Intermediate Accounting Exam 2

Wilson Links Products sells a product that involves two separate performance obligations: the SwingRight golf club weight and the SwingCoach teaching software. SwingRight has a stand-alone selling price of $160. Wilson sells both the SwingRight and the SwingCoach as a package deal for $220. The SwingCoach software is not sold separately. Wilson is aware that other vendors charge $120 for similar software, and Wilson's prices are generally 10% lower than what is charged by those vendors. Wilson estimates that it incurs approximately $75 of cost per copy of the software, and usually charges 50% above cost on similar products.Estimate the stand-alone selling price of the software using the adjusted market assessment approach. a. $108 b. $60 c. $78 d. $38

a. $108 (120*10%=12)(120-12=108)

Present and future value tables of $1 at 9% are presented below. Mustard's Inc. sold the rights to use one of its patented processes that will result in cash receipts of $2,800 at the end of each of the next five years and a lump sum receipt of $4,300 at the end of the sixth year. The total present value of these payments if interest is at 9% is: a. $13,455. b. $15,192. c. $10,891. d. $16,692.

a. $13,455. (2,800 x 3.88965 PVA= 10,891.02) (4,300 x .59627 PV= 2563.961) (a+b= 13,355)

Green Co.'s year 8 statement of cash flows reported cash provided from operating activities of $375,000. For year 8, depreciation of equipment was $145,000, cash inflows from the issuance of common stock was $75,000, and dividends paid on common stock was $25,000. In Greens' year 8 statement of cash flows, what amount was reported as net income? a. $230,000 b. $330,000 c. $245,000 d. $275,000

a. $230,000 (375,000-145,000=230,000) (Cash provided-depreciation of equipment)

Present and future value tables of $1 at 3% are presented below: At the end of each quarter, Patti deposits $1,300 into an account that pays 12% interest compounded quarterly. How much will Patti have in the account in 4 years? a. $26,204. b. $26,933. c. $25,952. d. $27,461.

a. $26,204. (1,300*20.15690 FVA)

Present and future value tables of $1 at 3% are presented below: On January 1, 2021, you are considering making an investment that will pay three annual payments of $10,000. The first payment is not expected until December 31, 2023. You are eager to earn 3%. What is the present value of the investment on January 1, 2021? a. $26,662. b. $27,462. c. $28,286. d. $29,135.

a. $26,662. (($10,000*(0.91514+0.88849+0.86261) PV)

Present and future value tables of $1 at 3% are presented below: Sondra deposits $2,900 in an IRA account on April 15, 2021. Assume the account will earn 3% annually. If she repeats this for the next 9 years, how much will she have on deposit on April 14, 2030? a. $30,345. b. $36,414. c. $31,863. d. $33,380.

a. $30,345. (2,900*10.46390 FVAD)

Present and future value tables of $1 at 3% are presented below: Micro Brewery borrows $260,000 to be repaid in equal installments over a period of five years. The loan payments are semiannual with the first payment due in six months, and interest is at 6%. What is the amount of each payment? a. $30,480. b. $26,000. c. $26,780. d. $29,592.

a. $30,480. (260,000/ 8.53020 PVA)

Present and future value tables of $1 at 3% are presented below: Bill wants to give Maria a $530,000 gift in 7 years. If money is worth 6% compounded semiannually, what is Maria's gift worth today? a. $350,394. b. $527,250. c. $348,999. d. $351,919.

a. $350,394. (530,000*.66112PV)

Fenland Co. plans to retire $250 million in bonds in five years, so it wishes to fund a savings account at the beginning of each year during that period for which it expects to earn 8% annually. At the end of the five years, there will be enough money in the account to pay off the bonds. What amount does Fenland need to invest each year? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) a. $39,457,693 b. $40,720,266 c. $46,865,016 d. Cannot be determined from the given information.

a. $39,457,693

On April 1st, Bob the Builder entered into a contract of one-month duration to build a barn for Nolan. Bob is guaranteed to receive a base fee of $4,100 for his services in addition to a bonus depending on when the project is completed. Nolan created incentives for Bob to finish the barn as soon as he can without jeopardizing the structural integrity of the barn. Nolan offered to pay an additional 20% of the base fee if the project finished 2 weeks early and 20% if the project finished a week early. The probability of finishing 2 weeks early is 20% and the probability of finishing a week early is 60%. What is the expected transaction price with variable consideration estimated as the expected value? a. $4,756 b. $4,100 c. $5,510 d. $3,895

a. $4,756 (4100x20%=820) (4100x20%=820) (820x20%=164) (820x60%=492) (4100+164+492=4756)

Present and future value tables of $1 at 3% are presented below: At the end of the next four years, a new machine is expected to generate net cash flows of $8,000, $12,000, $10,000, and $15,000, respectively. What are the (rounded) cash flows worth today if a 3% interest rate properly reflects the time value of money in this situation? a. $41,556. b. $39,982. c. $32,400. d. $38,100.

a. $41,556.

Davenport Inc. offers a new employee a single-sum signing bonus at the date of employment. Alternatively, the employee can receive $37,000 at the date of employment and another $57,000 2 years later. Assuming the employee's time value of money is 7% annually, what single sum at the employment date would make her indifferent between the two options? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) a. $86,786 b. $94,000 c. $76,786 d. $74,000

a. $86,786 ((37,000+ (57,000*.87344) PV)

Pita Pal sells fast-food franchises. Pita Pal receives $66,000 from a new franchisee for providing initial training, equipment, and furnishings that together have a stand-alone selling price of $66,000. Pita Pal also receives $33,300 per year for use of the Pita Pal name and for ongoing consulting services (starting on the date the franchise is purchased). Rachel became a Pita Pal franchisee on March 1, 2021, and on May 1, 2021 Rachel had completed training and was open for business. How much revenue in 2021 will Pita Pal recognize for its arrangement with Rachel? a. $93,750 b. $0 c. $99,300 d. $66,000

a. $93,750 (33300*(10/12)=27750) (66000+27750=93750)

