Intermediate Final Exam

Under both the Sum-of-year's digits and Declining balance methods of depreciation the book value of an asset should not be reduced to an amount below its respective salvage value. True False

True

Changes in salvage Value and useful life are considered to be changes in estimate, and therefore are treated prospectively T/F

True

The cost of land should include purchase price, closing cost, title search costs and the cost to raze old buildings. T/F

True

True or False. Under IFRS you are permitted to post a gain contingency if the gain is virtually certain.

True

True or False. Under IFRS you are required to post a loss accrual when a negative outcome is more likely than not.

True

True or False: Debt that is callable by the lender in the coming year should generally be classified as a current liability True False

True

Grover Inc. sold $18,000 in gift cards in August of 2014. $3,000 of gift cards were redeemed in each of September, October, November and December. How much gift card revenue could Grover Inc. recognize in 2014? $6,000 $12,000 $9,000 $18,000

12,000

At the beginning of 2011, Infochip acquired a facility for $12 million. $9 million of the purchase price was allocated to the building. Depreciation for 2011 and 2012 was calculated using the straight-line method, a 25-year useful life, and a $1 million residual value. In the beginning of 2013, the total estimated useful life and residual value were changed to 20 years and $500,000, respectively. What is deprecation on the building for 2013? $436,667 $393,000 $726,957 $325,000

$436,667

Zando Inc. has been experiencing declining market conditions for its analog cassette division. Management decided to test the finite-life assets of the division for possible impairment. The test revealed the following: Book value of division's assets: $26,500,000 Fair value of division's assets: $21,000,000 Estimated undiscounted cash flows from the division's assets: $28,000,000 What amount of impairment loss should Zando recognize? $4,500,000 $0 $7,000,000 $1,500,000

0

On October 1, 2015 Cowboy Inc. borrowed $200,000 cash from a bank using a 9 month $200,000 promissory note at a 10% interest rate. Principal and interest is due on June 30, 2016. What is interest expense for 2016? $6,666 $10,000 $13,333 $5,000

10,000

Torpedo Corporation has an investment portfolio which is categorized as FV-NI. On January 1, 2015 Torpedo Crop purchased 5% stake in Dynamite incorporated for 100,000. On December 31st Dynamite paid out total dividends of 500,000 and declared total net income for the year to be 1,500,000. The fair value of torpedo invest in Dynamite was 110,000 as of December 31 2015. What should be Torpedo's invest balance in Dynamite as of December 31, 2015

110,000

Beechcraft Corp. issued $10 million of commercial paper on November 1, 2015 on a six-month note. Interest was discounted at issuance at a 12% discount rate. Beechcraft's fiscal year end is December 31. Calculate the annual effective interest rate for the commercial paper. 6% 12% 6.38% 12.77%

12.77%

What accounting principal will effectively replace the current revenue realization principle when it becomes effective for periods December 15, 2017? Core revenue recognition principle Supplemental revenue recognition principle Matching principle Cost principle

Core Revenue Recognition principle

Eco Corp. issued $12 million of commercial paper on March 1 on a nine-month note. Interest was discounted at issuance at a 9% discount rate. Select the issuance journal entry below. Dr. Note Payable $10,920,000 Dr. Discount $1,080,000 Cr. Cash $12,000,000 Dr. Cash $11,190,000 Dr. Discount $810,000 Cr. Note Payable $12,000,000 Dr. Cash $10,920,000 Dr. Discount $1,080,000 Cr. Note Payable $12,000,000 Dr. Cash $12,000,000 Cr. Note Payable $12,000,000

Dr. Cash $11,190,000 Dr. Discount $810,000 Cr. Note Payable $12,000,000

15) A seller estimates variable consideration as either the "expected value" or the "most likely amount" T/F

False

rue or False. Short-term obligations can be reflected as long-term on the balance sheet if the firm intends to refinance on a long-term basis and demonstrates the willingness to refinance. True False

False

Identify the answer that puts Goodwill Impairment assessment process in the correct order based on the slides discussed in class (Note: FV= Fair value)

