c. $256,500 $121,500 d. $256,500 $ 34,000

C

Sosa Co.'s stockholders' equity at January 1, 2018 is as follows: Common stock, $10 par value; authorized 300,000 shares; Outstanding 225,000 shares $2,250,000 Paid-in capital in excess of par 800,000 Retained earnings 2,190,000 Total $5,240,000 During 2018, Sosa had the following stock transactions: Acquired 6,000 shares of its stock for $270,000. Sold 3,600 treasury shares at $50 a share. Sold the remaining treasury shares at $41 per share. No other stock transactions occurred during 2018. Assuming Sosa uses the cost method to record treasury stock transactions, the total amount of all additional paid-in capital accounts at December 31, 2018 is a. $791,600. b. $770,000. c. $808,400. d. $827,600.

C

Sun Co. was constructing fixed assets that qualified for interest capitalization. Sun had the following outstanding debt issuances during the entire year of construction: · $6,000,000 face value, 8% interest. · $8,000,000 face value, 9% interest. None of the borrowings were specified for the construction of the qualified fixed asset Average expenditures for the year were $1,000,000. What interest rate should Sun use to calculate capitalized interest on the construction? A. 8.00% B. 8.50% C. 8.57% D. 9.00%

C

Wheeler Company issued 5,000 shares of its $5 par value common stock having a fair value of $25 per share and 7,500 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $253,000. The proceeds allocated to the preferred stock is a. $151,800 b. $150,000 c. $138,000 d. $115,000

C

Which of the following statements correctly describes the proper accounting for nonmonetary exchanges that are deemed to have commercial substance? A. It defers any gains and losses. B. It defers losses to the extent of any gains. C. It recognizes gains and losses immediately. D. It defers gains and recognizes losses immediately.

C

During 2017, Eaton Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2017 and 2018 are as follows: Actual Warranty Sales Expenditures 2017 $ 800,000 $12,000 2018 1,000,000 35,000 $1,800,000 $47,000 At December 31, 2018, (assuming the accrual method) Eaton should report an estimated warranty liability of a. $0. b. $25,000. c. $35,000. d. $61,000.

D

Eddy Co. is indebted to Cole under a $1,000,000, 12%, three-year note dated December 31, 2016. Because of Eddy's financial difficulties developing in 2018, Eddy owed accrued interest of $120,000 on the note at December 31, 2018. Under a troubled debt restructuring, on December 31, 2018, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of $900,000. Eddy's acquisition cost of the land is $725,000. Ignoring income taxes, on its 2018 income statement Eddy should report as a result of the troubled debt restructuring Gain on Disposal Restructuring Gain a. $395,000 $0 b. $275,000 $0 c. $175,000 $100,000 d. $175,000 $220,000

D

Floyd Company purchases Haeger Company for $2,400,000 cash on January 1, 2018. The book value of Haeger Company's net assets, as reflected on its December 31, 2017 balance sheet is $1,860,000. An analysis by Floyd on December 31, 2017 indicates that the fair value of Haeger's tangible assets exceeded the book value by $180,000, and the fair value of identifiable intangible assets exceeded book value by $135,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company? a. $ -0- b. $540,000 c. $360,000 d. $225,000

D

Given a periodic inventory system, beginning inventory of $30,000, ending inventory of $34,000, and purchases of $450,000, what is the net debit to cost of goods sold? A. $450,000 B. $30,000 C. $34,000 D. $446,000

D

Guinea Corp. produced 1,000 units of its product that it sold for cash to Moresby Corp. In a related transaction, Guinea agreed to repurchase the 1,000 units at a specified price at a future date. The price specified in the agreement is not subject to change based on future market fluctuations except for fluctuations resulting from finance and holding costs incurred by Moresby. Guinea should account for these transactions by A. Recording the sale in an ordinary manner and removing the inventory from the balance sheet. B. Recording the sale, removing the inventory from the balance sheet, and disclosing the purchase commitment in the notes to the financial statements. C. Continuing to recognize the inventory and recording a valuation account to be reported as a reduction of the inventory on the balance sheet, rather than recording sale. D. Recording a liability and continuing to recognize the inventory rather than recording a sale.

D

Hagen Co. exchanged a truck with a carrying amount of $12,000 and a fair value of $20,000 for a truck and $5,000 cash. The fair value of the truck received was $15,000. The exchange was not considered to have commercial substance. At what amount should Hagen record the truck received in the exchange? A. $7,000 B. $9,000 C. $12,000 D. $15,000

D

Mingenback Company has 630,000 shares of $10 par value common stock outstanding. During the year Mingenback declared a 15% stock dividend when the market price of the stock was $48 per share. Two months later Mingenback declared a $.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by: a. $ 434,700. b. $ 594,000. c. $4,536,000. d. $4,970,700.