Wilson Links Products sells a product that involves two separate performance obligations: the SwingRight golf club weight and the SwingCoach teaching software. SwingRight has a stand-alone selling price of $195. Wilson sells both the SwingRight and the SwingCoach as a package deal for $290. The SwingCoach software is not sold separately. Wilson is aware that other vendors charge $190 for similar software, and Wilson's prices are generally 10% lower than what is charged by those vendors. Wilson estimates that it incurs approximately $110 of cost per copy of the software, and usually charges 50% above cost on similar products.Estimate the stand-alone selling price of the software using the residual approach. a. $95 b. $170 c. $220 d. $165.5

a. $95 (290-195=95)

On November 1, 2021, Taylor signed a one-year contract to provide handyman services on an as-needed basis to King Associates, with the contract to start immediately. King agreed to pay Taylor $5,880 for the one-year period. Taylor is confident that King will pay that amount, but payment is not scheduled to occur until 2022. Taylor should recognize revenue in 2021 in the amount of a. $980. b. $0. c. $2,940. d. $5,880.

a. $980. (5,880/12=490) (490*2=980)

Excerpts from Dowling Company's December 31, 2021 and 2020, financial statements and key ratios are presented below (all numbers are in millions): 2021 2020 Accounts receivable (net) $21 $17 Net sales $116 $101 Cost of goods sold $61 $56 Net income $21 $18 Inventory turnover 5.25 Return on assets 10.50% Equity multiplier 2.37 Dowling's 2021 profit margin is: (Round your answer to 1 decimal place.) a. 18.1%. b. 19.0%. c. 18.8%. d. 17.3%.

a. 18.1%. (21/116=.181) (.181*100=18.1%) ('21 net income /'21 sales= profit margin)

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receivable$58,000 $45,000 Merchandise inventory 37,000 53,000 Net sales 236,900 231,000 Cost of goods sold 132,000 117,000 Total assets 443,000 414,000 Total shareholders' equity 258,000 234,000 Net income 46,000 37,000 Hulkster's 2021 inventory turnover is: (Round your answer to 2 decimal places.) a. 2.93. b. 3.49. c. 3.57. d. 5.26.

a. 2.93. (37,000+53,000=90,000) (90,000/2=45,000) (132,000/45,000=2.93333) ((Merchandise inventory 21+20)/2 =average inventory) (COGS/Average inventory=inventory turnover)

An investor purchases a 7-year, $1,000 par value bond that pays semiannual interest of $14. If the semiannual market rate of interest is 7%, what is the current market value of the bond? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) a. 510 b. 1,000 c. 538 d. 1,122

a. 510 (1,000 x .38782PV) + (14 x 8.74547 PVA)

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receivable$48,000 $40,000 Merchandise inventory 32,000 43,000 Net sales 237,600 207,000 Cost of goods sold 122,000 112,000 Total assets 433,000 409,000 Total shareholders' equity 248,000 229,000 Net income 38,500 32,000 Hulkster's 2021 average collection period is: a. 68 days. b. 118 days. c. 123 days. d. 127 days.

a. 68 days. (48,000+40,000=88,000)(88,000/2= 44,000) (237,600/44,000=5.4) (365/5.4=67.59) (68) (Receivables turnover= net sales/ average accounts receivables) (average collection period = 365/ receivables turnover)

Which of the following is not an indicator that the customer is likely to have control over a good? a. Asset warehoused by seller-affiliated third party b. Accepted the asset c. Legal title to the asset d. Physical possession of the asset

a. Asset warehoused by seller-affiliated third party

Loan A has the same original principal, interest rate, and payment amount as Loan B. However, Loan A is structured as an annuity due, while Loan B is structured as an ordinary annuity. The maturity date of Loan A will be: a. Earlier than Loan B. b. Later than Loan B. c. The same as Loan B. d. Indeterminate with respect to Loan B.

a. Earlier than Loan B.

LeAnn wishes to know how much she should invest now at 7% interest in order to accumulate a sum of $5,000 in four years. She should use a table for the: a. Present value of $1. b. Future value of $1. c. Present value of an ordinary annuity of $1. d. Future value of an annuity due of $1.

a. Present value of $1.

You want to invest $6,000 annually beginning now in order to accumulate $33,300 for a down payment on a house in five years. To find the annual interest rate you would need to receive to accomplish this goal, you would search the fifth row in the: a. future value of an annuity due of $1 table, for the factor closest to 5.55. b. present value of an ordinary annuity of $1 table, for the factor closest to 0.1802. c. present value of an annuity due of $1 table, for the factor closest to 5.55. d. future value of an ordinary annuity of $1 table, for the factor closest to 0.1802.

a. future value of an annuity due of $1 table, for the factor closest to 5.55.

Reporting comprehensive income according to International Financial Reporting Standards (IFRS) can be accomplished by each of the following methods except: a. in the statement of shareholders' equity. b. a combined statement of income and comprehensive income. c. in two separate statements. d. the entity may choose either a combined statement of income and comprehensive income or two separate statements

a. in the statement of shareholders' equity.

You want to invest $20,000 today to accumulate $32,000 for graduate school. If you can invest at an interest rate of 10% compounded annually. To find how many years will it take to accumulate the required amount, you would search the 10% column in the: a. present value of $1 table, for the factor closest to 0.625. b. future value of $1 table, for the factor closest to 0.625. c. present value of $1 table, for the factor closest to 1.6. d. present value of an ordinary annuity of $1 table, for the factor closest to 1.6.

a. present value of $1 table, for the factor closest to 0.625.

