Acct 224 Midterm Review
Niles Co. has the following data related to an item of inventory: Inventory, March 1 400 units @ $2.10 Purchase, March 7 1,400 units @ $2.20 Purchase, March 16 280 units @ $2.25 Inventory, March 31 520 units The value assigned to ending inventory if Niles uses LIFO is
MC Ques 100 $1104 the first inventory in will be what is remaining so 520 is split up by 400 @ 2.10 and 120 @ 2.20
Transactions for the month of June were: Purchases 6/1 3,200 @ 3.2 6/3 8,800 @ 3.10 6/7 4,800 @ 3.30 6/15 7,200 @ 3.40 6/22 2,000 @ 3.50 Sales 6/2 2,400 @5.50 6/6 6,400 @ 5.5 6/9 4,000 @ 5.50 6/10 1,600 @ 6 6/18 5,600 @ 6 6/25 800 @ 6 Assuming that perpetual inventory records are kept in dollars, the ending inventory on a FIFO basis is
MC Ques 105 $17,880
The following information is available for barkley company's patents: cost $3,440,000 carrying amount 1,920,000 expected future net cash flows 1,600,000 fair value 1,300,000 Barkley would record a loss on impairment of
MC Ques 106 $620,000
Vasguez Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of $40,000. During 2017, it wrote off $28,800 of accounts and collected $8,400 on accounts previously written off. The balance in Accounts Receivable was $800,000 at 1/1 and $960,000 at 12/31. At 12/31/17, Vasguez estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2017?
MC Ques 110 $960,000 × .05 - [$40,000 - ($28,800 - $8,400)] = $28,400.
Lopez corp. incurred $840,000 on research and development costs to develop a product for which a patent was granted on january 2, 2015. Legal fees and other costs associated with registration of the patent totaled $160,000. On march 31, 2018, lopez paid $350,000 for legal fees in a successful defense of the patent. The total amount capitalized for the patent through march 31, 2018 should be
MC Ques 117 $510,000 R&D not included
The following costs are incurred during the research and development phases of a laser bone scanner Laboratory research aimed at discovery of new knowledge $800,000 Search for application of new research findings 400,000 Salaries of research staff designing new laser bone scanner 1,200,000 Material, labor and overhead costs of prototype laser scanner 850,000 Costs of testing prototype and design modifications 450,000 Engineering costs incurred to advance the laser scanner to full production stage (technological feasibility reached) 700,000 Identify which of these are development phase items and will be immediately expensed under U.S. GAAP and IFRS. A) $1,200,000 (U.S. GAAP); $1,200,000 (IFRS) B) $2,400,000 (U.S. GAAP); $1,400,000 (IFRS) C) $2,400,000 (U.S. GAAP); $2,500,000 (IFRS) D) $3,200,000 (U.S. GAAP); $2,500,000 (IFRS)
MC Ques 14
New age computers manufactures and sells pagers and radio paging systems which include a 180 day warranty on product defects. it also sells an extended warranty which provides an additional two years of protection. on may 10, it sold a paging system for $4,500 and an extended warranty for another $1,400. the journal entry to record this transaction would include a) a credit to Warranty Revenue of $1,400 b) a credit to sales of $4,500 and a credit to Warranty Revenue of $1,400 c) a credit to Unearned Warranty Revenue of $1,400 d) a credit to Warranty Revenue of $5,900
MC Ques 41 c) a credit to Unearned Warranty Revenue of $1,400
Seadrill engineering licensed software to oil-drilling firms for 5 years. in addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $420,000. Based on standalone values, the company estimates the consulting services and support have a value of $120,000 and the software license has a value of $300,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes a) a credit to Sales Revenue of $420,000. b) a credit to Sales Revenue for $300,000 and a credit to Unearned Service Revenue of $120,000. c) a credit to Service Revenue of $120,000. d) a credit to Unearned Service Revenue of $120,000.
MC Ques 42 b) a credit to Sales Revenue for $300,000 and a credit to Unearned Service Revenue of $120,000.
Which of the following intangible assets should not be amortized? copyrights customer lists perpetual franchises all of these intangible assets should be amortized
MC Ques 42 Perpetual Franchises
When a company has an obligation or right to repurchase an asset for an amount greater than or equal to its selling price, the transaction should be treated as a
MC Ques 54 Financing Transaction
Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,300 and $900, respectively. The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a debit to Warranty Liability, $350. credit to Warranty Liability, $900. credit to Unearned Warranty Revenue, $900. debit to Warranty Expense, $900.
