ACCT 3304 Final

To conduct goodwill impairment test, the first step is the recoverability test

False

A zero interest bearing note payable that is issued at a discount will not result in any interest expense being recognized

False

Companies have to allocate the transaction price to individual performance obligations in a contract even though the individual performances are interdependent

False

Companies only use the expected value a probability weighted amount to estimate variable consideration

False

Companies should accrue an estimated loss from a loss contingency if information available prior to the issuance of financial statements indicates that it is reasonable possible that a liability has been incurred

False

GAAP requires start up costs and initial operating losses during the early years to be capitalized

False

The revenue from a service type warranty that covers several years should all be recognized in the period the warranty is sold

False

The rules used to account for impairments of limited life intangible assets are different from the rules used to account for impairments of plant and equipment

False

Under an assurance type warranty companies charge warranty costs only to the period in which they comply with the warranty

False

When a company sells a product but gives the buyer the right to return it, revenue should not be recognized until the sale is collected

False

Limited-life intangibles are amortized by systematic charges to expense over their useful lives

True

When a sales transaction involves a significant financing component the fair value is determined and is reported as either interest revenue or interest expense

True

Internally generated intangible assets are initially recorded at fair value

False

Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent

False

Buerhle COmpany needs to determine if its indefinite life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet. The impairment test to be used is Recoverability Test Fair Value Test

No Yes

Which of the following is not an intangible asset

Research and development costs

When sales are made with a right of return the company

record the returned asset in a separate inventory account

Short Corporation purchased Hathaway Inc for 52,000,000. The fair value of all Hathaways identifiable tangible and intangible assets was 48,000,000. Short will amortize any goodwill over the maximum number of years allowed. What is the annual amortization of goodwill for this acquisition

0

A company offers a cash rebate of 2 on each 6 package of batteries sold during 2018. Historically 10% of customers mail in the rebate form. During 2018, 5,000,000 packages of batteries are sold and 175,000 $2 rebates are mailed to customers. What is the rebate expense and liability respectively shown on the 2018 financial statements date December 31

1,000,000;650,000

On August 5, 2018 Famous Furniture shipped 40 dining sets on consignment to Furniture Outlet Inc. The cost of each dining set was 350 each. The cost of shipping the dining sets amounted to 1800 and was paid for by Famous Furniture. On December 30,2018 the consignee reported the sale of 30 dining sets at 850 each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising expense of $600 and installation and setup costs of 780. The total profit on units sold for the consignor is

10,740

Vanco Company has 70 employees who work 8 hour days and are paid hourly. On January 1 2017 the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2017 may first be taken on January 1 2018. INformation relative to these employees is as follows. Vanco has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned. What is the amount of expense relative to compensated absences that should be reported on Vanco's income statement for 2017?

114800

Blue Sky companys 12/31/2018 balance sheet reports assets of 7,000,000 and liabilities of 2,800,000. All of blue skys 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?

2,520,000

Posner Co is a retail store operating in a state with a 7% retail sales tax. Posner Co records the sales tax in the sales revenue account. The amount recorded in the sales revenue account during May was 754,350. What is the amount of sale tax payable during May?

49350

The following information is avaible for Barkley Companys patents: cost 3,440,000 carrying amount 1,920,000 expected future net cash flows 1,600,000 fair value 1,300,000 what is the amount of impairment?

620,000

The total payroll of Trolley Company for the month of OCtober 2017 was 960,000 of which 180,000 represented amounts paid in excess of 118,500 to certain employees. 600,000 represented amounts paid to employees in excess of the 7,000 maximum subject to unemployment taxes, 180,000 of federal income taxes and 18,000 of union dues were withheld. The state unemployment tax is 1% the federal unemployment tax is .8% and the current FICA tax is 7.65% on the employees wages to 118,500 and 1.45% in excess of 118,500. What amount should Trolley record as payroll tax expense?

