ACCT FINAL
Enhancing qualities of accounting information include: - comparability and verifiability. - relevance and consistency. - comparability and materiality. - relevance and faithful representation.
comparability and verifiability.
When a company changes accounting principles, it financial statements lack ______________. - confirmatory value - predictive value - faithful representation - consistency
consistency
Construction permits are not considered to be intangible assets. contract-related intangible assets. customer-related intangible assets. marketing-related intangible assets.
contract-related intangible assets.
The cost of manufacturing equipment would include all of the following except: - purchase price reduced by any discount taken. - freight costs. - installation costs. - cost of training the equipment operator
cost of training the equipment operator
If the adjusting entry for an accrued revenue is not made: - assets will be overstated. - revenues will be overstated. - liabilities will be understated. - equity will be understated.
equity will be understated.
In an exchange of nonmonetary assets that lacks commercial substance in which a gain exists and no cash is paid or received, the asset received is recorded at: - book value of the asset received less the gain deferred. - fair value of the asset received less the gain deferred. - book value of the asset given up plus the deferred gain. - fair value of the asset given up less the deferred gain.
fair value of the asset received less the gain deferred.
Under dollar-value LIFO each layer in ending inventory at LIFO cost is calculated by: - first expressing the year at base-year prices and then extending it to current LIFO cost by multiplying by the year's price index. - dividing the layer at base-year prices by base-year price index. - multiplying the layer at current-year prices by the current year price index. - dividing the layer at current-year prices by the current year price index.
first expressing the year at base-year prices and then extending it to current LIFO cost by multiplying by the year's price index.
Other assets include all of the following except: - restricted cash. - timberlands. - property held for sale. - assets in special funds.
timberlands
Mains Corporation owns equipment with a cost of $290,000 and accumulated depreciation at December 31, 2017 of $150,000. It is estimated that he machinery will generate future cash flows of $165,000. The machinery has a fair value of $115,000. Mains should recognize a loss on impairment of $0. $15,000. $25,000. $35,000.
$0.
Tiburon Corporation purchased a patent for $1,850,000 on November 30, 2018. It has a remaining legal life of 18 years. Tiburon estimates that the remaining useful life of the patent is useful life of 15 years. What balance will be reported on the December 31, 2020 balance sheet for the patent (if necessary, round your answer to the nearest dollar)? $1,850,000. $1,583,678. $1,593,056. $1,485,606.
$1,593,056.
Addison, Inc. reports: Cash provided by operating activities$2,300,000Cash used by investing activities640,000Cash used by financing activities220,000Beginning cash balance340,000 What is Addison's ending cash balance? $1,440,000. $1,780,000. $3,060,000. $3,500,000.
$1,780,000
Flannery Corporation owns machinery with a book value of $520,000. It is estimated that the machinery will generate future cash flows of $465,000. The machinery has a fair value of $415,000. Florence should recognize a loss on impairment of $0. $50,000. $55,000. $105,000.
$105,000.
On January 1, 2020, Bumper Corp. acquires a customer list for $400,000. Bumper estimates that this customer list will generate value for at least 5 years. At the end of 3 years, Bumper plans to sell the customer list to another company for $62,500. On Bumper's income statement for the year ended December 31, 2020, how much amortization expense should it report? $67,500 $133,333 $80,000 $112,500
$112,500
Brackney Manufacturing Company has the following account balances at year-end: Office supplies$6,000Raw materials21,000Work-in-process44,000Finished goods52,000Prepaid insurance8,000 What amount should Brackney report as inventories in its balance sheet? $52,000. $96,000. $117,000. $123,000.
$117,000
On July 1, 2020, Adele Company bought a trademark from Robert, Inc. for $2,750,000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Robert's books was $1,600,000. In Adele's 2020 income statement, what amount should be reported as amortization expense? $80,000. $137,500. $160,000. $275,000.
$137,500.
Burchell Company purchased land and a building for a lump sum cost of $420,000. The land has a fair market value of $160,000 and the building has a fair market value of $320,000. The cost assigned to the land is $0. $140,000. $160,000. $210,000.
$140,000
Avery Tag makes an investment today (January 1, 2017). Avery will receive $40,000 every December 31st for the next six years (2017 - 2022). If Avery wants to earn 12% on her investment, what is the most she should invest on January 1, 2017? Time periods Factor PV Annuity due 5 4.03735 PV Annuity due 6 4.60478 PV Ordinary annuity 5 3.60478 PV Ordinary annuity 6 4.11141 $164,456. $144,191. $184,191. $161,494.
$164,456.
Bryson Corporation purchased a limited-life intangible asset for $1,162,500 on May 1, 2018. It has a remaining useful life of 15 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2020 (if necessary, round your answer to the nearest dollar)? $66,667 $129,167 $155,000 $206,667
$206,667
On January 1, 2017, Simmons Company sold to Flay Corporation $400,000 of its 10% bonds for $354,118 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Simmons report as interest expense for the six months ended June 30, 2017? (The effective-interest method of amortization is being used.) $21,322 $17,768 $21,247 $24,000
$21,247
Alexa Smith has saved $250,000 for her retirement. It is invested in an annuity that pays 12%. Alexa wishes to make equal semi-annual withdrawals over the next 10 years, beginning 6 months from now. How much can she withdraw each period without exhausting her initial investment? Time periods Factor PV Annuity due 12% 10 6.32825 PV Annuity due 6% 20 12.15812 PV Ordinary annuity 12% 10 5.65022 PV Ordinary annuity 6% 20 11.46992 $39,505. $20,562. $44,246. $21,796.