First: Evaluate relevant events and circumstances Second: Compare Book Value (including Goodwill) for reporting unit to Fair Value of reporting unit Third: compare Book Value of goodwill to implied value of Goodwill

Which of the following states the five revenue recognition steps in the correct order? Identify Contract, Determine Price, Identify Performance Obligations, Allocate Price, Recognize Revenue Identify Contract, Identify Performance Obligations, Determine Price, Allocate Price, Recognize Revenue Determine Price, Identify Contract, Identify Performance Obligations, Allocate Price, Recognize Revenue Determine Price, Identify Performance Obligations, Allocate Price, Identify variable considerations, Recognize Revenue

Identify Contract, Identify Performance Obligations, Determine Price, Allocate Price, Recognize Revenue

Darowish Corp. is the defendant in a $7 million lawsuit filed in 2015 by a previous employee. Darowish's fiscal year end is December 31, 2015. As of December 31, 2015, Darowish's attorneys state that a negative outcome from the litigation is reasonably possible and that an estimate of the payout is $2.5 million. Which best describes how this should this be reflected in Darowish's 2015 audited financial report? Post a loss accrual of $2.5 million Post a loss accrual of $2.5 million and include a disclosure explaining the litigation. Include a disclosure explaining the litigation and $2.5 loss estimate. Do not post or disclose anything relating to the litigation.

Include a disclosure explaining the litigation and $2.5 loss estimate.

At February 1, 2016, the EPA was in the process of investigating a green ooze leak which had originated during the summer of 2015 at a facility owned by Bungle Chemical. The EPA has not yet asserted a fine. Bungle's fiscal year end was December 31, 2015 and their financial statements will be published on March 31, 2016. Management feels that an assessment is probable. If the assessment is made management believes that the likelihood of an unfavorable settlement of $10 million is reasonably possible. Which of the following best describes the action that Bungle should take for its December 31, 2015 audited financial report? Do not post or disclose anything. No loss accrual, but a footnote disclosure is needed. Post a loss accrual of $10 million but do not disclose anything. Post a loss accrual of $10 million and include a disclosure.

No loss accrual, but a footnote disclosure is needed.

The "most likely amount" method for estimating variable considerations is best defined as___________ when you calculate the sum of each possible amount multiplied by its probability. when you select the amount that is most likely to be recognized based on two potential outcomes. when you calculate the average of the most likely amount based on probability. when you select the amount that is the least likely to be recognized based on two potential outcomes.

when you select the amount that is most likely to be recognized based on two potential outcomes.

Doorway Inc. issued $20million of commercial paper on March 1 on a 9 month note. Interest was discounted at issuance at a 9% discount rate. Prepare the Journal Entry for the issuance of the commercial paper. Dr. Cash $18,200,000 Cr. Discount on Note $1,800,000 Cr. Notes Payable $20,000,000 Dr. Cash $20,000,000 Cr. Discount on Note $1,350,000 Cr. Notes Payable $18,650,000 Dr. Cash $18,650,000 Cr. Discount on Note $1,350,000 Cr. Notes Payable $17,300,000 Dr. Cash $18,650,000 Dr. Discount on Note $1,350,000 Cr. Notes Payable $20,000,000

Dr. Cash $18,650,000 Dr. Discount on Note $1,350,000 Cr. Notes Payable $20,000,000

Barner Inc. introduced a new implant that carries a 5-year warranty against manufacturer's defects. Based on industry experience with similar product introductions, warranty costs are expected to approximate 1% of sales. Sales were $20 million and actual warranty expenditures were $40,000 for the first year of selling the product. What amount (if any) should Barner report as a warranty liability on its balance sheet at the end of the first year? $20,000 $160,000 $750,000 $130,000

160,000

On January 1, 2013 Zenith purchased equipment for 30,000. The company expects the machine to operate for 15,000 hours. Residual value at the end of an estimated four-year service life is expected to be 2,000. Calculate and select the correct amount of accumulated depreciation for as of December 31, 2014 using the sum of years' digits method