68760

At the beginning of 2016 Angel Corporation began offering a two year warranty on its products. The warranty program was expected to cost Angel 4% of nets sales. net sales made under warranty in 2016 were 180 million. Fifteen percent of the units sold were returned in 2016 and repaired or replaced at a cost of 5.3 million. The amount of warranty expense on ANgels 2016 income statement is

7.2 million

Jenks Corporation acquired Linebrink Products on January 1, 2018 for 8,000,000 and recorded goodwill of 1,700,000 as a result of that purchase. At December 31, 2018 Linebrink Products had a fair value of 6,800,000. The net identifiable assets of the Linebrink (excluding goodwill) had a book value of 5,800,000 at that time. What amount of loss on impairment of goodwill should Jenks record in 2018?

700,000

Meyer & Smith is a full service technology company.They provide equipment installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of 144,000 on March 15, 2018. Estimated standalone fair values of the equipment, installation and training are 90,000;60,000; and 30,000 respectively. The transaction price allocated to equipment and training is

72,000;48,000; and 24,000 respectively

Composite provides extended service contracts on electronic equipment sold through major retailers. The standard contract is four years. During the current year, composite provided 42,000 such warranty contracts at an average price of 162 each. Related to these contracts the company spent 800,000 servicing the contracts during the current year and expects to spend 4,200,000 more in the future. What is the net profit that the company will recognize in the current year related to these contacts?

901,000

Lynne Corporation acquired a patent on May 1, 2017. Lynne paid cash of 90,000 to the seller. Legal fees of 2,000 were paid to the acquisition. What amount should be debited to the patent account?

92,000

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 the 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 based on expected value is

995,000

Which of the following is not a liability

An unused line of credit

Consignments are specialized marketing method whereby the

Consignee takes possession of merchandise but title remains with manufacturer

A company buys an oil rig for 3,000,000 on January 1, 2018. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is 600,000 (present value at 10% is 231,330). 10% is an appropriate interest rate for this company. What expense should be recorded for 2018 as a result of these events?

Depreciation expense of 323,133 and interest expense of 23,133

Which of the following best describes the accounting for assurance type warranty costs

Expensed based on estimate in year of sale

A contingent loss should be reported in a disclosure note to the financial statements rather than being accrued if

The incurrence of a loss is reasonable possible

A short term obligation can be excluded from current liabilities if the company intends to refinance it on a long term basis and demonstrates the ability to consummate the refinancing

True

After an impairment loss is recorded for a limited life intangible asset, the carrying amount becomes the basis for the impaired asset and is used to calculate amortization in future periods

True

Companies report the amount of social security taxes withheld from employees as well as the company's' matching portion as current liabilities until they are remitted

True

Companies should recognize the expense and related liability for compensated absences in the year earned by employees

True

Discount on notes payable is a contra account to notes payable on the balance sheet

True

If the fair value of an unlimited life intangible other than goodwill is less than its book value an impairment loss must be recognized

True

If the performance obligation is not highly dependent on or interrelated with other promises in the contract then each performance obligation should be accounted for separately

True

In a business combination, a company assigns the cost, where possible to the identifiable tangible and intangible net assets, with the remainder recorded as goodwill.

True

Many companies do not segregate the sales tax collected and the amount of the sale at the time of the sale

True

The cost of acquiring a customer list from another company is recorded as an intangible asset

True

The fair value of an asset retirement obligation is recorded as both an increase to the related asset and a liability

True

A discount on a noninterest bearing note payable is classified in the balance sheet as

a contra liability

A loss on impairment of an intangible asset is the difference between the assets

carrying amount and its fair value

Greeson Corp signed a three month, zero interest bearing note on November 1, 2017 for the purchase of 500,000 of inventory. The face value of the note was 507,800. Greeson used a discount of note payable account to initially record the note. Assuming that the discount will be amortized equally over the 3 month period and that there was no adjusting entry made for November, the adjusting entry made at December 31, 2017 will include

debit to interest expense 5,200

Costs incurred internally to create intangibles are

expensed as incurred