$21,796.
In preparing its August 31, 2017 bank reconciliation, Adel Corp. has available the following information: Balance per bank statement, 8/31/17$21,650Deposit in transit, 8/31/17$3,900Return of customer's check for insufficient funds, 8/30/17$600Outstanding checks, 8/31/17$2,750Bank service charges for August$100 At August 31, 2017, Adel's correct cash balance is $22,800. $22,200. $22,100. $20,500.
$22,800.
Josie Corporation reported the following information for 2017: Sales revenue$1,000,000Cost of goods sold700,000Operating expenses110,000Unrealized holding gain on available-for-sale securities40,000Cash dividends received on the securities4,000 For 2017, Josie would report comprehensive income of $234,000. $230,000. $194,000. $40,000.
$234,000
Jamie wants to set aside enough money now to go on vacation in two years. She has developed the following estimates: Estimated Cash Outflows Probability Assessment $2,700 30% $3,300 50% $4,500 20% Time periods Factor PV of 1 2 .90703 PV Annuity of 1 2 1.85941 FV of 1 2 1.10250 FV Ordinary annuity 2 2.05 How much should she deposit today in an account earning 5%, compounded annually, to have sufficient cash on hand to pay for the vacation? $3,048 $3,704 $3,360 $6,248
$3,048
Colicchio Corporation acquired two inventory items at a lump-sum cost of $60,000. The acquisition included 3,000 units of knife X001, and 3,000 units of knife X002. X001 normally sells for $20 per unit, and X002 for $10 per unit. If Colicchio sells 1,000 units of X002, what amount of gross profit should it recognize? $1,000. $3,330. $6,670. $10,000.
$3,330.
Clair, Inc. reports net income of $700,000. It declares and pays dividends of $100,000 for the year, one-half of which relate to the preferred shares. The weighted-average number of common shares outstanding during the year is 200,000 shares, and the weighted-average number of preferred shares outstanding during the year is 10,000 shares. Earnings per share for Clair, Inc. is (round your answer to the nearest cent): $3.18. $3.25. $3.00. $2.95.
$3.25
Alma Company's average collection period is 45 days and its net sales are $2,430,000. What are Alma Company's average accounts receivables for the period? $300,000. $54,000. $6,658. $202,500.
$300,000.
The required balance in Wheeler's Allowance for Doubtful Accounts is $36,750, based on an aging of its accounts receivable. The Allowance for Doubtful Accounts currently has a debit balance of $4,200. Wheeler's bad debt expense for the period is $4,200. $36,750. $40,950. $32,550.
$40,950.
Viewpoint Company's October 31 inventory was destroyed by fire. The company's beginning inventory was $500,000, and purchases for January through October were $1,200,000. Sales for the same period were $1,800,000. The company's normal gross profit percentage is 30% of sales. Using the gross profit method, the October 31 inventory is estimated to be $40,000. $540,000. $300,000. $440,000.
$440,000.
Lebanon Corporation owns equipment with a cost of $320,000 and accumulated depreciation at December 31, 2017 of $120,000. It is estimated that the machinery will generate future cash flows of $175,000. The machinery has a fair value of $155,000. If Lebanon uses IFRS, the company should recognize a loss on impairment of $0. $25,000. $35,000. $45,000.
$45,000.
Lumberyard Inc. incurred the following costs during the year ended December 31, 2020: Laboratory research aimed at discovery of new knowledge$ 4,295,000 Costs of testing prototype and design modifications 712,500 Quality control during commercial production, including routine testing of products 485,000 On December 31, 2020, purchase of research facilities having an estimated useful life of 20 years with alternative future use in other research & development projects7,360,000 The total amount to be classified and expensed as research and development in 2020 is $5,007,500. $4,780,000. $5,492,500. $12,367,500.
$5,007,500.
Peterson Enterprises reports the following information: Net income$5,000,000Depreciation expense680,000Loss on the sale of investments154,000Increase in accounts receivable320,000 Peterson should report cash provided by operating activities of $3,846,000. $5,000,000. $5,514,000. $6,154,000.
$5,514,000.
Sally Tucker wants to invest a certain sum of money at the end of each year for six years. The investment will earn 6% compounded annually. At the end of six years, she will need a total of $500,000 accumulated. How should she compute her required annual investment? $500,000 times the future value of a 6-year, 6% ordinary annuity of 1 factor. $500,000 divided by the future value of a 6-year, 6% ordinary annuity of 1 factor. $500,000 times the present value of a 6-year, 6% ordinary annuity of 1 factor. $500,000 divided by the present value of a 6-year, 6% ordinary annuity of 1 factor.
$500,000 divided by the future value of a 6-year, 6% ordinary annuity of 1 factor.
Sawyer, Inc. consistently estimated its bad debt expense at 1 percent of credit sales. In 2017, however, Sawyer determines that it must revise upward the estimate of bad debts for the current year's credit sales to 2%, or double the prior years' percentage. Sawyer uses the revised estimate of 2% and calculates bad debt expense of $500,000. How is the change in the estimated bad debt expense reported in Sawyer's 2017 financial statements? - $500,000 of expense and $500,000 as an unusual loss in the income statement. - $500,000 of expense in the income statement as an ordinary item, $500,000 of expense reported as an adjustment to the beginning balance of retained earnings (net of tax). - $500,000 of expense reported as a change in accounting principle and accounted for under the retrospective approach. - $500,000 of expense in the income statement and $500,000 as a contra asset in the balance sheet.