19,600

Bayou Inc. sold $20,000 in gift cards in January of 2014. $10,000 of the January gift cards were redeemed by December 31, 2014. All gift cards older than 11 months are considered broken by Bayou Inc, and are accounted for accordingly. How much in gift card revenue should Bayou Inc. recognize in 2014 relating to gift cards sold in January 2014? $18,000 $20,000 $9,000 $10,000

20,000

On May 1,2015 CSX Freight Company purchased a new locomotive with a 20-year life costing 200,000. On June 1, 2015 CSX conducted maintenance on the locomotive consisting of the following: 50$ in grease, 300$ in oil and oil replacement, and 10,000 in the replacement brake pads. On July 1, 2015 CSX decided to install a diesel fuel injection stabilizer system for the new locomotive costing 10,000. The diesel fuel injection stabilizer system will extend the life for the locomotive by an addition year. Considering the above scenario how much total cost should be capitalized and added to fixed assets in 2015 relating to the new locomotive?

210,000

On January 1, 2013 Zenith purchased equipment for 30,000. The company expects the machine to operate for 15,000 hours. Residual value at the end of an estimated four-year service life is expected to be 2,000. Calculate and select the correct amount of accumulated depreciation for as of December 31, 2014 using the double declining method

22,500

Jamason Corp. sells a battery operated drill package for $90. The package includes the following: Drill, which is always sold with one battery and charging station. Management views the drill, battery and charging station as separate inputs necessary to fulfill the promise of a working battery powered drill. The drill, battery and charging station are always sold together as a set. When the set is sold outside of the package the price is $80. 1-year manufacturer's limited warranty 8-piece drill bit set which can be purchased at any construction supply store. The price of the drill bit set alone is $10. Coupon to buy a Jameson Corp. jackhammer at a $50 discount. These coupons are only offered through this package. It is assumed that 50% of the coupons will be used. How many Purchase Obligations are included with the drill package? Identify them. 1 Purchase Obligation: the package 2 Purchase Obligations: The drill set (drill, battery & charger) and coupon 3 Purchase Obligations: The drill set (drill, battery & charger), coupon and warranty 3 Purchase Obligations: The drill set (drill, battery & charger), 8-piece drill bit set and coupon

3 Purchase Obligations: The drill set (drill, battery & charger), 8-piece drill bit set and coupon

On July 1, 2013 Grubber Inc. borrowed $100,000 cash from a bank using a 9 month $100,000 promissory note at a 6% interest rate. Principal and interest is due on March 31, 2014. What is interest expense for 2013? 3,000 $0.00 $6,000 $4,000

3,000

(Underlined portion is same as first problem above.) On January 1, 2013 Bouyer Excavating purchased equipment for $30,000. The company expects the machine to operate for 10,000 hours. Residual value at the end of an estimated four-year service life is expected to be $2,000. Calculate and select the correct amount of depreciation expense for 2014 using the Double Declining Balance method. $15,000 $7,500 $9,000 $7,000

7,500

On January 1, 2013 Bouyer Excavating purchased equipment for $30,000. The company expects the machine to operate for 10,000 hours. Residual value at the end of an estimated four-year service life is expected to be $2,000. Calculate and select the correct amount of depreciation expense for 2014 using the straight-line method. $14,000 $0 $7,000 $7,500

7000

(Underlined portion is same as first problem above.) On January 1, 2013 Bouyer Excavating purchased equipment for $30,000. The company expects the machine to operate for 10,000 hours. Residual value at the end of an estimated four-year service life is expected to be $2,000. Calculate and select the correct amount of depreciation expense for 2014 using the Sum-of-the-years' digits method. $7,500 $9,000 $11,200 $8,400

8,400

Underlined portion is same as first problem above.) On January 1, 2013 Bouyer Excavating purchased equipment for $30,000. The company expects the machine to operate for 10,000 hours. Residual value at the end of an estimated four-year service life is expected to be $2,000. Calculate and select the correct amount of depreciation expense for 2014 using the Units-of-Production method. The machine operated for 2,200 and 3,000 hours in 2013 and 2014. $7,500 $6,160 $9,000 $8,400

