Progress Tests
Nu Corp. agreed to give Rand a machine in full settlement of a note payable to Rand. The machine's original cost was $140. The note's face amount $110. On the date of the agreement: Note CV=105 and PV=96 Machine CV=109 and FV=96 what amount ot net gains (losses) should Nu recognize in its income statement? 0 -4 -13 -9
-4 Ordinary gain o the troubled debt restructuring and (13) loss on on disposal of machine. Netting to an ordinary loss of -4.
On December 31, year 1, classic company revalued a patent under IFRS. On that date, the patent has a carrying value of $250,000, and a remaining useful life of 5 years. On december 31, year 2, the patent's fair value of 200,000, and a remaining useful life of 5 years. On December 31, year 2, the patent's fair value was $175,000. In its december 31, year 2 financial statements, classic will report a current period revaluation: loss of 25 loss of 75 gain of 40 gain of 15
gain of 15 During Year 2, Classic will record amortization on the patent of $40,000 ($200,000 revalued patent / 5 years). The carrying value of the patent on December 31, Year 2 will be $160,000 ($200,000 fair value on revaluation date - $40,000 amortization) and a revaluation gain of $15,000 will be recorded in Year 2 income to adjust the patent to its December 31, Year 2 fair value of $175,000. This represents a revaluation gain that partially offsets a previously recorded revaluation loss, so this is an income statement item.
On December 31, an entity analyzed a patent with a net carrying value of $500 for impairment. The entity determined the following FV $495 Undisc. FCF 515 what is the impairment loss that will be reported on the decemebr 31 IS under US Gaap? 20 15 0 5
0 Under U.S. GAAP, impairment analysis begins with a test for recoverability in which the net carrying value of the asset is compared to the undiscounted cash flows expected from the asset. If the net carrying value exceeds the undiscounted cash flows, then an impairment loss is recorded equal to the difference between the carrying value and fair value of the asset. In this situation, the carrying value of $500,000 is less than the undiscounted future cash flows of $515,000, so no impairment loss is recorded.
Dodd corp. is preparing its December 31 financial statements and must determine the proper accounting treatment for the following situations. - for the year ended 12/31 doss has a loss carry forward of $180 available to offset future taxable income. However, there are no temporary differences. - on December 30, dodd received a $200 offer for its patent. The offer expires on 2/28 of the next year. The patent has a carrying amount of $100 at December 31. Assume a current and future income tax rate of 21%. In its income statement, Dodd should recognize and increase in net income of: 79 0 37.8 142.2
0- US GAAP does not permit recognition of "net operating loss carry forward" in year of loss, but the deferred asset should be reduced by a "valuation allowance" based on the "more likely or no" test of expected realization. In this case, there does not appear to be enough evidence to support realization. Unless evidence is provided to the contrary, it is general assumed that an NOL is the current period means that there is a greater than 50% chance that there will be NOL's in future periods. Therefore, a "valuation allowance" should reduce the deferred asset to zero, and result in no increase in net income. Accounting recognition is not given to offers to sell assets because a completed transaction has not occurred.
Bach Co. adopted the U.S GAAP dollar-value LIFO inventory method ad of January 1, Yr1. A single inventory pool and an internally computed price index are used to compute Bach's LIFO inventory layers. Information about Bach's dollar value inventory follows: Date base cost Cy cost 1/yr1 90 90 yr1 lyr 20 30 yr 2 lyr 40 80 What was the price index used to compute Bach's year 2 dollar value LIFO inventory layer? 1.33 2 1.25 1.09
1.33
In its year 2 FS, cris reported interest exp of 85 an dits IS and Cash paid for int of 68 in its cf statement. There was no prepaid int or int capitalization either at the beginning or end of year 2. Accrued interes at decemeber 31, year 1, was $15. what amount should cris report as accrued interest payable in its dec 31, year 2 BS? 15 17 2 32
32 Beg bal = 15 + int. exp = 85 ----------= 100 - int. paid = (68) ------end = 32 ( use T accounts)
Lee, Inc. acquired 30% of Polk Corp.'s voting stock on January 1, Year 1, for $100,000. During Year 1, 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 Year 2, Polk earned $50,000 and paid dividends of $15,000 on April 1, and $15,000 October 1. On July 1, Year 2, Lee sold half its stock in Polk for $66,000 cash. What should be the gain on sale of this investment in Lee's Year 2 income statement? 12.25 13.75 10.00 16.00
12.25 Beg = 100 + 40*.3 = 12 + 25*.3 = (7.5) --------104.5 + 50*.3 *1/2 = 7.5 + 15*.3* = -4.5 -------- 107.5 x .5 = 53..75 sold for 66 gain of 12.25
In year 2, ajax reported taxable income of $400 and pretax financial statement income of $300. The difference resulted from $60 of nondeductible premiums on ajax officers' life insurance and $40 of rental income received in advance. Rental income is taxable when received. Ajax effective tax rate is 30%. In its year 2 IS, what amount should ajax report as IS tax exp current portion? 120 102 90 108
120 Income tax expense for current portion only accounts for the taxable income multiplied by the tax rate. For Ajax, that is $400 x 30% = $120
On January 2 of the current year, Peace. co. paid $310 to purchase 75% of the voting shares of Surge co. Peace reported retained earnings of $80 and Surge reported contributed capital of 300 and RE of 100. The purchase diff was attributed to depreciable assets with a remaining useful life of 10 year. Surge reported net income of $20 and paid dividends of 8 during the current year. What amount will peace report as dividends declared and paid in its current year's consolidated statement of retained earnings? 21 23 8 15
15 - when the fs's of peace and surge are consolidated, the equity of surge, including surge's RE will be eliminated. the consolidated statement of RE will include only the $15 div paid by peace during the current year.