$500,000 of expense in the income statement and $500,000 as a contra asset in the balance sheet.
On September 1, 2017, Alpha Graphics Printing Co. incurred the following costs for one of its printing presses: Purchase of attachment$35,000Installation of attachment3,000Replacement parts for renovation of press12,000Labor and overhead in connection with renovation of press1,000 Neither the attachment nor the renovation increased the estimated useful life of the press. However, the renovation resulted in significantly increased productivity. What amount of the costs should be capitalized? $0. $38,000. $47,000. $51,000.
$51,000.
During self-construction of an asset by Gambino Company, the following were among the costs incurred: Fixed overhead for the year$1,210,000 Portion of $1,000,000 fixed overhead that would be allocated to asset if it were normal production35,000Variable overhead attributable to self-construction25,000 What amount of overhead should Gambino include in the cost of the self-constructed asset? $ -0- $25,000 $35,000 $60,000
$60,000
Granger Company had January 1 inventory of $150,000 when it adopted dollar-value LIFO. During the year, purchases were $900,000 and sales were $1,500,000. December 31 inventory at year-end prices was $189,750, and the price index was 110. What is Granger Company's gross profit? $600,000. $624,750. $550,250. $450,000.
$624,750.
Coral Corporation began operating as a business in 2020. During January 2020, the company paid $300,000 in design costs to develop its trademark and $250,000 in legal and registration fees to secure the trademark. During October 2020, the company successfully defended its trademark, paying an additional $150,000 in legal fees during the process. At what amount should Coral Corporation report its trademark on its December 31, 2020 balance sheet? $150,000 $400,000 $550,000 $700,000
$700,000
Watauga Company purchased equipment on July 1, 2017 for $70,000. Sales tax on the purchase was $700. Other costs incurred were freight charges of $800, insurance during shipping of $ 150, repairs of $1,300 for damage during installation, and installation costs of $1, 050. What is the cost of the equipment? $70,000 $71,500 $72,700 $74,000
$72,700
Wendy Brown invests $50,000 at 10% annual interest. How much money has accumulated after five years, assuming simple interest? $55,000. $75,000. $80,526. $25,000.
$75,000.
The replacement cost of an inventory item is $75. Net realizable value is $82.50. Net realizable value less a normal profit margin is $69. The cost of the item is $76.50. The inventory item would be valued at: $69. $75. $76.50. $82.50.
$75.
Dixon Company purchased a depreciable asset for $32,000. The estimated salvage value is $4,000, and the estimated useful life is 4 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset? $6,400 $7,000 $8,000 $16,000
$8,000
The replacement cost of an inventory item is $90. Net realizable value is $97.50. Net realizable value less a normal profit margin is $88.50. The cost of the item is $93. The designated market value used in applying Lower-of-Cost-or-Market is $88.50. $90. $93. $97.50.
$90.
Barger Enterprises has an unusual or infrequent loss of $300,000, an unusual gain of $700,000, and a tax rate of 30%. At what amount should Barger report each item? Unusual loss . Unusual gain 1.$(300,000) . $700,000 2.(300,000) . 490,000 3.(210,000) 700,000 4.(210,000) . 490,000
1
Which of the following costs of goodwill should be amortized over their estimated useful lives? Costs of goodwill from a business combination accounted for as a purchase Costs of developing goodwill internally 1.NO NO 2.NO YES 3.YES YES 4.YES NO 1 2 3 4
1
A cash discount of 1/10, n/30 means the customer gets a: - 1% discount if they pay within 20 days. - 10% discount if they pay within 30 days. - 1% discount if they pay within 10 days. - 10% discount if they pay within 20 days.
1% discount if they pay within 10 days.
Assume that in an annual audit of Cullumber Inc. at December 31, 2020, you find the following transactions near the closing date.Assuming that each of the amounts is material, state whether the merchandise should be included in the client's inventory. Transactions 1.A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the shipping room on December 31, 2020. The customer was billed on that date and the machine excluded from inventory although it was shipped on January 4, 2021. 2.Merchandise costing $4,760 was received on January 3, 2021, and the related purchase invoice recorded January 5. The invoice showed the shipment was made on December 29, 2020, f.o.b. destination. 3.A packing case containing a product costing $5,780 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked "Hold for shipping instructions." Your investigation revealed that the customer's order was dated December 18, 2020, but that the case was shipped and the customer billed on January 10, 2021. The product was a stock item of your client. 4.Merchandise received on January 6, 2021, costing $1,156 was entered in the purchase journal on January 7, 2021. The invoice showed shipment was made f.o.b. supplier's warehouse on December 31, 2020. Because it was not on hand at December 31, it was not included in inventory. 5.Merchandise costing $1,224 was received on December 28, 2020, and the invoice was not recorded. You located it in the hands of the purchasing agent; it was marked "on consignment."
1. include 2. do not includee 3. include 4. include 5. do not include
Lagasse Corporation's computation of cost of goods sold is: Beginning Inventory$160,000Add: Cost of goods purchased605,000Cost of goods available for sale765,000Ending inventory180,000Cost of goods sold$585,000 The average days to sell inventory for Lagasse are 53.0 days. 100.0 days. 106.1 days. 112.3 days.
106.1 days.