MC Ques 62 credit to Unearned Warranty Revenue, $900
Wilson Co. purchased land as a factory site for $1,350,000. Wilson paid $120,000 to tear down two buildings on the land. Salvage was sold for $8,100. Legal fees of $5,220 were paid for title investigation and making the purchase. Architect's fees were $46,800. Title insurance cost $3,600, and liability insurance during construction cost $3,900. Excavation cost $15,660. The contractor was paid $4,200,000. An assessment made by the city for pavement was $9,600. Interest costs during construction were $255,000. The cost of the land that should be recorded by Wilson Co. is
MC Ques 63 $1,350,000 + $120,000 - $8,100 + $5,220 + $3,600 + $9,600 = $1,480,320
Slotkin Products purchased a machine for $65,000 on July 1, 2017. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $5,000. Depreciation for 2018 to the closest dollar is
MC Ques 64 $14,219
On July 31, O'Malley company contracted to have two products built by Taylor Manufacturing for a total of $370,000. The contract specifies that payment will only occur after both products have been transferred to o'malley company. Taylor determines that the standalone prices are $200,000 for product 1 and $170,000 for product 2. On august 1, when product 1 has been transferred, Taylor's journal entry to record this event includes a debit to Accounts Receivable for $200,000. debit to Contract Assets for $170,000. debit to Contract Assets for $200,000. debit to Accounts Receivable for $170,000.
MC Ques 66 debit to Contract Assets for $200,000 Contract Assets Sales Revenue Accounts Rec Contract Assets Sales Revenue
In a period of rising prices, the inventory method which tends to give the highest reported net income is base stock. first-in, first-out. weighted-average. last-in, first-out.
MC Ques 66 first in, first out
Landis Company purchased $3,000,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2018, with interest payable on July 1 and January 1. The bonds sold for $3,124,740 at an effective interest rate of 7%. Using the effective-interest method, Landis Company decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2018 and December 31, 2018 by the amortized premiums of $10,620 and $10,980, respectively. At December 31, 2018, the fair value of the Ritter, Inc. bonds was $3,180,000. What should Landis Company report as other comprehensive income and as a separate component of stockholders' equity?
MC Ques 71 $3,180,000 - ($3,124,740 - $10,620 - $10,980) = $76,860.
Gutierrez Company is constructing a building. Construction began in 2017 and the building was completed 12/31/17. Gutierrez made payments to the construction company of $3,000,000 on 7/1, $6,600,000 on 9/1, and $6,000,000 on 12/31. Weighted-average accumulated expenditures were
MC Ques 73 $3,700,000
On September 19, 2017, Markham Co. purchased machinery for $475,000. Salvage value was estimated to be $25,000. The machinery will be depreciated over eight years using the sum-of-the-years'-digits method. If depreciation is computed on the basis of the nearest full month, Markham should record depreciation expense for 2018 on this machinery of
MC Ques 78 $96,875
On January 2, 2017, Indian River Groves began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2018. Expenditures for the construction were as follows: January 2, 2017 $ 600,000 September 1, 2017 1,800,000 December 31, 2017 1,800,000 March 31, 2018 1,800,000 September 30, 2018 1,200,000 Indian River Groves borrowed $3,300,000 on a construction loan at 12% interest on January 2, 2017. This loan was outstanding during the construction period. The company also had $12,000,000 in 9% bonds outstanding in 2017 and 2018. The interest capitalized for 2017 was:
MC Ques 83 $144,000
Instrument Corporation has the following investment which was held throughout 2018-2019: Equity Investment: Cost Face Value 12/31/18 12/31/19 $900,000 $1,200,000 $1,140,000 What amount of gain or loss would Instrument Corporation report in its income statement for the year ended December 31, 2019 related to its investment?
MC Ques 84 $1,200,000 - $1,140,000 = $60,000 loss. Time period from cost to 12/31/18 already reported, just need change from 2018 to 2019
Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2018 with a performance bonus of $50,000 if the building is completed by July 31, 2018. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2018 65% August 7, 2018 25% August 14, 2018 5% August 21, 2018 5% The transaction price for this transaction is
MC Ques 86 $995,000
Morgan Corporation purchased a depreciable asset for $600,000 on January 1, 2015. Theestimated salvage value is $60,000, and the estimated useful life is 9 years. The straight-line method is used for depreciation. In 2018, Morgan changed its estimates to a totaluseful life of 5 years with a salvage value of $90,000. What is 2018 depreciation expense?