Tack, Inc. reported a retained earnings balance of $150,000 at December 31, Year 1. In June Year 2, Tack discovered that merchandise costing $40,000 had not been included in inventory in its Year 1 financial statements. Tack has a 30°/o tax rate. What amount should Tack report as adjusted beginning retained earnings in its statement of retained earnings at December 31, Year 2? a. $190,000 b. $178,000 c. $150,000 d. $122,000
178 Prev RE 150 + 40k adj - 12 (.30*40) = 178
On december 31, Planet company acquired 80% of the voting common stock of Star company by issuing $100 shares of its own common stock (FV $8/shr). In the acquisition, plannet paid legal fees in the amount of $5 and paid SEC registration fees of $10. The book val of star of 12/31 was $700. Stars only balance sheet item had a BV of $00 and FV of $150. GW to be shown on planet's December 31 consolidated balance sheet under IFRS partial goodwill method is: 50 65 200 250
200 Under the IFRS partial goodwill method, goodwill is the difference between the purchase price and the fair value of the net assets acquired: Partial goodwill = Purchase price − FV net assets acquired Partial goodwill = (100,000 shares × $8/share) − [80% × ($700,000 + $50,000)] Partial goodwill = $800,000 − $600,000 = $200,000
Pugh co. reported the following in its statement of stockholder's equity on January 1 of the current year. CS, $5 par val, authorized 200 shares, issued 100 shares = 500 APIC = 1500 RE = 516 ------------= 2516 less TS, at cost, 5000 shares (40) ------------= 2476 the following occurred in the current year. May 1 - 1 shrs of TS sold for 10 Jul 9 - 10 shares of prev unissued CS sold for $12 ps Oct 1 - distri of a 2for1 stock split resulted in the CS per share pv being halved. pugh accts for TS under the cost method. Laws in the state of pugh's incorporation protect shares held in treasuty from dilution when stock divs or stock splits are declared. The number of outstanding commons shares at December 31 should be: 222 212 216 220
212 Orig shrs outs = 100 - TS shrs (5) + TS shrs sold 1 + new shrs issd = 10 Total shares O/S before split = 106 *2 = 212
an entity authorized 500 shares of common stock. At January 1, yr2 the entity has 110 shares of CS issued and 100 shares of cs outstanding. The entity had the following transactions in yr 2. March 1 - issued 15 shares of CS June 1 - resold 2.5 shares of ts sept 1 completed a 2for 1 cs split. what is the total # of shares of commons stock that the entity has outstanding at the end of year 2. 250 235 117.5 230
235 when TS is resold, the stock is regarded as outstanding bc after the sales, the stock becomes stock held by shareholders other than the corp. prior to the stock split on 9/1 the entity will have 117.5 (100+15+2.5) shares of cs outstanding
Lizzy Co. traded an old machine to Chang co. for a similar machine. The exchange is assumed to lack commercial substance. Lizzy also received $10 cash. The following info relates to the machines on the date of the exchange. Old CV=70 Old FV=100 New CV=45 Old FV=90 what amount of gain should lizzy record from this exchange under US GAAP? 30 3 0 10
3 To determine the gain to be recognized, a gain of $30,000 ($100,000 fair value − $70,000 carrying value) is realized on the exchange. The total consideration received is $100,000 ($90,000 + $10,000). The cash received is $10,000, which is less than 25% of the total consideration received. A gain of $3,000 (1/10th) is recognized. The journal entry is as follows:
Which of the following is the minimum reporting requirement for a company that is preparing its first IFRS Financial statements? A. One statement of comprehensive income. B. 3 statements of financial position C. Two statements of financial position D. One statement of CF
3 statements of financial position
Taigo co. purchased merchandise from a vendor in engalnd on Nov 20 for 500 british pounds. Payment was dur in british pounds on jan 20. the spot rate to purchase on pound are as follows: Nov 20 - 1.25 Dec 31 - 1.20 Jan 20 - 1.17 how should the foreign currency translation gain be reported on Toigos FS at december 31? 1. gain of 40 on IS 2. Gain of 25 on OCI 3. gain of 25 on IS 4. gain of 40 on OCI
3. gain of 25 on IS On November 20th, the company enter into an agreement to purchase merchandise for an amount that it expected to settle for $625,000 (500,000 pounds x $1.25/pound). On December 31st, the spot rate had fallen to $1.20 per pound, at which rate the purchase could be settled for $600,000 (500,000 pounds x $1.20/pound). This represents a $25,000 foreign currency transaction gain that is recognized on the year-end income statement.