Present and future value tables of $1 at 3% are presented below: Monica wants to sell her share of an investment to Barney for $130,000 in 7 years. If money is worth 6% compounded semiannually, what would Monica accept today? a. $ 4,643. b. $ 85,946. c. $ 85,139 d. $ 84,692

b. $ 85,946. (130,000*.66112PV)

The Ultimate Frisbee League (UFL) licenses its trademark to Tank-Skin Apparel. Under the license arrangement, Tank-Skin pays the UFL a $1 million initial license fee plus a bonus when annual sales of Tank-Skin merchandise reach a threshold. The license agreement is for 4 years. Assume that the UFL anticipates that, in addition to receiving the $1 million license fee, it will receive a bonus of $2 million in year 1 of the contract and a bonus of $3 million in years 2-4 of the contract based on Tank-Skin's sales. Also assume that the UFL is convinced that it is probable there will not be a significant reversal of any revenue recognized with respect to the bonus in subsequent periods. At the inception of the contract, what is the amount of transaction price that the UFL would estimate with respect to this license arrangement? a. $0 b. $1,000,000 c. $3,000,000 d. $12,000,000

b. $1,000,000

Cendant Corporation's results for the year ended December 31, 2021, include the following material items: Sales revenue$6,350,000 Cost of goods sold 3,800,000 Selling and administrative expenses 1,290,000 Loss on sale of investments 186,000 Loss on discontinued operations 485,000 Loss on impairment from continuing operations 60,000 Cendant Corporation's income from continuing operations before income taxes for 2021 is: a. $1,074,000. b. $1,014,000. c. $1,073,300. d. $529,000.

b. $1,014,000. (6,350,000- 3,800,000- 1,290,000- 186,000 - 60,000= 1,014,000) (Sales revenue- COGS- Selling and administrative expenses - loss on sale of investments - loss on impairment from continuing operations= income from continuing operations )

Stinley Co. paid utilities of $139,000 during 2021. At the end of 2021, utilities payable equals $27,000 and utilities expense equals $155,000. What was the balance of utilities payable at the beginning of 2021? a. $32,000. b. $11,000. c. $27,000. d. $16,000.

b. $11,000. (139,000+ 27,000= 166,000) (166,000- 155,000= 11,000) (Paid utilities+ utilities payable= difference) (difference - utilities expense= utilities payable at the beginning of 2021)

Present and future value tables of $1 at 3% are presented below: Today, Thomas deposited $110,000 in a 2-year, 12% CD that compounds quarterly. What is the maturity value of the CD? a.$240,686. b. $139,345. c. $116,600. d. $219,355.

b. $139,345. (110,000*1.26677FV)

Present and future value tables of $1 at 11% are presented below. Spielberg Inc. signed a $200,000 noninterest-bearing note due in two years from a production company eager to do business. Comparable borrowings have carried an 11% interest rate. What is the value of this debt at its inception? a. $222,000. b. $162,324. c. $200,000. d. $178,000.

b. $162,324. (200,000*.81162 PV)

Present and future value tables of $1 at 3% are presented below: Shelley wants to cash in her winning lottery ticket. She can either receive sixteen, $187,000 semiannual payments starting today, or she can receive a single-amount payment today based on a 6% annual interest rate. What is the single-amount payment she can receive today? a. $1,391,448. b. $2,419,395. c. $1,595,140. d. $1,499,676.

b. $2,419,395. (1187,000* 12.93794 PVAD)

On October 28, 2021, a company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2021, the end of the company's fiscal year. The division's loss from operations for 2021 was $1,850,000. The division's book value and fair value less cost to sell on December 31 were $3,080,000 and $2,320,000, respectively. What before-tax amount(s) should the company report as loss on discontinued operations in its 2021 income statement? a. $1,850,000 loss. b. $2,610,000 loss. c. No loss would be reported. d. $760,000 impairment loss included in continuing operations and a $1,850,000 loss from discontinued operations.

b. $2,610,000 loss. (3,080,000-2,320,000+1,850,000=2,610,000) (Book value- fair value+ loss from operations= loss on discontinued operations)

Misty Company reported the following before-tax items during the current year: Sales revenue $650 Selling and administrative expenses 290 Restructuring charges 20 Loss on discontinued operations 40 Misty's effective tax rate is 25%. What is Misty's net income for the current year? a. $295. b. $225. c. $255. d. $215.

b. $225. (650-290-20-40=300) (300*.25=75) (300-75=225) (Sales-Expenses-charges-loss=income) (income*tax rate(25%)=taxes) (income-taxes=net income)

Present and future value tables of $1 at 3% are presented below: On January 1, 2021, you are considering making an investment that will pay three annual payments of $10,000. The first payment is not expected until December 31, 2024. You are eager to earn 3%. What is the present value of the investment on January 1, 2021? Multiple Choice a. $28,286. b. $25,886. c. $26,662. d. $27,300.

b. $25,886. ((10,000*(.88849+.86261+.83748)PV)

Rowdy's Restaurants cash flow ($ in millions) Cash received from: Customers $4,350 Interest on investments 370 Sale of land 270 Sale of Rowdy's common stock 940 Issuance of debt securities 3,700 Cash paid for: Interest on debt $470 Income tax 250 Debt principal reduction 3,200 Purchase of equipment 7,400 Purchase of inventory 2,700 Dividends on common stock 710 Operating expenses 840 Rowdy's would report net cash inflows (outflows) from operating activities in the amount of: a. $(250) million. b. $460 million. c. $710 million. d. $930 million.

b. $460 million. (4,350+ 370- 470 -250- 2,700- 840=460) (Customers+ interest on investments- interest on debt- income tax- purchase of inventory - operating expenses= cash inflows from operating activities)

Bird Brain Co. reported net income of $46,400 for the year ended December 31, 2021. January 1 balances in accounts receivable and accounts payable were $23,600 and $25,200 respectively. Year-end balances in these accounts were $20,500 and $28,200, respectively. Assuming that all relevant information has been presented, Bird Brain's cash flows from operating activities would be: a. $46,300. b. $52,500. c. $40,300. d. $46,400.

b. $52,500. (25,200-23,600=1,600) (28,200-20,500= 7,700) (46,400+7,700- 1,600= 52,500) ('21-'20 Jan 1difference) ('21- '20 year end difference ) (net income+ Year end difference- Jan 1 difference)

Schneider Inc. had salaries payable of $61,700 and $91,000 at the end of 2020 and 2021, respectively. During 2021, Schneider recorded $621,900 in salaries expense in its income statement. Cash outflows for salaries in 2021 were: a. $621,900. b. $592,600. c. $530,900. d. $651,200.