If a company purchases merchandise on terms of 1/10, n/30, the cash discount available is equivalent to what effective annual rate of interest (assuming a 360-day year)? 1% 12% 18% 30%
18%
For an investment that earns 1% compounded monthly for two years, how many compounding periods are there? 2 24 12 8
24
Which of the following is not classified as an unusual and infrequent gain or loss? - A discontinued operation. - Losses from inventory write-downs. - Impairment losses on intangible assets. - Flood damage losses to property.
A discontinued operation.
Which one of the following guidelines regarding reversing entries is incorrect? - All accruals should be reversed. - All deferrals for which a company debited or credited the original cash transaction to an expense or revenue account should be reversed. - Adjusting entries for bad debts are reversed. - None of these answer choices are correct.
Adjusting entries for bad debts are reversed.
To convert cash receipts from customers to revenue on an accrual basis, which of the following adjustments is necessary? - Add ending Accounts Receivable. - Subtract ending Unearned Service Revenue. - Subtract beginning Accounts Receivable. - All of these answer choices are correct.
All of these answer choices are correct.
Which of the following is a reason the trial balance may not contain up-to-date and complete data? - Some items may be unrecorded. - Some costs are not recorded during the accounting period because these costs expire with the passage of time rather than as a result of recurring daily transactions. - Some events are not recorded daily because it's not efficient to do so. - All of these answer choices are correct.
All of these answer choices are correct.
If an adjusting entry is not made for a deferred revenue which was initially credited to an unearned revenue account, which of the following results? - Liabilities are understated. - Revenues are overstated. - Assets are unaffected. - All of these answer choices are correct.
Assets are unaffected.
When net realizable value is lower than cost, and the loss method applying the lower-of-cost-and-net-realizable approach of recording the write-down is used, what account is credited? - A loss account. - Inventory. - Allowance to Reduce Inventory to NRV. - Cost of Goods Sold.
Allowance to Reduce Inventory to NRV.
When net realizable value is lower than cost, and the loss method applying the lower-of-cost-and-net-realizable approach of recording the write-down is used, what account is credited? A loss account. Inventory. Allowance to Reduce Inventory to NRV. Cost of Goods Sold.
Allowance to Reduce Inventory to NRV.
Which of the following is an incorrect depiction of the accounting equation? - Assets = Liabilities + Stockholders' Equity. - Assets - Stockholders' Equity = Liabilities. - Assets - Liabilities = Stockholders' Equity. - Assets + Stockholder's Equity = Liabilities.
Assets + Stockholder's Equity = Liabilities.
Which of the following statements is true regarding the conceptual frameworks developed by FASB and IASB? - The monetary unit assumption is part of each framework and the U.S. dollar will be the established as the common unit of currency. - The existing conceptual frameworks underlying U.S. GAAP and IFRS are quite dissimilar. - Both have similar measurement principles based on historical cost and fair value. - The economic entity assumption is not part of the framework due to cultural differences.
Both have similar measurement principles based on historical cost and fair value.
Which of the following would not represent an accounting error? - Mathematical mistakes. - Mistakes in the application of accounting principles. - Oversight or misuse of facts that existed at the time financial statements were prepared. - Change in the method of inventory pricing form FIFO to average-cost.
Change in the method of inventory pricing form FIFO to average-cost.
Companies are required to highlight certain items in the financial statements so that users can better determine the long-run earning power of the company. Which of the following is not one of those items? - Unusual gains and losses. - Noncontrolling interest. - Changes in accounting principle. - Discontinued operations.
Changes in accounting principle.
Which of the following is not a recordable event or item? - Changes in managerial policy. - Sales of the company's product in overseas markets. - Declaration of dividends. - Purchase of supplies.
Changes in managerial policy.
Which of the following is not transferred to Retained Earnings at the end of the period? - Revenues. - Dividends. - Common stock. - Expenses.
Common stock.
All of the following statements about contra asset accounts are true except: - Contra asset accounts have normal credit balances. - Contra asset accounts are deducted from the related asset account to determine book value. - Contra asset accounts are not reported in the financial statements. - Contra asset accounts are increased with credits.
Contra asset accounts are not reported in the financial statements.
Property received through a contribution is to be recognized at its fair market value and offset with a credit entry to a: - Miscellaneous Gain account. - Paid-in Capital account. - Contribution Revenue account. - Additional Paid-in Capital account.
Contribution Revenue account.
Which of the following is not an example of a contract-related intangible asset? Broadcast rights. Franchise. Construction permits. Copyright.
Copyright.
Which of the following represents a federally granted right? Copyrights. Goodwill. Franchise. Internet domain names.
Copyrights.
When the cost-of-goods-sold method is used adjust cost to "net realizable value" in the lower-of-cost-and-net-realizable-value (LCNRV) approach, what account is debited? - Inventory. - Cost of Goods Sold. - Loss Due to Market Decline of Inventory to NRV. - Allowance to Reduce Inventory to Market Value.
Cost of Goods Sold.
Windsor Inc. purchased land at a price of $63,720. Closing costs were $3,186. An old barn was removed at a cost of $6,608.What amount should be recorded as the cost of the land? Cost of land to be recorded$
Cost of land to be recorded $73514
Which of the following costs should be excluded from research and development expense? - Modification of the design of a product. - Acquisition of R & D equipment for use on a current project only. - Cost of marketing research for a new product. - Engineering activity required to advance the design of a product to the manufacturing stage.
Cost of marketing research for a new product.
Which of the following is considered a research activity? - Construction of a prototype. - Operation of a pilot plant. - Critical investigation aimed at discovery of new knowledge. - All of these answer choices are correct.
Critical investigation aimed at discovery of new knowledge.