D

The following data are relevant to an exchange of nonmonetary assets by Kim Co. with Kip Co.: Fair Value Asset Given by Kim Fair Value $9,000 Asset Received by Kim Fair Value $12,000 Asset Given by Kim Carrying Amount 4,000 Asset Received by Kim Carrying Amount 10,000 Kim also gave $3,000 in boot. At what amount should Kim record the new asset? A. $15,000 B. $7,000 C. $9,000 D. $12,000

D

The following information pertains to Wales Corp.'s issuance of bonds on July 1, Year 1: Face amount $800,000 Term 10 years Stated Interest rate 6% Interest payment dates Annually on July 1 Yield 9% What should be the issue price for each $1,000 bond? A. $1,000 B. $943 C. $864 D. $807

D

Tunis Company purchased a van for $45,000 on January 1. Depreciation will be taken for a full year. The estimated useful life of the van is 5 years or 80,000 miles, and the salvage value is $5,000. Actual mileage driven in the first year was 20,000 miles. Which of the following methods will result in the highest depreciation for the first year? A. Straight-line. B. Activity. C. Sum-of-the-years' -digits. D. Double-declining-balance.

D

If Toulouse uses perpetual moving-average inventory pricing, the sale of 220 items on November 17 will be recorded at a unit cost of A. $4.00 B. $4.16 C. $4.20 D. $4.32 9. If Toulouse uses periodic LIFO inventory pricing, the cost of goods sold for November will be A. $2,416 B. $2,444 C. $2,474 D. $2,584

D and D

1. On January 1, Year 2, Dart, Inc., entered into an agreement to sell the assets and product line of its Jay Division, which met the criteria for classification as an operating segment. The sale was consummated on December 31, Year 2, and resulted in a gain on disposal of $400,000. The division's operations resulted in losses before income tax of $225,000 in both Year 1 and Year 2, and the criteria for reporting a discontinued operation have been met. Dart, Inc., has a tax rate of 30% in both years. In a comparative statement of income for Year 2 and Year 1, under the caption discontinued operations, Dart should report a gain (loss) of Year 2 Year 1 A. $122,500 $(157,500) B. $122,500 $0 C. $(157,500) $(157,500) D. $(157,500) $0

A

8. During periods of inflation, a: perpetual inventory system will result in the same dollar amount of ending inventory as a periodic inventory system under which of the following inventory cost-flow assumptions? FIFO LIFO A. Yes No B. Yes Yes C. No Yes D. No No

A

8. Telemarker Co. uses a perpetual system: Beginning Inventory No Units 1,000 Cost/Unit $60.00 Total Cost $60,000 May 2 Sale No Units 600 Cost/Unit Total Cost May 7, purchase No Units 800 Cost/Unit 78.00 Total Cost 62,400 May 16, Sale No Units 400 Cost/Unit Total Cost May 20, purchase No Units 1,000 Cost/Unit 79.20 Total Cost 79,200 May 30, sale No Units 1,200 The cost of the goods sold on May 30 under the LIFO method is A. $94,800 B. $94,080 C. $86,400 D. $91,200

A

During 2017, Woods Company purchased 80,000 shares of Holmes Corporation common stock for $1,260,000 as an equity investment. The fair value of these shares was $1,200,000 at December 31, 2017. Woods sold all of the Holmes stock for $17 per share on December 3, 2018, incurring $56,000 in brokerage commissions. Woods Company should report a realized gain on the sale of stock in 2018 of a. $44,000. b. $100,000. c. $104,000. d. $160,000.

A

Four years ago on January 2, Randall Co. purchased a long-lived asset. The purchase price of the asset was $250,000, with no salvage value. The estimated useful life of the asset was 10 years. Randall used the straight-line method to calculate depreciation expense. An impairment loss on the asset of $30,000 was recognized on December 31 of the current year. The estimated useful life of the asset at December 31 of the current year did not change. What amount should Randall report as depreciation expense in its income statement for the next year? A. $20,000 B. $22,000 C. $25,000 D. $30,000

A

General Products Company bought Special Products Division in 2017 and appropriately recorded $750,000 of goodwill related to the purchase. On December 31, 2018, the fair value of Special Products Division is $6,000,000 and it is carried on General Product's books for a total of $5,100,000, including the goodwill. An analysis of Special Products Division's assets indicates that goodwill of $600,000 exists on December 31, 2018. What goodwill impairment should be recognized by General Products in 2018? a. $0. b. $300,000. c. $75,000. d. $450,000.