8,400

On March 31, 2013 Vancor Enterprise purchased equipment for $30,000. The company expects the machine to operate for 10,000 hours. Residual value at the end of an estimated four-year service life is expected to be $2,000. Calculate and select the correct amount of depreciation expense for 2014 using the Double Declining Balance method when considering the partial year. $7,000 $11,250 $9,100 $9,375

9,375

Harold Corp. exchanged one forklift for a tractor with a longer useful life. The book value of the forklift was $20,000. The fair value of the forklift was appraised at $24,000. Harold also paid $8,000 in cash for the tractor. At what value should the tractor be recorded on Harold Corp's books? A) 32,000 B) 28,000 C) 20,000 D) 4,000 E) 36,000

A

In 2013 McArthur - Douglas was contracted to build an airplane for $12,000. Data relating to the contract is as follows: 2013: 2014: Cost incurred during the year 2000 6000 Est. Costs to complete as of year-end 6000 - Billings during year 6000 6000 Cash Collections during the year 5000 7000 Revenue for this project qualifies to be recognized over time. Determine the gross profit adj. McArthur-Douglas should recognize in both 2013 and 2014 as part of the revenue journal entry. A) 1000 3000 B) 2000 2000 C) 3000 1000 D) - 4000 E) 2000 6000

A

Matching ACM holds Multiple equity and debt securities. For each of the ACM's scenarios below match it with the investment category listed on the right. You may use the investment category more than once or not at all Equal to 2 MC problems ACM bought a bond form Dole Inc. with a maturity of November 3, 2025. ACM has both the intent and ability to hold it until November 3, 2025 A. Held to Maturity B. Trading Security C. Available for Sale D. Equity Method E. Consolidation F. Fair Value-Ni

A

Moxham Lumber purchased a milling machine for $35,000. In addition to the purchase price, Maxham made the following expenditures: milling machine research to inform the purchase $1,000; freight $1,500; installation $3,000; testing $2,000; personal property tax on the machine for the first year subsequent to purchase $500. What is the capitalized cost of the machine? A) 42,000 B) 35,000 C) 41,500 D) 39,500 E) 38,000

A

Which one of the following best defines goodwill: A) A unique value relating to the difference between the acquisition price of an entity and the fair value of the entity's identifiable assets and liabilities. B) Capitalizable intangible asset stemming from a business combination which demonstrates commercial substance. C) Exclusive right of protection given to a creator or a published work. D) Value assigned due to a contractual arrangement under which exclusive rights are required. E) Value capitalized due to the fair value assessment of identifiable assets generated from a business acquisition.

A

12) Harley Davidson (HD) sells a V-twin motorcycle package for $12,100. The package includes the following: - V-twin motorcycle which sold for $12,000 when it is sold individually -limited 3 year, 36,000mile manufactures warranty - Extended 5 year, 100,000mile warranty. When sold alone the extended warranty costs $1,000 - One black leather HD jacket. Sells for $600 - One coupon for 25% off one pair of black leather HD chaps. This is the only way to obtain this is coupon. The chaps' retail for $300. There is an 80% probability that each coupon will be used. How should the V-Twin motorcycle package price of $12,100 be allocated across the performance obligations?

A) Motorcycle=$10,630; EXTENDED Warranty= $886; Jacket=$531; Chaps=$53

14) Zebra Inc. has recently entered into the 3-D printing business. They currently sell 3-D printer starter kit, which includes the following: -A 3-D printer -A pack of plastic resin -A "how to get rich quick with 3-D printing" guidebook. Zebra's management plans to sell each of these items individually and sees each of these items as being distinct. Zebra knows the price for which its competitors sell the same 3-D printer. Zebra knows the cost of the 3-D resin and plans to mark it up 40% when sold individually. Zebra isn't sure of the cost of the guidebook In the table below, identify which approach would need to be taken to determine the stand-alone selling price of each performance obligation included in the 3-D printing starter kit necessary to determine the allocation of the transaction price

Adjusted Market Assessment: 3-D printer; Expected Cost plus Margin: Resin ; Residual Approach: Guidebook