Which of the following is an intangible asset? - Prepaid pension costs. - Restricted cash. - Deferred income taxes. - Customer lists.
Customer lists.
Production backlogs fall under which category of intangible assets? - Technology-related. - Customer-related. - Marketing-related. - Artistic-related.
Customer-related.
Blossom Company took a physical inventory on December 31 and determined that goods costing $663,000 were on hand. Not included in the physical count were $11,000 of goods purchased from Sunland Corporation, f.o.b. shipping point, and $34,000 of goods sold to Ro-Ro Company for $45,000, f.o.b. destination. Both the Sunland purchase and the Ro-Ro sale were in transit at year-end. What amount should Blossom report as its December 31 inventory?
December 31 Inventory$ 708000
Which of the following is a nominal account? - Interest Payable. - Dividends. - Cash. - Retained earnings.
Dividends.
Which of the following statements about the fair value principle is true? - Fair value is a market-based measure. - Fair value is generally less relevant than historical cost. - Measurements based on fair value increase the objectivity in financial reporting. - GAAP requires the use of fair value for financial assets and financial liabilities.
Fair value is a market-based measure.
Which of the following is not one of the major categories of intangibles? Contract-related. Financing-related. Artistic-related. Marketing-related.
Financing-related.
Which table would you use to determine how much you will have five years from now if you deposit $10,000 today at 8% compounded annually? Future value of 1 or present value of 1 Future value of an annuity due of 1 Future value of an ordinary annuity of 1 Present value of an ordinary annuity of 1
Future value of 1 or present value of 1
Which of the following occur from peripheral or incidental transactions? - Sales revenue. - Cost of goods sold. - Gain on the sale of equipment. - Operating expenses.
Gain on the sale of equipment.
Which of the following items should be included in a company's inventory at the balance sheet date? - Goods in transit, which were purchased f.o.b. shipping point. - Goods received from another company for sale on consignment. - Goods sold to a customer that are being held for the customer to call for at his or her convenience. - Goods sold to a customer, that were shipped f.o.b. shipping point
Goods in transit, which were purchased f.o.b. shipping point.
All of the following are true regarding IFRS except: - IFRS includes standards referred to as International Auditing Standards (IAS). - The adoption of IFRS by U.S. companies would make it easier to compare them with foreign companies. - IFRS is more "principles-based" than U.S. GAAP. - IFRS are developed by the IASB.
IFRS includes standards referred to as International Auditing Standards (IAS).
Which of the following columns is generally found on a worksheet? - Chart of accounts. - Statement of cash flows. - Income statement. - All of these answer choices are correct.
Income statement.
Noncontrolling interest - Is not shown on the face of the income statement. - Is reported as a separate item below net income or loss. - Is shown in a separate section of the income statement after continuing operations but before discontinued operations net of tax. - Is shown in a separate section of the income statement after discontinued operations, net of tax.
Is reported as a separate item below net income or loss.
Which of the following is true about intraperiod tax allocation? - It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return. - It is required for discontinued operations but not for prior period adjustments. - Its purpose is to allocate income tax expense evenly over a number of accounting periods. - Its purpose is to relate the income tax expense to the items that give rise to the amount of income tax provision.
Its purpose is to relate the income tax expense to the items that give rise to the amount of income tax provision.
Select the correct statement concerning LIFO liquidations from the following. LIFO liquidations often distort net income and do not result in substantial tax payments. LIFO liquidations seldom distort net income and do not result in substantial tax payments. LIFO liquidations seldom distort nets income and may result in substantial tax payments. LIFO liquidations often distort net income and may result in substantial tax payments.
LIFO liquidations often distort net income and may result in substantial tax payments.
In a period of rising prices, the inventory method that produces the lowest ending inventory is the: - average cost method. - FIFO perpetual method. - LIFO periodic method. - LIFO perpetual method.
LIFO periodic method.
Which of the following is included in the calculation of the cost-to-retail ratio under the conventional retail inventory method? Markdowns only. Markdowns and markdown cancellations. Markups only. Markups and markup cancellations.
Markups and markup cancellations.
Which of the following statements related to noncontrolling interest is incorrect? - Noncontrolling interest is sometimes called minority interest. - Noncontrolling interest is the portion of equity interest in a subsidiary not attributable to the parent company. - Noncontrolling interest in net income is reported as an expense on the income statement. - Consolidated net income is allocated to the parent and to the noncontrolling interest in proportion to their appropriate percentages of ownership.
Noncontrolling interest in net income is reported as an expense on the income statement.
Which of the following is included in an owners' equity section reported in the balance sheet? - Working capital. - Dividends. - Accumulated capital. - Noncontrolling interest.
Noncontrolling interest.
On March 1, 2017, Beijing Pasta Company assigns $1,400,000 of its accounts receivable to Bank of China as collateral for a $1,000,000 note. Bank of China assesses a finance charge of 1 percent of the accounts receivable and interest on the note of 12 percent. Which of the following is correct regarding this transaction? - Bank of China has purchased Beijing Pasta's receivables. - On March 1, 2017, Bank of China will credit Interest Revenue for $14,000. - On March 1, 2017, Bank of China will credit Gain on Purchase of Receivables for $34,000. - On March 1, 2017, Bank of China will credit Due from Factor for $20,000.
On March 1, 2017, Bank of China will credit Interest Revenue for $14,000.