b. $592,600. (91,000-61,700=29,300) (621,900-29,300=592,600) (Salaries payable 21-20) (21 salaries -salaries payable difference= cash outflows for salaries)

Present and future value tables of $1 at 3% are presented below: Carol wants to invest money in a 6% CD account that compounds semiannually. Carol would like the account to have a balance of $110,000 7-years from now. How much must Carol deposit to accomplish her goal? a. $85,128. b. $72,723. c. $75,529. d. $70,673

b. $72,723. (110,000*.66112PV)

Present and future value tables at $1 at 3% are presented below: Shane wants to invest money in a 6% CD account that compounds semiannually. Shane would like the account to have a balance of $120,000 8-years from now. How much must Shane deposit to accomplish his goal? a. $75,295. b. $74,780. c. $82,280. d. $57,600

b. $74,780. (120,000*.62317PV)

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receivable$42,000 $37,000 Merchandise inventory 29,000 37,000 Net sales 213,300 200,000 Cost of goods sold 116,000 109,000 Total assets 427,000 406,000 Total shareholders' equity 242,000 226,000 Net income 34,000 29,000 Hulkster's 2021 return on shareholders' equity is: (Round your answer to 1 decimal places.) a. 15.9%. b. 14.5%. c. 13.1%. d. 7.3%.

b. 14.5%. (242,000+226,000=468,000) /2= 234,000) (34,000/234,000=.145)*100= 14.5%) (Net income/ average shareholders equity= return on shareholders' equity)

Koko Company pays $10 million at the beginning of each year for 10 years to Mocha Inc. in exchange for a building that now has a fair value of $75 million. What interest rate is Mocha earning on financing this land sale? (PV of $1 and PVAD of $1) a. Between 13% and 14%. b. Between 7% and 8%. c. Between 5.5% and 6%. d. Cannot be determined from the given information.

b. Between 7% and 8%.

In which of the following is the option described not a performance obligation? a. Customers accumulate points for every dollar spent at Madeline's Book Store. The points can be redeemed for books once certain levels are met. b. Customers can get 5% cash back for every $100 spent on eco-friendly products. c. Customers can "buy two, get one free" at a menswear store. d. Upon purchase of any name-brand TV, customers can purchase a 5-year extended warranty at a 25% discount.

b. Customers can get 5% cash back for every $100 spent on eco-friendly products.

On a statement of cash flows prepared in conformity with GAAP, which of the following would not be included as a financing activity? a. Dividends paid to shareholders b. Dividends received from an investment c. Cash used to repay a loan d. Cash received from the issuance of common stock

b. Dividends received from an investment

Which of the following must be known in order to compute the interest rate when financing an asset purchase with an annuity? a. Fair value of the asset purchased, number and dollar amount of the annuity payments. b. Present value of the annuity, dollar amount and timing of the annuity payments. c. Fair value of the asset and timing of the annuity payments. d. Number of annuity payments and future value of the annuity.

b. Present value of the annuity, dollar amount and timing of the annuity payments.

Assume a contract for the sale of goods specifies that the seller will receive cash 20 months after delivery of a product. The seller is likely to do which of the following with respect to the time value of money over the life of the contract? a. Recognize interest expense. b. Recognize sales revenue for an amount that is less than the cash eventually received. c. Recognize additional cost of goods sold. d. Ignore the time value of money.

b. Recognize sales revenue for an amount that is less than the cash eventually received.

A contract does not exist for purposes of applying the revenue recognition principle in all of the following cases except for when: a. The seller believes it is not probable that it will collect the amount it's entitled to receive under the contract. b. The seller and buyer did not sign a formalized written contract. c. The seller and buyer can terminate the contract without penalty and neither has performed any obligations under the contract. d. The seller believes it is highly likely but not certain that the buyer will agree to the terms of the contract.

b. The seller and buyer did not sign a formalized written contract.

An uncle asks to borrow $1,000 today and promises to repay you $1,210 two years from now. To find the annual interest rate you would be agreeing to, you would search the second row in the: (PV of $1) a. future value of $1 table, for the factor closest to 0.82645. b. present value of $1 table, for the factor closest to 0.82645. c. present value of $1 table, for the factor closest to 1.21. d. present value of an ordinary annuity of $1 table, for the factor closest to 1.21.

b. present value of $1 table, for the factor closest to 0.82645.

Income smoothing refers to: a. the ability of management to report an earnings amount in each period less than actual earnings. b. the ability of management to use accruals to reduce the volatility of reported earnings over time. c. the ability of management to maintain sales to its current customers for several years. d. the ability of management to report an earnings amount in each period greater than actual earnings.

b. the ability of management to use accruals to reduce the volatility of reported earnings over time.

Present and future value tables of $1 at 9% are presented below. How much must be invested now at 9% interest to accumulate to $17,000 in four years? a. $9,033. b. $11,776. c. $12,043. d. $9,300.

c. $12,043. ( 17,000*.70843 PV)

On May 1, Tango Co. agreed to sell the assets of its Formal Wear Division to Top Hat Inc.The following additional facts pertain to the transaction: -The Formal Wear Division qualifies as a component of the entity according to GAAP regarding discontinued operations. -The book value of Formal Wear's assets totaled $48 million on December 31, 2021. -Formal Wear's operating income was a pre-tax loss of $10 million in 2021. -Tango's income tax rate is 25%. Suppose that the Formal Wear Division's assets had not been sold by December 31, 2021, but were considered held for sale. Assume that the fair value of these assets was $40 million at December 31, 2021. In the income statement for the year ended December 31, 2021, Tango Co. would report discontinued operations of: a. $7.5 million loss. b. $10.0 million loss. c. $13.5 million loss. d. $18.0 million loss.

c. $13.5 million loss. (10+ (48-40) =18) (18*.25= 4.5) (18-4.5= 13.5) (a. Pre-tax loss from discontinued operations+ b. Loss from disposal + c. total loss from discontinued operations(a+ b) +income tax benefit(c*.25)