Cooper Diagnostics knows the stand alone price for each of its goods and services. Therefore, they should use which method for allocating the transaction price across performance obligations? Adjusted market assessment approach Expected cost plus margin approach Residual approach Lower of cost or market approach

Adjusted market assessment approach

Which of the following best describes a line of credit? Unsecured notes sold in minimum denomination of $25,000 with maturities ranging from 30 to 270 days. Agreement that permits a company to borrow up to a prearranged limit without needing to follow formal loan procedures and paperwork. Short-term note which expresses exactly how much is being borrowed, with prearranged maturity dates. Long-term note which expresses exactly how much is being borrowed, with prearranged maturity dates.

Agreement that permits a company to borrow up to a prearranged limit without needing to follow formal loan procedures and paperwork.

Which of the following best defines a loss contingency? An existing uncertain situation involving potential loss depending on whether some future event occurs. An existing uncertain situation involving potential loss not dependent on future events. An existing situation in which claims are unasserted and probability of assertion is remote. An existing certain situation involving potential gain.

An existing uncertain situation involving potential loss depending on whether some future event occurs.

Matching ACM holds Multiple equity and debt securities. For each of the ACM's scenarios below match it with the investment category listed on the right. You may use the investment category more than once or not at all Equal to 2 MC problems ACM has an investment portfolio in which it buy and sells debt and equity securities daily Most positions are not held for longer than a week A. Held to Maturity B. Trading Security C. Available for Sale D. Equity Method E. Consolidation F. Fair Value-Ni

B

On January 1, 2016 Tucker Corp Purchased a dump truck from Dirt Inc. by paying $10,000 down and signing a non-interest bearing note of $100,000 to be paid in full on December 31, 2020. Tucker Corp's effective borrowing rate is 8% (present value coefficient for 5 years at 8% = .68058). At what value should the dump truck be recorded on Tucker Corp's general ledger at January 1, 2016? A) $68,058 B) $78,058 C) $10,000 D) $100,000 E) $110,000

B

Stable Inc. purchased land and a warehouse for $600,000. In addition to the purchase price Stable made the following expenditures related to the acquisition: Brokers commission $30,000, title insurance $3,000, closing costs $6,000. An independent appraiser estimated the fair value of the land and warehouse to be $420,000 and $280,000 respectively. How much should Stable capitalize as the cost of the land and the building? A) Land 379,800 - Building 253,200 B) Land 383,400 - Building 255,600 C) Land 381,600 - Building 254,400 D) Land 255,600 - Building 383,400 E) Land 253,200 - Building 379,800

B

At the Beginning of 2011, Apperfield Co. acquired a facility for 12million. 9million of the purchase price was allocated to the building. Depreciation for 2011 and 2012 was calculated using the straight-line method, a 25-year useful life, and a 1 million residual value. In the beginning of 2013 the total estimated useful life and residual value were changed to 20 years and 500,000 respectively. What is deprecation on the building for 2013

B) 436,667

Matching ACM holds Multiple equity and debt securities. For each of the ACM's scenarios below match it with the investment category listed on the right. You may use the investment category more than once or not at all Equal to 2 MC problems ACM has a long term investment portfolio in which it holds debt securities for years A. Held to Maturity B. Trading Security C. Available for Sale D. Equity Method E. Consolidation F. Fair Value-Ni

C

States corp. exchanged one grain of elevator for another grain elevator. This exchange lacked commercial substance. The book value of the grain elevator given up by the States Corp was $30,000. The fair value of the grain elevator given up was appraised at $35,000. States also paid $2,000 in cash for the acquired elevator. At what value should the acquired grain elevator be recorded on states corps books? A) $35,000 B) $37,000 C) $32,000 D) $30,000 E) $0

C

5.Banker Inc. has been experiencing declining market conditions for its tube amplifier division. Management decided to test the assets of the division for possible impairment. The test revealed the following: · Book Value of the division's assets: 26,500,000 · Fair Value of divisions assets: 21,000,000 · Estimated undiscounted cash flows from the division's assets: 26,000,000

C) 5,500,000

13) Johnson Supply sells medical equipment. On December 29, Johnson Supply received an order from a hospital for $100,000 in equipment. The hospital requested that Johnson Supply bill them, but requested the Johnson Supply keep the equipment at a Johnson Supply location. The hospital shared that the rationale for this request was that they were remodeling a wing of the hospital and did not currently have enough space to take delivery of the equipment. What type of arrangement is described in this scenario?