The factor of 0.94232 is taken from the column marked 2% and the row marked three periods in a certain interest table. From what interest table is this figure taken? Future value of 1 Future value of annuity of 1 Present value of 1 Present value of annuity of 1
Present value of 1
Which of the following research and development costs may be capitalized? - Contract services. - Personnel. - Indirect costs. - Research and development equipment with alternative future uses in other research & development projects or otherwise.
Research and development equipment with alternative future uses in other research & development projects or otherwise.
If the entry to close Income Summary to Retained Earnings includes a debit to Income Summary: - The company has incurred a net loss. - Retained Earnings will be increased by the current period's net income. - Dividends paid exceed the net income earned for the period. - Expenses exceed revenues.
Retained Earnings will be increased by the current period's net income
The proper sequence of financial statement preparation is: - The Retained Earnings Statement, the Balance Sheet, the Income Statement, and then the Statement of Cash Flows. - The Income Statement, the Retained Earnings Statement, the Balance Sheet, and then the Statement of Cash Flows. - The Balance Sheet, the Retained Earnings Statement, the Income Statement, and then the Statement of Cash Flows. - The Statement of Cash Flows, the Income Statement, the Retained Earnings Statement, and then the Balance Sheet
The Income Statement, the Retained Earnings Statement, the Balance Sheet, and then the Statement of Cash Flows.
Which of the following statements regarding a deferred annuity is correct? - A deferred annuity does not begin to produce rents until three or more periods have expired. - A deferred annuity can only be an ordinary annuity. - The future value of a deferred annuity includes interest accumulated during the deferral period. - The future value of a deferred annuity is the same as the future value of an annuity not deferred.
The future value of a deferred annuity is the same as the future value of an annuity not deferred.
Which of the following is a primary characteristic of an annuity? - The periodic rent is always paid at the beginning of each time period. - The periodic rents are always equal. - Interest is compounded once each year. - All of these answer choices are correct.
The periodic rents are always equal.
Of the following conditions, which is the only one that is not required if the transfer of receivables with recourse is to be accounted for as a sale? - The transferor is obligated to make a genuine effort to identify those receivables that are uncollectible. - The transferred asset has been isolated from the transferor. - The transferee does not maintain effective control over the transferred assets through an agreement to repurchase or redeem them before their maturity. - The transferees have obtained the right to pledge or exchange the receivables.
The transferor is obligated to make a genuine effort to identify those receivables that are uncollectible.
Which of the following would not be amortized? Copyright. Patent. Trade name. Customer List.
Trade name.
Which of the following is not a way in which MACRS differs from GAAP depreciation? - Assigned salvage value of zero. - Estimated life is mandated by tax law. - Cost recovery is accelerated. - Useful life must be shorter than legal life.
Useful life must be shorter than legal life.
Delta River Company sold manufacturing equipment with a cost of $44,000 and accumulated depreciation of $32,000 for $9,000. The journal entry to record this transaction will include: a credit to the Equipment account for $12,000. a credit to a gain account for $8,000. a debit to a loss account for $3,000. a credit to Accumulated Depreciation - Equipment for $32,000.
a debit to a loss account for $3,000.
In a transfer of receivables accounted for as a secured borrowing: - a gain or loss is recorded. - receivables are reduced. - a finance charge is recorded. - a recourse liability is recognized.
a finance charge is recorded.
St. Sebastian Company and A. Jamison Company were combined in a purchase transaction. St. Sebastian was able to acquire Jamison at a bargain price. The fair market value of Jamison's net assets exceeded the price paid by St. Sebastian to acquire the company. Proper accounting treatment by St. Sebastian is to report the excess fair value over purchase price as a gain. a loss. a liability. paid-in capital.
a gain.
A company with a _________________ is better able to survive bad times, to recover from unexpected setbacks, and to take advantage of profitable and unexpected investment opportunities. - low degree of financial flexibility - a low degree of liquidity - a low degree of solvency - a high degree of financial flexibility
a high degree of financial flexibility
Marketing-related intangibles would include a customer list. a trade name. a copyright. a franchise.
a trade name.
For each item below, indicate to which category of elements of financial statements it belongs. (a)Dividends (b)Interest receivable (c)Issuance of preferred stock (d)Prepaid insurance (e)Amortization (f)Cost of goods sold (g)Accounts payable (h)Cash (i)Equipment (j)Gain on sale of equipment
a. distribution to owners b. assets c. investments by owners d. assets e. expenses f. expenses g. liabilities h. assets i. assets j. gains
ndicate which of the following costs should be expensed when incurred. (a)$15,000 paid to replace single pane windows with hurricane-proof windows. (b)$370,000 paid for addition to building. (c)$1,400 paid to repaint the interior of a building. (d)$4,000 paid for a major overhaul on a truck engine, which extends the useful life. (e)$8,500 paid to rearrange and reinstall the assembly line.
a. no b. no c. yes d. no e. no
Adjustments are often prepared - after the balance sheet date, but dated as of the balance sheet date. - after the balance sheet date, and dated after the balance sheet date. - before the balance sheet date, but dated as of the balance sheet date. - before the balance sheet date, and dated after the balance sheet date.
after the balance sheet date, but dated as of the balance sheet date.
Notes receivable can be classified as - current. - trade. - nontrade. - all of these answer choices are correct.
all of these answer choices are correct.
The Financial Accounting Standards Board Accounting Standards Codification - does not create new GAAP. - eliminates nonessential information. - simplifies user access to all authoritative U.S. generally accepted accounting principles. - all of these answer choices are correct.
all of these answer choices are correct.