On February 1, Pinn Corp., paid $40,000 in advertising expenses for ads that will run in a periodical for the entire calendar year. On July 3, Pinn paid $430,000 for anticipated major repairs to their machinery used for business. The repairs will benefit operations for the remainder of the calendar year. Assuming Pinn is a calendar year corporation, what amount of these expenses should Pinn include in its third quarter interim financial statements? a. $470,000 b. $255,000 c. $225,000 d. $440,000

c. $225,000 ((40,000/12)x3=10,000) ((410,000/6)x3=215,000) (10,000+215,000=225,000) (Advertising expense for 3 months) (repair expense for 3 months) (add the 2)

Maas LLP developed software that helps farmers to plow their fields in a manner that prevents erosion and maximizes the effectiveness of irrigation. Sunny Dale paid a licensing fee of $23,000 for a copy of the software. Although Sunny Dale can use the software as long as it wants, Maas expects that Sunny Dale will use the software for approximately 5 years. Maas does not anticipate any further interaction with Sunny Dale following transfer of the license. How much revenue should Maas recognize in the first year of the contract? a. $4,600 b. $0 c. $23,000 d. $5,750

c. $23,000

Howard Inc. had prepaid rent of $88,000 and $98,000 at the end of 2020 and 2021, respectively. During 2021, Howard recorded $253,000 in rent expense in its income statement. Cash outflows for rent in 2021 were: a. $243,000. b. $253,000. c. $263,000. d. $273,000.

c. $263,000. (98,000- 88,000= 10,000) (253,000+ 10,000= 263,000) ('21-'20 prepaid rent) (rent expense+ prepaid rent difference= cash outflows for rent)

You borrow $35,000 to buy a boat. The loan is to be paid off in monthly installments over one year at 30% interest annually. The first payment is due one month from today. What is the amount of each monthly payment? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) a. $2,917. b. $2,657. c. $3,412. d. None of these answer choices are correct.

c. $3,412.

Present and future value tables of $1 at 9% are presented below. Claudine Corporation will deposit $6,700 into a money market sinking fund at the end of each year for the next four years. How much will accumulate by the end of the fourth and final payment if the sinking fund earns 9% interest? a. $29,212. b. $33,398. c. $30,640. d. $28,609.

c. $30,640. (6,700*4.5731 FVA)

Present and future value tables of $1 at 9% are presented below. Ajax Company purchased a six-year certificate of deposit for its building fund in the amount of $230,000. How much should the certificate of deposit be worth at the end of six years if interest is compounded at an annual rate of 9%? a. $1,031,761. b. $384,474. c. $385,733. d. $1,030,502.

c. $385,733. (230,000*1.6771 FV)

Present and future value tables of $1 at 3% are presented below: A firm leases equipment under a long-term finance lease (analogous to an installment purchase) that calls for 12 semiannual payments of 46,104.31. The first payment is due at the inception of the lease. The annual rate on the lease is 6%. What is the value of the leased asset at inception of the lease? a. $512,772 b. $461,039 c. $472,690 d. $526,818

c. $472,690 (46,104.31* 10.25262 PVAD)

During its 2021 fiscal year, Jacobsen Corporation reported before-tax income of $626,000. This amount does not include the following two items, both of which are considered to be material in amount: Unusual gain $206,000 Loss on discontinued operations (306,000) The company's income tax rate is 25% .Jacobsen Corporation prepares its financial statements applying U.S. GAAP. In its 2021 income statement, Jacobsen would report income from continuing operations of: a. $399,500. b. $626,000. c. $624,000. d. $469,500.

c. $624,000. (626,000+ 206,000= 832,000) (832,000*.25=208,000) (832,000-208,000= 624,000)

During its 2021 fiscal year, Jacobsen Corporation reported before-tax income of $638,000. This amount does not include the following two items, both of which are considered to be material in amount: Unusual gain $218,000 Loss on discontinued operations (318,000) The company's income tax rate is 25%. Jacobsen Corporation prepares its financial statement applying International Financial Reporting Standards (IFRS). In its 2021 income statement, Jacobsen would report income from continuing operations of: a. $408,500. b. $638,000. c. $642,000. d. $478,500.

c. $642,000. (638,000+ 218,000=856,000) (856,000*.25= 214,000) (856,000- 214,000= 642,000)

Green Co. reported the following in its year-end statement of cash flows: net cash provided by operating activities of $209,000; net cash used for investing activities of $354,000; and net cash provided by financing activities of $190,000. Included in those cash flows is the sale of equipment during the year that resulted in a gain of $7,200 and proceeds of $55,000. Green's cash balance at the beginning of the year was $36,500. What was Green's cash balance at the end of the year? a. $45,000 b. $55,000 c. $81,500 d. $88,700

c. $81,500 (209,000-354,000+190,000+36,500=81,500) (Net cash provided operating -net cash used+ net cash provided financing+ cash at beginning of the year= cash balance at the end of the year)

Rowdy's Restaurants cash flow ($ in millions) Cash received from: Customers $2,850 Interest on investments 270 Sale of land 170 Sale of Rowdy's common stock 740 Issuance of debt securities 2,700 Cash paid for: Interest on debt $370 Income tax 150 Debt principal reduction 2,200 Purchase of equipment 5,400 Purchase of inventory 1,700 Dividends on common stock 410 Operating expenses 640 Rowdy's would report net cash inflows (outflows) from financing activities in the amount of: a. $1,240 million. b. $(1,240) million. c. $830 million. d. $(680) million.

c. $830 million. (2,700+ 740- 2,200- 410=830) (Issuance of debt securities+ sale of capital stock - debt principal reduction-dividends= net cash flows from financing activities)

On January 1, 2021, Glanville Company sold goods to Otter Corporation. Otter signed an installment note requiring payment of $25,000 annually for four years. The first payment was made on January 1, 2021. The prevailing rate of interest for this type of note at date of issuance was 9%. Glanville should record sales revenue in January 2021 of: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) a. $100,000 b. $80,993 c. $88,282 d. None of these answer choices are correct.

c. $88,282 (25,000*3.53129 PVAD)

Kunkle Company wishes to earn 6% annually on its investments. If Kunkle makes an investment that equals or exceeds that rate, it considers it a success. Assume that Kunkle invests $3.8 million and gets $475,000 in return at the end of each year for X years. What is the minimum value of X (number of years) for which Kunkle will consider the investment a success? Assume that Kunkle can't invest for fractional parts of a year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) a. 10 years. b. 7 years. c. 12 years. d. 9 years.

c. 12 years.