C) Bill and hold

Fab Beauty supplies sells their beauty supplies through local retailers in communities all across the USA. They have arrangements with retailers in which Fab "gives" the retailers the products to put on their shelves to sell. The products remain as part of Fab's inventory. The retailers like this arrangement as they don't need to buy the products and the retailers earn a commission when the products are eventually sold. What type of arrangement is described here and at what point can Fab recognize revenue? Bill and Hold arrangement: Fab can recognize revenue when the retailers take possession of the product. Consignment arrangement: Fab can recognize revenue when the retailers take possession of the product. Consignment arrangement: Fab can recognize revenue when the retailers sells the product. Franchise arrangement: Fab can recognize revenue when retailer recognizes commission income.

Consignment arrangement: Fab can recognize revenue when the retailers sells the product.

Boyer Outlaw Supplies sold manufacturing equipment for $16,000 cash. Boyer originally purchased the equipment for $80,000, and depreciation through the date of sale totaled $71,000. What was the gain or loss on the sale of the equipment? A) Loss of $9,000 B) Gain of $9,000 C) Loss of $7,000 D) Gain of $7,000 E) No gain or loss on the sale

D

Matching ACM holds Multiple equity and debt securities. For each of the ACM's scenarios below match it with the investment category listed on the right. You may use the investment category more than once or not at all Equal to 2 MC problems ACM holds 20% of Parker Corporation and has a board seat A. Held to Maturity B. Trading Security C. Available for Sale D. Equity Method E. Consolidation F. Fair Value-Ni

D

Context Inc. is the plaintiff in a $10 million lawsuit filed against a supplier. Context's fiscal year end is December 31. As of December 31, the litigation is in the final appeal and legal counsel advises that it is certain that Context will win the lawsuit and be awarded $6 million. Which best describes how this should this be reflected in Context's audited financial report? Do not post anything. A disclosure relating to lawsuit and potential gain may be included. Post a gain for the $6 million and have it reflected in revenue and include a disclosure. Post a gain for the $10 million and have it reflected in revenue. Post a gain for the $4 million and have it reflected in revenue.

Do not post anything. A disclosure relating to lawsuit and potential gain may be included.

Darowish Corp. is the defendant in a $7 million lawsuit filed in 2015 by a previous employee. Darowish's fiscal year end is December 31, 2015. As of December 31, 2015, Darowish's attorneys stated that a negative outcome from the litigation is reasonably possible and that an estimate of the payout is $2.5 million. However, on March 1, 2016, based on developments in the case, Darowish's attorney's stated that they now believe that there is a remote chance that Darowish will have a negative outcome and need to pay. Darowish will issue their financial statements on March 31, 2016. Which best describes how the lawsuit should be reflected in Darowish's 2015 audited financial report? Post a loss accrual of $2.5 million and include a disclosure explaining the litigation. Do not post or disclose anything relating to the litigation. Include a disclosure explaining the litigation and $2.5 loss estimate. Post a loss accrual of $2.5 million

Do not post or disclose anything relating to the litigation

Torpedo Corporation has an investment portfolio which is categorized as FV-NI. On January 1, 2015 Torpedo Crop purchased 5% stake in Dynamite incorporated for 100,000. On December 31st Dynamite paid out total dividends of 500,000 and declared total net income for the year to be 1,500,000. The fair value of torpedo invest in Dynamite was 110,000 as of December 31 2015. What should be Torpedo's invest balance in Dynamite as of December 31, 2015 Consider the information in problem 10. How should Torpedo corporation account for the dividends paid by Dynamite as of December 31, 2015