On the first day of each month, Bell mtg co. received from Keny an escrow deposit of $2500 for real estate taxes. Bell record the $2500 in an escrow account. Kents year 2 RE tax is $28k payable in equal installments of the first day of each calendar quarter. On December 31, yr1, the BS in the escrow account was $3000. On 9/30/ yr 2 what amount should bell show as an escrow liability to Kent? 11.5 8.5 4.5 1.5
4.5 Begin balance 12/31/ Year 1 $ 3,000 Add deposits ($2,500 x 9 months) 22,500 Sub Total 25,500 Deduct payments ($28,000/4 qtrs x 3 payments) (21,000) Ending balance 9/30/ Year 2 $ 4,500
On December 31, year 1, Byte co. had capitalized software costs of $600 with an economic life of 4 years. sales for year 2 were 10% of expected total sales of the software. At December 31, year 2, the software had a net realizable value of $480. In its December 31, year 2 balance sheet. What amount should they report as net capitalized cost of computer software? A. 450 B. 432 C. 480 D. 540
450 - amortization of capitalized software costs equals the greater of SL amort or sales revenue from the software for the period divided by the total projected sale. Dec 31 yr 1 bal 600/4 = 150 600-150 = 450
on January 1 yr1 David corp. Issued 1000 of its $1000 bonds at 94. david corp. uses GAAP. The bonds mature in 10 yrs but are callable at 102 any time after issuance. On jan 1 yr1 david incurred bond issue costs of $50. On 7/1 yr8 david called all the bonds and retired them. Assuming that bond disc and issue costs were amortized using the SL method, what amount of pretax loss would david report from this extinguishment of debt? 85 20 58.5 47.5
47.5
Macklin Co. entered into a franchise agreement with Heath Co. for an initial fee of $50,000. Macklin received $10,000 when the agreement was signed. The balance was to be paid at a rate of $10,000 per year, starting the next year. All services were performed by Macklin and the refund period had expired. Operations started in the current year. What amount should Macklin recognize as revenue in the current year? a. $0 b. $10,000 c. $20,000 d. $50,000
50 - the franchisor should report revenue from initial franchise fees when all performance obligations of the sale have been satisfied. macklin co will recognize the entire initial fee in the current year.