A

Heidelberg Co.'s beginning inventory at January 1 was understated by $52,000, and its ending inventory on Dec. 31 was overstated by $104,000. As a result Heidelberg's cost of goods sold for the year was A. Understated by $52,000. B. Overstated by $52,000 C. Understated by $156,000. D. Overstated by $156,000.

A

Lehman Corporation purchased a machine on January 2, 2017, for $4,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes: 2017 $800,000 2020 $460,000 2018 1,280,000 2021 460,000 2019 768,000 2022 232,000 Assuming an income tax rate of 30% for all years, the net deferred tax liability that should be reflected on Lehman's balance sheet at December 31, 2018 be: a. $144,000 b. $134,400 c. $9,600 d. $0

A

On August 1, 2018, Fowler Company acquired $500,000 face value 10% bonds of Kasnic Corporation at 104 plus accrued interest. The bonds were dated May 1, 2018, and mature on April 30, 2023, with interest payable each October 31 and April 30. The bonds will be held to maturity. What entry should Fowler make to record the purchase of the bonds on August 1, 2018? a. Debt Investments. 520,000 Interest Revenue 12,500 Cash 532,500 b. Debt Investments 532,500 Cash 532,500 c. Debt Investments 532,500 Interest Revenue 12,500 Cash 520,000 d. Debt Investments 500,000 Premium on Bonds 32,500 Cash 532,500

A

On December 31, 2015, Nolte Co. is in financial difficulty and cannot pay a note due that day. It is a $3,000,000 note with $300,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Nolte equipment that has a fair value of $1,450,000, an original cost of $2,400,000, and accumulated depreciation of $1,150,000. Piper also forgives the accrued interest, extends the maturity date to December 31, 2018, reduces the face amount of the note to $1,250,000, and reduces the interest rate to 6%, with interest payable at the end of each year. Nolte should record interest expense for 2018 of a. $0. b. $75,000. c. $150,000. d. $225,000.

A

Torque Co. has equipment with a carrying amount of $2,400,000. The expected future net cash flows from the equipment are $2,445,000, and its fair value is $2,040,000. The equipment is expected to be used in operations in the future. What amount (if any) should Torque report as an impairment to its equipment? a. No impairment should be reported. b. $360,000 c. $45,000 d. $405,000

A

1. Which of the following should be reported as a prior period adjustment? Change in Estimated Lives Mistakes in the Application of Depreciable Assets Accounting Principles a. Yes Yes b. No Yes c. Yes No d. No No

B

22. The following information is available for the Sibelius Company for the 3 months ended March 31 of this year: Merchandise inventory, January 1 of this year $ 900,000 Purchases 3,400,000 Freight-in 200,000 Sales 4,800,000 The gross margin recorded was 25% of sales. What should be the merchandise inventory at March 31? A. $700,000 B. $900,000 C. $1,125,000 D. $1,200,000

B

8. In January, Stitch, Inc., adopted the dollar-value LIFO method of inventory valuation. At adoption, inventory was valued at $50,000. During the year, inventory increased $30,000 using base-year prices, and prices increased 10%. The designated market value of Stitch's inventory exceeded its cost at year end. What amount of inventory should Stitch report in its year-end balance sheet? A. $80,000 B. $83,000 C. $85,000 D. $88,000

B

8. Lorraine Co. has determined its fiscal year-end inventory on a FIFO basis to be $400,000. Information pertaining to that inventory follows: Estimated selling price $408,000 Estimated cost of disposal 20,000 Normal profit margin 60,000 Current replacement cost 360,000 Lorraine records losses that result from applying the lower-of-cost-or-NRV rule. At its year end, what should be the net carrying amount of Lorraine's inventory? A. $400,000 B. $388,000 C. $360,000 D. $328,000

B

Kern Company purchased bonds with a face amount of $1,000,000 between interest payment dates. Kern purchased the bonds at 102, paid brokerage costs of $15,000, and paid accrued interest for three months of $25,000. The amount to record as the cost of this long-term investment in bonds is a. $1,060,000. b. $1,035,000. c. $1,020,000. d. $1,000,000.

B

On January 1, 2018, Jacobs Company sold property to Dains Company which originally cost Jacobs $2,660,000. There was no established exchange price for this property. Danis gave Jacobs a $4,200,000 zero-interest-bearing note payable in three equal annual installments of $1,400,000 with the first payment due December 31, 2018. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a $4,200,000 note payable in three equal annual installments of $1,400,000 at a 10% rate of interest is $3,481,800. What is the amount of interest income that should be recognized by Jacobs in 2018, using the effective-interest method? a. $0. b. $140,000. c. $348,180. d. $420,000.