Dr. Cash 25,000 Cr. Investment Income 25,000

On October 1 Byer Inc. borrowed $80 million and issued a nine-month, 12% promissory note. Interest was payable at maturity. Prepare the appropriate adjusting journal entry relating to interest as of Byer's December 31 year end. Correct! Dr. Interest Expense $2,400,000 Cr. Interest Payable $2,400,000 Dr. Interest Payable $7,200,000 Cr. Interest Expense $7,200,000 Dr. Interest Expense $7,200,000 Cr. Interest Payable $7,200,000 Dr. Interest Payable $2,400,000 Cr. Interest Expense $2,400,000

Dr. Interest Expense $2,400,000 Cr. Interest Payable $2,400,000

Beechcraft Corp. issued $10 million of commercial paper on November 1, 2015 on a six-month note. Interest was discounted at issuance at a 12% discount rate. Beechcraft's fiscal year end is December 31. Select the necessary year-end adjusting entry below. Dr. Interest expense $200,000 Cr. Interest payable $200,000 Dr. Interest expense $200,000 Cr. Discount $200,000 Dr. Interest expense $100,000 Cr. Interest payable $100,000 Dr. Interest expense $100,000 Cr. Discount $100,000

Dr. Interest expense $200,000 Cr. Discount 200,000

Which one of the following costs related to the patent should be capitalized? A) Depreciation expense from equipment used in the development of the successful patent. B) Patent filing cost C) Engineer salary expense incurred in the creation of the patent D) Attorney fees relating to the successful legal defense of the patent E) Both B & D

E

11) Alter Corp. sells salon equipment. Alter is currently selling a Faboo hair-sculpting package for $200. The package claims that it can make anyone's hair look "Faboo!". Management does not see any of the items in the package as inputs necessary to fulfill a promise of the overall contract. The items included in the Faboo hair sculpting package are as followed: -One ionizing hairdryer, which, when sold independently is sold for $150. -1-year manufacturer's limited warranty on the hairdryer. -One ceramic hair straightener, which, when sold independently sells for $50. -A coupon to buy on titanium curling iron at a $50 discount. These coupons are only offered through this package. It is assumed that 80% of the coupons will used. How many purchase obligations are included with the Faboo hair sculpting package? Name them.

E) 3- The ionizing hairdryer w/ the 1-year manufacturer's limited warranty, ceramic hair straightener, and the coupon

Bond prices and Bond yields have an inverse relationship. This means when interest rates rise then bond prices fall. T/F

True

Which of the following is not a condition needing considered when determining whether an accrual for future paid employee absences is required. Equitable application of the vesting schedule Paid absence can be taken in a future year Payment is probable Obligation is for services already performed

Equitable application of the vesting schedule

True or False: A good or service is distinct if it is either, capable of being distinct, or separately identifiable from other goods or services in the contract.

False

True or False: Debt that is callable by the lender in the coming year should generally be classified as a long-term liability. True False

False

True or False: Revenue from the sale of gift cards is always accounted for in the period in which the gift cards are sold. True False

False

Unlike with Investments categorized as trading securities, upon sale the realized gain for Available for sale investments is recognized in other Compressive income T/F

False

While changes in salvage value or useful life are considered a change in estimate, changes in the depreciation method used are considered a change in accounting principle and therefore must be accounted for retrospectively. True False

False

Harley Davidson (HD) sells a V-Twin motorcycle package for $10,000. The package includes the following: V-twin motorcycle which is sold for $10,000 when it is sold individually. Limited 3 year, 36,000mile manufacturer's warranty. Extended 5 year, 100,000mile warranty. When sold alone the extended warranty is sold for $500. One black leather HD jacket. When sold alone the price of the jacket is $300. One coupon for 50% off one pair of black leather HD chaps. A coupon for a 25% discount is readily available without the purchase of the package. The chaps retail for $200. There is an 80% probability that each coupon will be used. How should the V-Twin motorcycle package price of $10,000 be allocated across the performance obligations? Motorcycle with limited warranty = $9,225, Extended warranty = $461, Jacket = $277, Coupon =$37 Motorcycle with limited warranty = $9,174, Extended warranty = $459, Jacket = $275, Coupon =$92 Motorcycle with limited warranty = $9,662, Extended warranty = $0, Jacket = $290, Coupon =$48 Motorcycle with limited warranty = $9,259, Extended warranty = $463, Jacket = $278, Coupon =$0