The excess cost of the purchase over the fair market value of a company's identifiable net assets is sometimes referred to as a master valuation account. goodwill. a gap filler. all of these answer choices are correct.
all of these answer choices are correct.
The presentation of intangible assets in the financial statements - includes reporting Research & Development costs as an expense in the income statement. - involves crediting amortization directly to the intangible asset account. - includes the disclosure of the amortization expense for the next 5 years. - all of these answer choices are correct.
all of these answer choices are correct.
The adjusting entry to record an accrued expense includes a debit to: - a liability account and a credit to an expense account. - a liability account and a credit to a revenue account. - an expense account and a credit to a revenue account. - an expense account and a credit to a liability account.
an expense account and a credit to a liability account.
If a company employs the net method of recording accounts receivable from customers, then sales discounts forfeited (not taken) should be reported as - an addition to sales in the income statement. - an item of "other revenues and gains" in the income statement. - a deduction from accounts receivable in determining the net realizable value of accounts receivable. - sales discounts forfeited in the cost of goods sold section of the income statement.
an item of "other revenues and gains" in the income statement.
The most extensively used method of accounting for overhead costs related to self-constructed assets implies: allocating overhead on the basis of lost production. assigning a portion of all overhead to the asset. assigning no fixed overhead to the asset. assigning a pro rata portion of fixed overhead to the asset.
assigning a pro rata portion of fixed overhead to the asset.
Expenditures that extend the useful life of a plant asset without improving its quantity or quality are accounted for: as additions. as improvements. by debiting the asset account. by debiting Accumulated Depreciation.
by debiting Accumulated Depreciation.
The gain recognized in an exchange that lacks commercial substance and in which cash is received is computed by multiplying the total gain by the formula of: - cash paid divided by the total of cash paid plus fair value of the asset received. - cash paid divided by the total of cash paid plus fair value of the asset given up. - cash received divided by the total of cash received plus fair value of the asset received. - cash received divided by the total of cash received plus fair value of the asset given up.
cash received divided by the total of cash received plus fair value of the asset received.
The correct order to present current assets is - cash, accounts receivable, prepaid items, inventories. - cash, accounts receivable, inventories, prepaid items. - cash, inventories, accounts receivable, prepaid items. - cash, inventories, prepaid items, accounts receivable.
cash, accounts receivable, inventories, prepaid items.
An adjusting entry would never include a: - debit to an expense account and a credit to an asset account. - debit to an expense account and a credit to a liability account. - debit to a liability account and a credit to a revenue account. - debit to an asset account and a credit to a liability account.
debit to an asset account and a credit to a liability account.
All of the following are major disadvantages of using LIFO, except: - lower profits reported in inflationary times. - doesn't approximate the physical flow of inventory. - future earnings will not be affected substantially by future price declines. - inventory is understated.
future earnings will not be affected substantially by future price declines.
Erie Corporation owns machinery with a book value of $2,200,000. It is estimated that the machinery will generate future cash flows of $1,995,000. The machinery has a fair value of $1,915,000. The journal entry to record the impairment loss will - record an extraordinary loss of $80,000. - increase the asset's Accumulated Depreciation account by $285,000. - reduce income from continuing operations by $205,000. - include a $285,000 credit to the asset account.
increase the asset's Accumulated Depreciation account by $285,000.
The use of a Purchase Discounts Lost account implies that the recorded cost of a purchased inventory item is its - invoice price. - invoice price plus the purchase discount lost. - invoice price less the purchase discount taken. - invoice price less the purchase discount allowable whether taken or not.
invoice price less the purchase discount allowable whether taken or not.
A purchased limited-life intangible asset ______ amortized and is impairment tested using _______________. is; the recoverability test and then the fair value test is not; the fair value test only is not; the recoverability test and then the fair value test is; the fair value test only
is; the recoverability test and then the fair value test
A plant site donated by a township to a manufacturer that plans to open a new factory should be recorded on the manufacturer's books at the nominal cost of taking title to it. its fair value. one dollar (since the site cost nothing but should be included in the balance sheet). the value assigned to it by the company's directors.
its fair value.
The future value of an ordinary annuity will always be: - equal to the future value of an annuity due. - greater than the future value of an annuity due. - greater than or equal to the future value of an annuity due. - less than the future value of an annuity due.
less than the future value of an annuity due.
Unearned revenues are: - revenues. - liabilities. - accruals. - all of these answer choices are correct.
liabilites
When a dividend is declared: - assets decrease. - liabilities increase. - stockholders' equity increases. - all of these answer choices are correct.
liabilities increase.
The percentage markup on cost can be computed by dividing gross profit on selling price by 100%: - plus gross profit on selling price. - minus gross profit on selling price. - plus markup on cost. - minus markup on cost.
minus gross profit on selling price.
The worksheet: - replaces the financial statements. - is prepared at the beginning of the period to ready the permanent accounts for the activity that will occur during the period. - must be prepared on columnar paper. - none of these answer choices are correct.
none of these answer choices are correct.
Property, plant, and equipment includes - deposits on machinery not yet received. - idle equipment awaiting sale. - land held for possible use as a future plant site. - none of these answer choices would be classified as Property, plant, and equipment.
none of these answer choices would be classified as Property, plant, and equipment.
Ignoring income tax effects, accelerated depreciation methods can - generate funds for the earlier replacement of fixed assets. - decrease funds provided by operations. - offset the effect of increasing repair and maintenance costs as the asset ages. - decrease the fixed asset turnover ratio.
offset the effect of increasing repair and maintenance costs as the asset ages.