MC Ques 87 $164,464 so about $165,000
Mini corp. acquires a patent from maxi co. in exchange for 2,500 shares of mini corp.'s $5 par value common stock and $90,000 cash. when the patent was initially issued to maxi co., mini corp.'s stock was selling at $7.50 per share. when mini corp. acquired the patent, its stock was selling for $9 a share. mini corp. should record the patent at what amount?
MC Ques 87 Patent Amount Recorded = Historical value of shares(when the patent was acquired by Mini Corp.) + Cash received 2500(9) + 90,000= $112,500
Bell Inc. took a physical inventory at the end of the year and determined that $780,000 of goods were on hand. In addition, Bell, Inc. determined that $60,000 of goods that were in transit that were shipped f.o.b. shipping point were actually received two days after the inventory count and that the company had $90,000 of goods out on consignment. What amount should Bell report as inventory at the end of the year?
MC Ques 88 $780,000 + $60,000 + $90,000 = $930,000.
AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue?
MC Ques 89 $24,750
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 FV at 12/31/15 X $130,000 $160,000 Y 100,000 90,000 Z 175,000 125,000 Total: 405,000 375,000 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?
MC Ques 89 $30,000
Risers Inc. reported total assets of $2,400,000 and net income of $320,000 for the current year. Risers determined that inventory was overstated by $24,000 at the beginning of the year (this was not corrected). What is the corrected amount for total assets and net income for the year?
MC Ques 90 2,400,000 total assets (only change/let net income be impacted) 344,000 (if overstate inventory, net income will be overstated)
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?
MC Ques 94 No impairment should be reported Future net cash flows > carrying amount
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 received 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
MC Ques 95 $142,000 Carrying Amt > Future net so impairment planning to hold assets so impairment is difference between Fair value and carrying amount
The following information was available from the inventory records of Rich Company for January: Balance at 1/1 Units: 9,000 Unit Cost $9.77 Total Cost $87,930 Purchases: 1/6 6,000 Units Cost $10.30 Total Cost 61,800 1/26 8,100 Units Cost $10.71 Total Cost 86,751 Sales: 1/7 (7,500 Units) 1/31 (11,100 Units) Balance at 1/31 4,500 Assuming that Rich does not maintain perpetual inventory records, what should be the inventory at January 31, using the weighted-average inventory method, rounded to the nearest dollar?
MC Ques 98 Only care about beginning invt and purchases ($87,930 + $61,800 + $86,751) ÷ (9,000 + 6,000 + 8,100) = $10.237/unit $10.237 × 4,500 = $46,067.
Blue sky company's 12/31/18 balance sheet reports assets of $7,000,000 and liabilities of $2,800,000. all of blue sky's assets' book values approximate their fair value, except for land, which has a fair value that is $420,000 greater than its book value. on 12/31/18, horace wimp corporation paid $7,140,000 to acquire blue sky. what amount of goodwill should horace wimp record as a result of this purchase?
MC Ques 99 $2,520,000
Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of $1,392,000. It also has the following items (gross amounts). Unusual loss $222,000 Discontinued operations loss 606,000 Gain on disposal of equipment 48,000 Change in accounting principle increasing prior year's income 318,000 What is the amount of income tax expense Arreaga would report on its income statement?
MC Question #72 (1392000 - 222000 + 48000) (.4) = $487,200
At the beginning of 2016, Gannon Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2016 year-end statement of financial position and $1,000 as sales revenue for 2016. What effect did this accounting for the note have on Gannon's net earnings for 2016, 2017, 2018, and its retained earnings at the end of 2018, respectively? Overstate, understate, understate, zero. Overstate, overstate, understate, zero Overstate, overstate, overstate, overstate Overstate, understate, understate, understate
Overstate, understate, understate, zero. MC Ques 61
A manufacturing firm purchased used equipment for $135,000. the original owners estimated that the residual value of the equipment was $10,000. the carrying amount of the equipment was $120,000 when ownership transferred. the new owners estimate that the expected remaining useful life of the equipment was 10 years, with a salvage value of $15,000. what amount represents the depreciable base used by the new owners?
CPA Ques 01 $120,000 is correct. The purchase price of the asset acquired less its salvage value is the asset's depreciable cost. In this case, total depreciation on the asset is limited to $120,000 ($135,000 purchase price-$15,000 salvage value). The cost to the seller and the previous salvage value are not relevant to the new owner.