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receivable$58,000 $45,000 Merchandise inventory 37,000 53,000 Net sales 236,900 231,000 Cost of goods sold 132,000 117,000 Total assets 443,000 414,000 Total shareholders' equity 258,000 234,000 Net income 46,000 37,000 Hulkster's 2021 average days in inventory is (rounded): (Round your intermediate calculations to 2 decimal places.) a. 67 days. b. 114 days. c. 125 days. d. 102 days.

c. 125 days. (37,000+53,000=90,000) (90,000/2=45,000) ((365*45,000)/132,000=124.43) (125) ((365* average inventory)/ COGS= average inventory in days)

On July 15, 2021, Ortiz & Co. signed a contract to provide EverFresh Bakery with an ingredient-weighing system for a price of $90,000. The system included finely tuned scales that fit into EverFresh's automated assembly line, Ortiz's proprietary software modified to allow the weighing system to function in EverFresh's automated system, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortiz's systems.) If Ortiz was to provide these goods or services separately, it would charge $60,000 for the scales, $10,000 for the software, and $30,000 for the calibration contract. Ortiz delivered and installed the equipment and software on August 1, 2021, and the calibration service commenced on that date.How many performance obligations exist in this contract? a. 0 b. 1 c. 2 d. 3

c. 2

Present and future value tables of $1 at 3% are presented below: Debbie has $174,808 accumulated in a 401K plan. The fund is earning a low, but safe, 3% per year. The withdrawals will take place annually starting today. How soon will the fund be exhausted if Debbie withdraws $60,000 each year? a. 2.7 years. b. 4.3 years. c. 3.0 years. d. 5.0 years.

c. 3.0 years.

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receivable$42,000 $37,000 Merchandise inventory 29,000 37,000 Net sales 213,300 200,000 Cost of goods sold 116,000 109,000 Total assets 427,000 406,000 Total shareholders' equity 242,000 226,000 Net income 34,000 29,000 Hulkster's 2021 receivables turnover is: (Round your answer to 2 decimal places.) a. 2.76. b. 4.81. c. 5.40. d. 10.17.

c. 5.40. (42,000+37,000= 79,000) (79,000/2= 39,500) (213,000/39,500=5.4) (Net sales/average accounts receivables= receivables turnover)

Excerpts from Dowling Company's December 31, 2021 and 2020, financial statements and key ratios are presented below (all numbers are in millions): 2021 2020 Accounts receivable (net)$28 $19 Net sales$135 $120 Cost of goods sold$80 $75 Net income$28 $23 Inventory turnover 6.20 Return on assets 12.40% Equity multiplier 2.56 Dowling's 2021 average collection period is: (Round your answer to 2 decimal places.) a. 49.32 days. b. 53.48 days. c. 63.54 days. d. 51.26 days.

c. 63.54 days. ((28+19)/2=23.5) ((23.5/135)*365=63.54) ((Beg. Acct receivable+ ending acct receivable) / 2= average accounts receivable) ((average accounts receivable/ net sales) * days in a year =average collection period)

Which of the following is not an indicator that the constraint on recognizing variable consideration should be applied? a. Poor (limited) evidence on which to base an estimate b. A broad range of outcomes that could occur c. A short delay before uncertainty resolves d. A history of the seller changing payment terms on similar contracts

c. A short delay before uncertainty resolves

Sanjeev enters into a contract offering variable consideration. The contract pays him $4,200/month for six months of continuous consulting services. In addition, there is a 60% chance the contract will pay an additional $5,200 and a 40% chance the contract will pay an additional $6,200, depending on the outcome of the consulting contract. Sanjeev concludes that this contract qualifies for revenue recognition over time.Assume that Sanjeev estimates variable consideration as the most likely amount. After Sanjeev has recognized revenue for two months of the contract, he changes his assessment of the chance the contract will pay him $6,200 to 70%. What adjustment to revenue should Sanjeev recognize to account for that change in estimate? a. Debit of $332 b. Debit of $4,200 c. Credit of $332 d. Credit of $4,200

c. Credit of $332 (4200x6=25200) (25200+5200=30400) (30400/6=5066.67)(5066.67x2=10133.33)(4200x6=25200)(25200+6200=31400) (31400/6=5233.33) (5233.33x2=10466.67)(10466.67-10133.33=~322)

When preparing interim financial statements, an enterprise should: I. Use the same accounting principles followed in preparing its latest annual financial statements. II. Allocate expenses among all interim periods benefited, if the expenses are expected to benefit not only the period of occurrence but also additional period(s) in the same fiscal year. III. Allocate revenues and expenses evenly over the quarters, regardless of when they actually occurred. a. I only. b. II only. c. I and II only. d. I and III only.

c. I and II only.

Which of the following is not a characteristic of a distinct good or service? a.It can be used on its own or in combination with other goods or services the seller could obtain elsewhere b. It is not highly dependent on other goods or services in the contract c. It has a stand-alone selling price d. It is not interrelated with other goods or services in the contract

c. It has a stand-alone selling price

Which of the following is an example of an extended warranty? a. Fancy Headphones, Inc. provides assurance that its headphones are defect-free after purchase. b. Azalea's Flowers assures clients that its flowers will stay fresh for at least a week. c. Mark Electronics offers a warranty at an affordable price that provides additional protection after the customer takes possession of the product. d. Erickson Electronics promises to make repairs or replace any product found to be defective within a week of purchase.

c. Mark Electronics offers a warranty at an affordable price that provides additional protection after the customer takes possession of the product.