When a company uses LIFO for external reporting purposes and FIFO for internal reporting purposes, an Allowance to Reduce Inventory to LIFO account is used. This account should be reported: on the income statement in the Other Revenues and Gains section. on the income statement in the Cost of Goods Sold section. on the income statement in the Other Expenses and Losses section. on the balance sheet in the Current Assets section.
on the balance sheet in the Current Assets section.
Receipt of interest from a Note Receivable would be reported as a cash inflow in which of the following sections: operating activities. financing activities. investing activities. stock activities.
operating activities.
The table that would show the smallest value for 7 periods at 5% is the: - future value of 1 table. - present value of 1 table. - present value of an ordinary annuity table. - present value of an annuity due table.
present value of 1 table.
The amounts that must be deposited now at 6% interest to permit withdrawals of $10,000 at the end of each period for a specified number of periods are contained in the: - present value of 1 table. - future value of an ordinary annuity of 1 table. - present value of an ordinary annuity of 1 table. - present value of an annuity due of 1 table.
present value of an ordinary annuity of 1 table.
The buyer would report the inventory in its balance sheet for items: - received on consignment. - shipped f.o.b. destination and in transit. - purchased with a buyback agreement. - purchased f.o.b. shipping point and in transit.
purchased f.o.b. shipping point and in transit.
Cayo Casta Cabins Corporation recently purchased Ship Island Resort and Casino and the land on which it is located with the plan to tear down the resort and build a new luxury hotel on the site. Cayo Casta Cabin Corporation salvaged fixtures and wood flooring from Ship Island prior to demolishing the building. The proceeds from the sale of the salvaged materials should be - recognized as revenue in the period of the sale. - recognized as an extraordinary gain in the year the hotel is torn down. - recorded as a reduction of the cost of the land. - recorded as a reduction of the cost of the new hotel.
recorded as a reduction of the cost of the land
The statement of stockholders' equity - need not be presented if a company is reporting comprehensive income using the two statement approach. - is dated using "As of December 31, 20x7". - reports the change in each stockholders' equity account and in total stockholders' equity during the year. - all of these answer choices are correct.
reports the change in each stockholders' equity account and in total stockholders' equity during the year.
The major difference between the service life of an asset and its physical life is that - service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last. - physical life is the life of an asset without consideration of salvage value and service life requires the use of salvage value. - physical life is always longer than service life. - service life refers to the length of time an asset is of use to its original owner, while physical life refers to how long the asset will be used by all owners.
service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last.
A general description of the depreciation methods applicable to major classes of depreciable assets is not a current practice in financial reporting. is not essential to a fair presentation of financial position. is needed in financial reporting when company policy differs from income tax policy. should be included in corporate financial statements or notes thereto.
should be included in corporate financial statements or notes thereto.
When a corporation purchases a computer for cash, - liabilities increase. - stockholders' equity decreases. - assets increase. - the account Cash will be credited.
the account Cash will be credited.
The period of time during which interest must be capitalized ends when - the asset is substantially complete and ready for its intended use. - no further interest cost is being incurred. - the asset is abandoned, sold, or fully depreciated. - the activities that are necessary to get the asset ready for its intended use have begun.
the asset is substantially complete and ready for its intended use.
If the balances in both accounts receivable and accounts payable decrease during the year - the decrease in both the accounts receivable and accounts payable balances will result in a decrease in cash for the period. - the decrease in both the accounts receivable and accounts payable balances will result in an increase in cash for the period. - the decrease in the accounts receivable balance would result in an increase in cash for the period. - the decrease in the accounts payable balance would result in an increase in cash for the period.
the decrease in the accounts receivable balance would result in an increase in cash for the period.
The double-entry accounting system means - each transaction is recorded with two journal entries. - each item is recorded in a journal entry, then in a general ledger account. - the dual effect of each transaction is recorded with a debit and a credit. - each journal entry must have one debit and one credit, or two debits and two credits.
the dual effect of each transaction is recorded with a debit and a credit.
The controversy surrounding the policy to expense all research and development costs associated with internally created intangible assets results in - overstating assets and overstating expenses. - overstating assets and understating expenses. - understating assets and overstating expenses. - understating assets and understating expenses.
understating assets and overstating expenses.
Included in Pharoah's December 31 trial balance is unearned revenue of $17,600. Management reviewed the company's progress on the underlying contracts and determined that $8,800 of revenue should be recognized. Prepare Pharoah's December 31 adjusting entry.
unearned revenue 8800 service revenue 8800
Jackson, Inc. has the following information is available: Cost of goods sold$148,500Dividend revenue3,750Income tax expense3,000Operating expenses79,500Sales255,000 In Jackson's's multiple-step income statement, gross profit - will not be reported. - will be reported at $24,000. - will be reported at $27,000. - will be reported at $106,500.
will be reported at $106,500.
Presented below are three different transactions related to materiality. Do you classify these transactions as material? (a)Blair Co. has reported a positive trend in earnings over the last 3 years. In the current year, it reduces its bad debt allowance to ensure another positive earnings year. The impact of this adjustment is equal to 3% of net income. (b)Hindi Co. has an unusual gain of $3.1 million on the sale of plant assets and a $3.3 million loss on the sale of investments. It decides to net the gain and loss because the net effect is considered immaterial. Hindi Co.'s income for the current year was $10 million. (c)Damon Co. expenses all capital equipment under $2,500 on the basis that it is immaterial. The company has followed this practice for a number of years.
yes yes no