The following trial balance of Trey Co. at December 31, 2017 has been adjusted except for income tax expense. Dr. Cr. Cash $550,000 (Dr) Accounts Receivable, net 1,650,000 (Dr) Prepaid taxes 300,000 (Dr) Accounts payable $120,000 (Cr) Common stock 500,000 (Cr) Additional paid-in capital 680,000 (Cr) Retained earnings 630,000 (Cr) Foreign currency translation adjustment 430,000 (Dr) Revenues 3,600,000 (Cr) Expenses 2,600,000 (Dr) $5,530,000 = $5,530,000 Additional information: •During 2017, estimated tax payments of $300,000 were charged to prepaid taxes. Trey has not yet recorded income tax expense. There were no differences between the financial statement and the income tax income, and Trey's tax rate is 30%. •Included in accounts receivable is $500,000 due from a customer. Special terms granted to this customer require payments in equal, semiannual installments of $125,000 every April 1 and October 1. In Trey's December 31, 2017 Balance Sheet, what amount should be reported as total current assets?
CPA Ques 02 $1,950,000 is correct. Current assets are assets that are collectible within one year. The sum of the stated current assets is $2,500,000 ($550,000+$1,650,000+$300,000). However, once the current tax bill is calculated, the prepaid taxes of $300,000 are transferred into a tax expense account to cover the $300,000 in current year tax expense. In addition, $250,000 of the special accounts receivable is not due for over one year and is, therefore, non-current. Therefore, current assets should be $1,950,000 ($2,500,000-$300,000-$250,000).
When the FIFO inventory method is used during periods of rising prices, a perpetual inventory system results in an ending inventory cost that is Higher than in a periodic inventory system. Lower than in a periodic inventory system. Higher or lower than in a periodic inventory system, depending on whether physical quantities have increased or decreased. The same as in a periodic inventory system.
CPA Ques 02 The same as in a periodic inventory system
On January 1, 2016, Purl Corp. purchased, as a long-term investment, $500,000 face value Shaw, Inc. 8% bonds for $456,200. The bonds were purchased to yield 10% interest. Purl has the positive intent and ability to hold the bonds until maturity on January 1, 2022. The bonds pay interest annually on January 1, and Purl uses the interest method of amortization. What amount (rounded to nearest $100) should Purl report on its December 31, 2017 Balance Sheet for this long-term investment?
CPA Ques 05 $468,000
At the beginning of the year, Cann Co. started construction on a new $2 million addition to its plant. Total construction expenditures made during the year were $200,000 on January 2, $600,000 on May 1, and $300,000 on December 1. On January 2, the company borrowed $500,000 for the construction at 12%. The only other outstanding debt the company had was a 10% interest rate, long-term mortgage of $800,000, which had been outstanding the entire year. What amount of interest should Cann capitalize as part of the cost of the plant addition?
CPA Ques 05 $72,500 is correct. First calculate the average accumulated expenditures. This gives you the amount of borrowing from which to calculate avoidable interest ($625,000). Next calculate avoidable interest ($72,500) and actual interest (($500,000 x 12%) + ($800,000 x 10%) = $140,000). The amount that can be capitalized is the lesser of the avoidable interest or actual interest. The amount that can be capitalized is $72,500.
Generally, which inventory costing method approximates most closely the current cost for each of the following: Cost of Goods Sold and Ending Inventory
CPA Ques 05 COGS - LIFO Ending INVT - FIFO
Hat's accounting records showed the following: Inventory, January 1 $35,000 Purchases, January 1 through May 1 200,000 Sales, January 1 through May 1 250,000 Inventory not damaged by flood 30,000 Gross profit percentage on sales 40% What amount of inventory was lost in the flood?
CPA Ques 07 $55,000 See paper for work if necessary
Brock Co. adopted the dollar-value LIFO inventory method as of January 1, 2016. A single inventory pool and an internally computed price index are used to compute Brock's LIFO inventory layers. Information about Brock's dollar-value inventory follows: Inventory Date at base-year at current-year at dollar-valueLIFO 1/1/16 40,000 40,000 40,000 2016 layer 5,000 14,000 6,000 12/31/16 45,000 54,000 46,000 2017 layer 15,000 26,000 ? 12/31/17 60,000 80,000 ?
CPA Ques 07 $66,000
Lee, Inc. acquired 30% of Polk Corp.'s voting stock on January 1, 2016 for $100,000. During 2016, Polk earned $40,000 and paid dividends of $25,000. Lee's 30% interest in Polk gives Lee the ability to exercise significant influence over Polk's operating and financial policies. During 2017, Polk earned $50,000 and paid dividends of $15,000 on April 1 and $15,000 on October 1. On July 1, 2017, Lee sold half of its stock in Polk for $66,000 cash. Before income taxes, what amount should Lee include in its 2016 Income Statement as a result of the investment?