During the year ended December 31, year 8, Dalgiesh Co. had sales of $1,500, cost of goods sold of $800, and sales, general and administrative expenses of $200. In addition, Dalgiesh is involved in a restructuring process expected to last several years, and incurred restructuring costs in year 8 of $125. During the year the company also sold various investments for a net pre-tax gain of $125, and received $40 in dividends from investments. What amount of operating and nonoperating income will Dalgiesh present in its year 8 income statement? Operating Nonoperating a.$500 $40 b.$225 $165 c.$375 $165 d.$300 $40 a. Option a b. Option b c. Option c d. Option d

c. Option C (1,500-800-200-125= 375) (125+40=165) (Sales-COGS-expenses- = Operating) (+Dividends=Nonoperating)

Which of the following is not an indicator that revenue can be recognized over time? a. The seller is enhancing an asset that the buyer controls as the service is performed. b. The customer consumes the benefit of the seller's work as the seller performs the service. c. The seller is creating an asset that has an alternative use to the seller, and the seller can receive payment for its progress even if the customer cancels the contract. d. None of these answer choices are correct.

c. The seller is creating an asset that has an alternative use to the seller, and the seller can receive payment for its progress even if the customer cancels the contract.

Restructuring costs typically can be defined as: a. costs of external financing through issuance of debt or equity securities. b. costs associated safeguarding a company's assets and ensuring accuracy of financial reporting. c. costs associated with management's plans to materially change the scope of business operations or the manner in which they are conducted. d. costs of expenditures made on capital projects and executive compensation.

c. costs associated with management's plans to materially change the scope of business operations or the manner in which they are conducted.

A change in accounting principle that is implemented using the retrospective approach includes: a. implementing the change in the current period only and not adjusting for the cumulative effects on prior periods. b. applying the new standard to the adoption period only and recording the cumulative adjustment for prior periods to the beginning balance of retained earnings. c. restating financial statements of all periods presented as if the new standard had been used in those periods. d. not accounting for the change in the current period or prior periods.

c. restating financial statements of all periods presented as if the new standard had been used in those periods.

On August 1, 2021, Rocket Retailers adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by June 30, 2022. On January 31, 2022, Rocket's fiscal year-end, the following information relative to the discontinued division was accumulated: Operating loss Feb. 1, 2021-Jan. 31, 2022$128,000 Estimated operating losses, Feb. 1-June 30, 2022 85,000 Impairment of division assets at Jan. 31, 2022 18,000 In its income statement for the year ended January 31, 2022, Rocket would report a before-tax loss on discontinued operations of: a. $(67,000). b. $(128,000). c. $(213,000). d. $(146,000).

d. $(146,000) (128,000+18,000=146,000) (Operating loss+ impairment= before-tax loss)

Johnson sells $114,000 of product to Robbins, and also purchases $12,800 of advertising services from Robbins. The advertising services have a fair value of $9,400. Johnson should recognize total revenue to account for these events of: a. $114,000 b. $104,600 c. $101,200 d. $110,600

d. $110,600 (12800-9400=3400) (114000-3400=110600)

Present and future value tables of 1 at 11% are presented below. Polo Publishers purchased a multi-color offset press with terms of $65,000 to be paid at the date of purchase, and a noninterest-bearing note requiring payment of $40,000 at the end of each year for three years. The interest rate implicit in the purchase contract is 11%. Polo would record the asset at: a. $158,841. b. $105,000. c. $97,748. d. $162,748.

d. $162,748. ((40,000*2.44371) + 65,000)

Orange Inc. offers a discount on an extended warranty on its oPhone when the warranty is purchased at the time the oPhone is purchased. The warranty normally has a price of $138, but Orange offers it for $114 when purchased along with an oPhone. Orange anticipates a 80% chance that a customer will purchase the extended warranty along with the oPhone. Assume Orange sells to 1,000 oPhones with the extended warranty discount offer. What is the total stand-alone selling price that Orange would use for the extended warranty discount option for purposes of allocating revenue among the performance obligations in those 1,000 oPhone contracts? a. $24,000 b. $0 c. $114,000 d. $19,200

d. $19,200 (138-114=24) (24x80%=19.2) (19.2x1000=19,200)

On July 15, 2021, Ortiz & Co. signed a contract to provide EverFresh Bakery with an ingredient-weighing system for a price of $86,400. The system included finely tuned scales that fit into EverFresh's automated assembly line, Ortiz's proprietary software modified to allow the weighing system to function in EverFresh's automated system, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortiz's systems.) If Ortiz was to provide these goods or services separately, it would charge $57,000 for the scales, $10,000 for the software, and $33,000 for the calibration contract. Ortiz delivered and installed the equipment and software on August 1, 2021, and the calibration service commenced on that date.Assume that the scales, software and calibration service are viewed as one performance obligation. How much revenue will Ortiz recognize in 2021 for this contract? a. $86,400 b. $0 c. $57,888 d. $36,000

d. $36,000 (86,400* (5/12)= 36,000)

Present and future value tables of $1 at 3% are presented below: Rosie's Florist borrows $360,000 to be paid off in six years. The loan payments are semiannual with the first payment due in six months, and interest is at 6%. What is the amount of each payment? a. $36,921. b. $37,166. c. $38,964. d. $36,166.

d. $36,166. (360,000/9.95400 PVA)

Tropical Tours reported revenue of $418,000 for its year ended December 31, 2021. Accounts receivable at December 31, 2020 and 2021, were $36,600 and $31,800, respectively. Using the direct method for reporting cash flows from operating activities, Tropical Tours would report cash collected from customers of: a. $418,000. b. $454,600. c. $413,200. d. $422,800.

d. $422,800. (36,600- 31,800= 4,800) (418,000+ 4,800= 422,800) ('21- '20 accounts receivable= difference) (revenue+ difference= cash collected from customers)

Red Co. had the following transactions through December 31: Cash proceeds from the sale of investment in Gold Co. stock $15,000 Dividends received on investment in Blue Co. stock $10,000 Repaid principal on a loan to the bank $35,000 Acquired investment in Yellow Co. stock $75,000 Proceeds from the disposal of factory equipment $12,000 What amount should Red report as net cash used by investing activities in its statement of cash flows for the period ended December 31? a. $23,000 b. $35,000 c. $75,000 d. $48,000

d. $48,000 (15,000+10,000+35,000-12,000=48,000) (Cash proceeds+ Dividends+ Prepaid principal- proceeds= net cash)