Wall co. sells a product under a Two year warranty. The estimated cost of warranty repairs id 2% if net sales. During Wall's first 2 year in business, it made the following sales and incurred the following warranty repair costs: Yr1 total sales =250 total repair costs =4.5 YR2 total sales =300 total repair costs =5 what amount should wall report as warranty expense for yr2? 5 6 5.9 1
6 under accrual accounting the entire warranty liability must be accrued in the year of the sale to match the warranty cost to the related revenue. The yr 2 warranty expense is 6: Yr2 sales 300*.02=6
On July 1 yr1. black and associates issued 2000 of its 8%, 1000 bonds for $1752. the bonds were issued to yield 10%. The bonds are dated july 1 yr1 and mauture on july 1 11. interest is payable semiannually on january 1 and july 1. Using the effective interest method, how much of the bond discount should be amortizes for the six months ended December 31 yr1? 9.920 15.2 12.4 7.6
7.6 Effective interest = $1,752,000 × .10 =$ 175,200 −Cash interest = 2,000,000 × .08 =160,000 15,200÷ 2= Disc. Amortization for the 6 months ended Dec. 31, Year 1 $ 7,600
a co records items on the cash basis throughout the yr and converts to an accrual basis for year-end reporting. Its Cash basis NI for the year is $70. The Company has gathered the following comparative BS info Beg & end of yr. AP = 3000 & 1000 Unearned REv = 300 & 500 Wages payable = 300 & 400 Prepaid rent = 1200 & 1500 AR = 1400 & 600 what amount should the company report as its accrual abased NI for the current year? 70200 73200 68800 71200
70200 One approach for converting from cash-basis to accrual-basis is as follows: Add increases in current assets. For example, when AR increases, the increase is not considered to be income under the cash basis because the cash has not been collected, but the increase is income under the accrual basis. Subtract decreases in current assets. Conversely, when AR decreases, then cash-basis counted it as revenue when the cash was collected, but under the accrual basis, the income was recognized in a prior period and should not be recognized again in the current period. Add decreases in current liabilities. For example, when AP decreases, this represents a cash outflow that is recorded as an expense under the cash basis. However, under the accrual basis the paid expenses were recorded in a prior period and should not be recorded again in the current period. Subtract increases in current liabilities. Conversely, when AP increases, this represents expenses incurred under the accrual basis method that have not been recorded under the cash basis method because they have not been paid. Therefore, starting with the $70,000, we add the $2,000 decrease in AP, subtract the $200 and $100 increases in unearned revenue and wages payable, add the $300 increase in prepaid rent, and finally subtract the $800 decrease in accounts receivable: $70,000 + $2,000 - $300 + $300 - $800 = $71,200
On December 30, hale corp paid 400 cash and issued 80 shares of its 1 par val common stock to its unsecured creditors on a pro rate basis pursuant to reorganization plan under chapter 11 of the bankruptcy statutes. Hale owned these unsecured creditors a total of 1200. hale's common stock was trading at 1.25 per share on december 30. Ignoring income taxes, as a result of this transaction, hales total stockholder's equity had a net increase of: a. 80 b. 800 c. 100 d. 1200
800 Gain is recognized by debtor if the face amoutn of the payable exceed the FMV of assets and/or equity transfer Face of payable 1200 Less: equity/asset transferred: Cash (400) Stock (100) (80*1.25) = Gain on restruc 700 + 80*1.25 9shares 100 = 800
On December 31, special insurance costs, incurred but unpaid, were not recorded, if these insurance costs were related to WIP, what is the effect of the omission on accrued liabilities and RE in the December 31 balance sheet?
Accrued liabilities = understated RE = No effect No effect to RE since the unrecorded liability affects WIP inv rather than COGS/RE), there is no effect on RE. But accrued liabilites (and inventory are understated)
Crossroads Co. chooses to report a financial asset at its fair value. The asset trades in two different markets; however, neither market is the principal market for the financial asset. In the first market, sales proceeds are $76, which is net of transaction costs of $6. In the second market, the sales proceeds are $80, which is net of transaction costs of $1. What amount should Crossroads report as the fair value of the asset? A. $76 B. $80 C. $81 D. $82
81 if the principal market (the market with the greatest volume and level of activity) cannot be identified, the most advantageous market should be used when determining the fair value of a financial asset. The most advantageous market will be the one which generates the highest net price, after considering transaction costs. However, the transaction costs will not be incorporated into the fair value. The second market generates the highest net price of $80 after considering transaction costs; therefore, it should be used for fair value purposes. The fair value amount will exclude transaction costs, which results in a fair value of $81 for the asset.
On august 31, yr 2 Harvey co. decided to change from the FIFO periodic inventory system to the weighted average periodic inventory system. Harvey is on a calendar year basis, uses US GAAP, and does not present comparative FS. the cummulative effect of the change is determined: a. Jan 1 yr2 b. Aug 31 yr2 c. During the months ending August 31 yr2 by a weighted average of the purchases d. during year 2 by a weighted average of the purchases
As of january 1 yr 2 (the begining of the year. if comparative FS are presented, then the adjustment is made to the beginning RE of the earliest year presented.
which of the following situations would require that the seller recognize revenue over time rather than at a point in time? A physical possession of the asset has transferred to the buyer B. Benefits are received by the buyer as the seller performs C. Rewards and risk of ownership remain with the seller D The buyer has legal title to the asset.
Benefits are received by the buyer and the seller perfoems
which of the following is a cost associated with exit and disposal activities? 1. cost associated with retirement of a FA 2. costs to relocate employees. 3. costs to terminate a capital lease 4. benefits related to voluntary employee termination
Costs to relocate employees - exit and disposal activities include costs to terminate a contract that is not a capital lease.
when the total consideration for a contract with multiple embedded obligations reflects a discount, the most appropriate way to assign that discount is to: A. assign it to the obligation with the highest stand alone price. B reduce the smaller obligation by the full amount of the discount C Assign it equally across all obligations D Allocate it proportionally to all obligations within the contract.