CPA Ques 08 2016, not 2017!! $12,000 = .30($40,000). Under the equity method, the investor recognizes its share of investee earnings in its own income. The equity method is used because Lee has significant influence over Polk.
The accumulated other comprehensive income (AOCI) beginning balance for the current year was $6,000 dr. Net income for the period is $21,000. During the year the following two other comprehensive income items were recognized: •foreign currency translation loss, $2,000 •and unrealized gain on securities available for sale, $9,000 What amount is reported for comprehensive income (CI) for the year, and what is the ending AOCI balance?
CPA Ques 08 CI = net income + OCI = 28,000 AOCI = 1000 credit
Rue Co.'s allowance for uncollectible accounts had a credit balance of $12,000 at December 31, Year 1. During Year 2, Rue wrote off uncollectible accounts of $48,000. The aging of accounts receivable indicated that a $50,000 allowance for uncollectible accounts was required at December 31, Year 2. What amount of uncollectible accounts expense should Rue report for Year 2?
CPA Ques 09 $86,000 is correct. An examination of the T-account indicates the beginning balance in Allowance for uncollectible accounts has a credit balance of $12,000. When an account is written off, a debit entry is made to the Allowance for uncollectible accounts. If the aging schedule indicates that a $50,000 allowance is required, then the ending balance in the Allowance for uncollectible accounts must be $50,000. Therefore, this answer is correct because $86,000 ($12,000 − $48,000 − $50,000) must be debited to Bad debt expense and credited to the Allowance for uncollectible accounts.
Larkin Co. has owned 25% of the common stock of Devon Co. for a number of years, and has the ability to exercise significant influence over Devon. The following information relates to Larkin's investment in Devon during the most recent year: Carrying amount of Larkin's investment in Devon at the beginning of the year $200,000 Net income of Devon for the year 600,000 Total dividends paid to Devon's stockholders during the year 400,000 What is the carrying amount of Larkin's investment in Devon at year end?
CPA Ques 09 Larkin's investment in Devon at year end would be computed as the carrying amount of the investment at the beginning of the year ($200,000) + Larkin's share of Devon's reported net income for the year ($600,000 x .25 = $150,000)-Larkin's share of Devon's dividends paid during the year ($400,000 x .25 = $100,000), or $200,000 + $150,000 = $350,000-$100,000 = $250,000, the correct answer.
Zahn Corp.'s comprehensive Balance Sheet at December 31, 2017 and 2016 reported accumulated depreciation balances of $800,000 and $600,000, respectively. Property with a cost of $50,000 and a carrying amount of $40,000 was the only property sold in 2017. Depreciation charged to operations in 2017 was:
CPA Ques 11 $210,000
Dodson Company traded in a manual pressing machine for an automated pressing machine and gave $40,000 cash. The old machine cost $465,000 and had a net book value of $355,000. The old machine had a fair value of $300,000. Which of the following is the correct journal entry to record the exchange assuming commercial substance? Equipment 340,000 Loss on Disposal 55,000 Accumulated Depre110,000 Equipment 465,000 Cash 40,000 Equipment 615,000 Accumulated Depreciation 110,000 Equipment 465,000 Cash 40,000 Equipment 304,000 Equipment 200,000 Cash 40,000 Cash 40,000 Equipment 300,000 Loss on Dispo 55,000 Accumulated D 110,000 Equipment 505,000
Equipment 340,000 Loss on Disposal 55,000 Accumulated Depre110,000 Equipment 465,000 Cash 40,000
Sullivan Corporation has determined its year-end inventory on a FIFO basis to be $500,000. Sullivan's retail selling price is $520,000 but Sullivan should pay $30,000 of sales commission. When the replacement cost (current wholesale price to be bought) is $440,000, What should be the reported value of Sullivan's inventory?
Lower of Cost of NRV $490,000
Moorman Corporation reports the following information: Correction of understatement of depreciation expense: in prior years, net of tax $ 1,290,000 Dividends declared 960,000 Net income 3,000,000 Retained earnings, 1/1/17, as reported 6,000,000 Moorman should report retained earnings, 12/31/17, at
MC Ques #81 $6,000,000 - $1,290,000 + $3,000,000 - $960,000 = $6,750,000.