Motorcycle with limited warranty = $9,225, Extended warranty = $461, Jacket = $277, Coupon =$37

Go to quiz 5 and do problems 9 and 10

NOW

On November 30, 2016 Credit Corp. negotiated a revolving credit arrangement with Tower Bank that is available for five years. The amount available under the line of credit is $100,000 at LIBOR which is currently 5%. Interest is payable monthly on the 3rd of the following month and is based on the average monthly outstanding balance. Outstanding principal is due December 1, 2021. December 31 is Credit Corp's fiscal year end. What entry should be posted to reflect the negotiation of the line of credit. Dr. Cash $95,000 Dr. Discount $5,000 Cr. Note Payable - Line of Credit $100,000 No journal entry necessary Dr. Cash $95,000 Dr. Interest payable $5,000 Cr. Note Payable - Line of Credit $100,000 Dr. Cash $100,000 Cr. Note Payable - Line of credit $100,000

No JE

Torpedo Corporation has an investment portfolio which is categorized as FV-NI. On January 1, 2015 Torpedo Crop purchased 5% stake in Dynamite incorporated for 100,000. On December 31st Dynamite paid out total dividends of 500,000 and declared total net income for the year to be 1,500,000. The fair value of torpedo invest in Dynamite was 110,000 as of December 31 2015. What should be Torpedo's invest balance in Dynamite as of December 31, 2015 Consider the same information in question 10 above. How should Torpedo Corp Account for the net income reported by dynamite for the year ending December 31, 2015

No JE

At March 13, 2014, the EPA was in the process of investigating a salty brine leak which had originated during the summer of 2014 at a facility owned by Dow Chemical. The EPA has not yet asserted a penalty assessment. Dow's fiscal year end was December 31, 2013 and their financial statements will be published on April 15, 2014. Management feels that an assessment is reasonably possible. If the assessment is made management believes that the probability of an unfavorable settlement of $33 million is probable. Which of the following best describes the action that Dow should take for its December 31, 2013 audited financial report? Accrual of $33 million and a footnote disclosure is needed as the probability of an unfavorable settlement after assessment is made is remote. Accrual of $33 million and a footnote disclosure is needed as the probability of an unfavorable settlement after assessment is made is probable. No accrual, but footnote disclosure is needed as the assessment is reasonably possible. No accrual and no disclosure as the probability of an assessment is less than probable.

No accrual and no disclosure as the probability of an assessment is less than probable.

On January 1, 2016, Justin Berber slipped on ice outside of Decko Corp's New York City restaurant. Justin and his attorney's filed suit against Decko on January 15, 2016 for the amount of $4,000,000. Decko's fiscal year end is December 31 and they will issue their audited financial report March 31, 2016. Decko's attorneys believe that a negative outcome is certain and estimate losses to be $1,000,000. Which of the following best describes the action that Decko should take for its December 31, 2015 audited financial report? No loss accrual, but a footnote disclosure is needed. Post a loss accrual of $1 million and include a disclosure. Do not post or disclose anything. Post a loss accrual of $1 million but do not disclose anything.

No loss accrual, but a footnote disclosure is needed.

Which of the following best defines a Current Liability? Future benefit expected to be received in one year. Obligation payable in more than one year. Obligation with remote probability to be payable in one year. Obligation payable within one year.

Obligation payable within one year

When does US GAAP require the investigation of possible impairment? Assets must undergo a quantitative assessment for indicators of impairment at the end of each reporting period. Only when events or changes in circumstances indicate that book value of the asset may not be recoverable Only when implied fair value has been determined to be less than the implied carrying value of the asset. Semi-annually to coincide with the application of half-year convention.

Only when events or changes in circumstances indicate that book value of the asset may not be recoverable

Which term best fits the following definition? An exclusive right to manufacture a product or to use a process

Patent