Hong Kong Clothiers reported revenue of $5,150,000 for its year ended December 31, 2021. Accounts receivable at December 31, 2020 and 2021, were $320,100 and $353,700, respectively. Using the direct method for reporting cash flows from operating activities, Hong Kong Clothiers would report cash collected from customers of: a. $5,193,600. b. $5,150,000. c. $5,183,600. d. $5,116,400.

d. $5,116,400. (353,700- 320,100= 33,600) (5,150,000-33,600= 5,116,400) ('21-'20=difference) (revenue- difference=cash collected from customers)

Mary Alice just won the lottery and is trying to decide between the options of receiving the annual cash flow payment option of $390,000 per year for 25 years beginning today, or receiving one lump-sum amount today. Mary Alice can earn 6% investing this money. At what lump-sum payment amount would she be indifferent between the two alternatives? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) a. $9,750,000 b. $4,985,510 c. $5,674,640 d. $5,284,640

d. $5,284,640 (390,000* 13.55036 PVAD)

Howard Co.'s 2021 income from continuing operations before income taxes was $295,000. Howard Co. reported before-tax income on discontinued operations of $76,000. All tax items are subject to a 25% tax rate. In its income statement for 2021, Howard Co. would show the following line-item amounts for income tax expense and net income: a. $278,250 and $73,750 respectively. b. $371,000 and $314,000 respectively. c. $219,000 and $276,000 respectively. d. $73,750 and $278,250 respectively.

d. $73,750 and $278,250 respectively. (295,000 x .25=73,750) & ( 295,000+76,000=371,000) (371,000 x .25=92,750) (371,000-92,750=278,250) (Income taxes x tax rate= income tax expense) & (income taxes+ discontinued operations=?) (? x tax rate(25%=!) (?-!=net income)

Minarski Electronics sells computers and provides hardware maintenance services. On April 1st, Minarski sold a package deal containing a computer and a one-year unlimited maintenance/repair service for the computer at a bundle price of $1,000. If sold separately, the computer costs $1,002, and the one-year unlimited maintenance/repair service costs $198. How much revenue does Minarski Electronics recognize for the month ended April 30th, assuming that revenue is accrued monthly? a. $16.50 b. $1,000 c. $1,018.50 d. $848.75

d. $848.75 (1000/1200=.8333) (.833*1002=835) (1000/1200=.8333) (.8333*198=165) (165/12=13.75) (835+13.75=848.75)

Garland Inc. offers a new employee a single-sum signing bonus at the date of employment, June 1, 2021. Alternatively, the employee can receive $47,000 at the date of employment plus $18,000 each June 1 for five years, beginning in 2025. Assuming the employee's time value of money is 10% annually, what single amount at the employment date would make the options equally desirable? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) a. $53,265 b. $92,560 c. $47,560 d. $98,265

d. $98,265 (18,000 x 4.16987 PVAD) (<< x .68301 PV(n=4)) (<<+47,000)

Excerpts from Dowling Company's December 31, 2021 and 2020, financial statements and key ratios are presented below (all numbers are in millions): 2021 2020 Accounts receivable (net)$25 $36 Net sales$135 $120 Cost of goods sold$80 $75 Net income$25 $37 Inventory turnover 6.20 Return on assets 12.4% Equity multiplier 2.56 Dowling's average total assets for 2021 is: (Round your answer to whole number.) a. 52. b. 250. c. 135. d. 202.

d. 202. (25/.124=201.61) 202 (Net income/return on assets =average total assets)

Present and future value tables of $1 at 9% are presented below. You want to invest $7,900 annually beginning now in order to accumulate $27,900 for a down payment on a house. If you can invest at an interest rate of 9% compounded annually, about how many years will it take to accumulate the required amount? a. 4 years. b. 6 years. c. 5 years. d. 3 years.

d. 3 years.

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receivable$50,000 $41,000 Merchandise inventory 33,000 45,000 Net sales 263,900 250,000 Cost of goods sold 124,000 113,000 Total assets 435,000 410,000 Total shareholders' equity 250,000 230,000 Net income 40,000 33,000 Hulkster's 2021 return on assets is (rounded): a. 16.0%. b. 8.4%. c. 60.7%. d. 9.5%.

d. 9.5%. (435,000+410,000= 845,000) (845,000/2= 422,500) (40,000/422,500=.09467)(.09467*100=9.5%) (Net income/ average asset = return on assets)

A series of equal periodic payments that starts more than one period after the agreement is called: a. An annuity due. b. An ordinary annuity. c. A future annuity. d. A deferred annuity.

d. A deferred annuity.

Cash flows from financing activities include: a. Interest received. b. Interest paid. c. Dividends received. d. Dividends paid.

d. Dividends paid.

In a statement of cash flows prepared under International Financial Reporting Standards (IFRS), each of the following items is typically classified as a financing cash flow except: a. Interest paid. b. Dividends paid. c. Proceeds from the issuance of long-term debt. d. Dividends received.

d. Dividends received.

Which of the following does not apply to a seller who is a principal? a. Has control over goods or services b. Primarily responsible for providing goods or services to customers c. Exposed to risks associated with holding inventory d. Primary performance obligation is to facilitate the transfer of goods or services

d. Primary performance obligation is to facilitate the transfer of goods or services

In the DuPont formula, return on assets equals: a. Gross margin on sales x Inventory turnover. b. Profit margin on sales x Inventory turnover. c. Gross margin on sales x Asset turnover. d. Profit margin on sales x Asset turnover.

d. Profit margin on sales x Asset turnover.

A company has decided to discontinue a component of its business and sells the component by the end of the year. The amount that the company would report as income from discontinued operations is (ignore tax effects): a. only income from operations for the year. b. only the gain or loss on the disposal of the component's assets. c. income from operations for the year and only a loss on the disposal of the component's assets. d. income from operations for the year and either a gain or loss on the disposal of the component's assets.

d. income from operations for the year and either a gain or loss on the disposal of the component's assets.