C

On July 1, Dover Co. received $206,576 for $200,000 face amount, 12% bonds, a price that yields 10%. Interest expense for the 6 months ended December 31 should be A. $12,394 B. $12,000 C. $10,328 D. $10,000

C

. A company purchased some large machinery on a deferred payment plan. The contract calls for $40,000 down on January 1 and $40,000 at the beginning of each of the next 4 years. There is no stated interest rate in the contract, and there is no established exchange price for the machinery. What should be recorded as the cost of the machinery? A. $200,000. B. $200,000 plus the added implicit interest C. Future value of an annuity due for 5 years at an imputed interest rate. D. Present value of an annuity due for 5 years at an imputed interest rate.

D

1. On March 1, Year 7, Pill Company approved a formal plan to sell one of its components. The component meets all the criteria for classification as held for sale, and its results of operations meet the criteria for reporting in discontinued operations. The sale will occur on January 31, Year 8. The component had $200,000 operating loss from January 1 to March 1, Year 7, and an $800,000 operating loss from March 1 through December 31, Year 7. These losses excluded the effects of writing down the component to its fair value minus cost to sell. Pill expects to incur an operation loss on the component of $50,000 in January Year 8 and to realize a $150,000 gain on sale of its assets. Pill's tax rate is 40%. Assuming that Pill recognized a $500,000 loss in Year 7 from writing down the component to its fair value minus cost to sell, how much loss from discontinued operations should Pill report in its December 31, Year 7, income statement? A. $600,000 B. $780,000 C. $840,000 D. $900,000

D

4. For the year ended December 31, 2017, Dent Co. estimated its allowance for uncollectible accounts using the year-end aging of accounts receivable. The following data are available: Allowance for uncollectible accounts, 1/1/17 $126,000 Provision for uncollectible accounts during 2017 90,000 Uncollectible accounts written off, 11/30/17 104,000 Estimated uncollectible accounts per aging, 12/31/17 156,000 After year-end adjustment, the bad debt expense for 2017 should be a. $104,000. b. $90,000. c. $156,000. d. $134,000

D

On December 31, 2015, Nolte Co. is in financial difficulty and cannot pay a note due that day. It is a $3,000,000 note with $300,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Nolte equipment that has a fair value of $1,450,000, an original cost of $2,400,000, and accumulated depreciation of $1,150,000. Piper also forgives the accrued interest, extends the maturity date to December 31, 2018, reduces the face amount of the note to $1,250,000, and reduces the interest rate to 6%, with interest payable at the end of each year. Nolte should recognize a gain on the partial settlement and restructure of the debt of a. $0. b. $75,000. c. $275,000. d. $375,000.

D

On December 31, Year 1, Ulster Co. issued $200,000 of 8% serial bonds, to be repaid in the amount of $50,000 each year. Interest is payable annually on December 31. The bonds were issued to yield 10% a year. The bond proceeds were $190,280 based on the present values at December 31, Year 1, of the five annual payments: Due Date 12/31/Year 2 Principal $40,000 Interest $16,000 12/31/Year 3 Principal40,000 Interest 12,800 12/31/Year 4 Principal 40,000 Interest 9,600 12/31/Year 5 Principal40,000 Interest 6,400 12/31/Year 6 Principal 40,000 Interest 3,200 Ulster amortizes the bond discount by the interest method. In its December 31, Year 2, balance sheet, at what amount should Ulster report the carrying amount of the bonds? A. $160,000 B. $149,100 C. $150,280 D. $153,308

D

On January 1, 2014, Russell Company purchased a copyright for $2,500,000, having an estimated useful life of 16 years. In January 2018, Russell paid $375,000 for legal fees in a successful defense of the copyright. Copyright amortization expense for the year ended December 31, 2018, should be a. $0. b. $156,250. c. $179,686. d. $187,500.

D

Regis Inc. bought a machine on January 1, 2008 for $800,000. The machine had an expected life of 20 years and was expected to have a salvage value of $80,000. On July 1, 2018, the company reviewed the potential of the machine and determined that its future net cash flows totaled $400,000 and its fair value was $280,000. If the company does not plan to dispose of it, what should Regis record as an impairment loss on July 1, 2018? a. $ 0 b. $22,000 c. $40,000 d. $142,000

D

The accounting records of Seraphina Co. contain the following amounts on November 30, the end of Its fiscal year: Beginning inventory $ 68,000 $100,000 Purchases 262,000 400,000 Net markups 50,000 Net markdowns 110,000 Sales 360,000 Seraphina's ending inventory as of November 30, computed by the conventional retail method, is A. $80,000 B. $60,000 C. $54,400 D. $48,000

D