D - allocate it proportionally to all obligations within the contract.
At the end of year 1, a company reduced its inventory cost from $100 to its net realizable value of $80. As of the end of year 2, the inventory was still on hand and its net realizable value increased to $150. Under IFRS, what journal entry should the company record for year 2 to properly report the inventory value?
Debit Inventory for $20 and credit expense for $20 Under IFRS, if a lower of cost or market write-down has occurred and subsequently the net realizable value of the inventory item increases, a recovery may be recorded to the extent of the original write-down. In this case, a $20 recovery is allowed to increase the inventory value back up to its original cost of $100 and decrease the expense (original loss recorded), but the total increase of $70 is not allowed as this would cause the inventory value to exceed its original cost.
a deferred tax liability may result from which of the following items? 1. penalties paid for legal violations 2. depreciation of tangible assets 3. life insurance proceeds received on the death of key employees 4. interest on municipal bonds
Depreciation of tangible assets - a deferred tax liability may result from depreciation of tangible assets because MACRS depreciation methof used for tax purposed is an accelerated method. the depreciaiton expense taken on the tax return may e in excess of the depreciation taken on the IS. which will result in a deferred tax liability.
which of the following is not a disclosure requirement related to risks and uncertainties under US GAAP? A. Statement that accrual results could differ from the estimate included in the FS b. disclosure of vulnerability due to identified concentrations. c. disclosure of the relative importance of each business when an entity operates Multiple businesses. d. estimates of the effect of changes in significant accounting estimate.
Disclosure of vulnerability due to identified concentrations. concentrations only need to be identified if all the following are met. 1. concentration exists at the FS date. 2. it make the entity vulnerable to the risk of near-term severe impact. 3. it is least reasonably possible that the event that could cause the severe impact will occur in the near-term.
A board of commissioners directly elected by the citizens of the city of Lewisville governs the lewisville library and the library represents a legally recognized jurisdiction within its state. The city council of Lewisville approves the budget of the library, and by law, is entitiled to any excess earnings of the library. The lewisville library should be reported as a: 1. primary government 2. blended component unit of the city of lewisville 3. Discrete component unit of the city of lewisville 4. special purpose gov
Discreet comp of the city RUlE: the reporting status of a gov unit is determined by wheter it can stand alone by its SELF based on the following org. characteristics: S - separately E - elected gov body L - legally separate entity F- financially Independent status govs that meet all the criteria are reported a primary govs, while those that fail any of the criteria are considered component units. In addition govs that are comp units whose gov bodies are substantially the same as the primary gov or which exclusively serve primary gov of which it is a comp or that fail to qualify as a legal separate entity are blended.
Pott co. owned shares in rose co. On December 1, Pot declared and distributed a property dividend of rose shares when theif FV exceeded the CV. As a concequence of the dividend declaration and distribution, the accounting effects would be:
Div recorded at = FV RE= Decrease
times interest earned ratio
EBIT/Interest
Peel Co. received a cash dividend from a common stock investment. Should Peel report an increase in the investment account if it uses the FV method or the equity method of accounting?
FF = No (receipt of a div is recorded as income and does not affect the investment account) Equity= No (receipt of a dividend is recorded as a decrease in the investment account)
An XBRL financial statement exhibit is required to be submitted with all of the following SEC filings, except: a. Form 10-K. b. Forms 3, 4, and 5. c. Form 20-F. d. Form 6-K.
Forms 3,4 and 5 Forms 3, 4, and 5 are required to be filed by directors, officers, or beneficial owners of more than 10 percent of a class of equity securities of a registered company. These forms do not contain the registered company's financial statements because they are not filed by the company, and therefore are not required to present the company's financial statements in an exhibit prepared using XBRL
Under U.S. GAAP, the effect of a material transaction that is infrequent in occurrence but not unusual in nature should be presented separately as a component of income from continuing operations when the transaction results in a: Gain Loss
Gain: yes Loss: yes material transactions that are infrequent and or unusual in nature should be presented separately as a components of income from continuing operations when the transaction results in either a gain or loss.
When a property dividend is declared and the market value of the property exceeds it book value, the excess 1. Increases NI for the period 2. Increases APIC for the period 3. Decreases NI for the period 4. Decreases APIC for the period
Increases NI for the period - A property dividend is recorded at the FV of the property to be distributed. The property to be distributed. The property has to be adjusted to FV with the adjustment affecting earnings for the period.
Which of the following items is not required to be presented in an exhibit prepared using XBRL when a filer submits Form 10k to the sec? MD&A Statement of comprehensive income BS Summary of significant accounting policies
MD&A The MD&A is not required to be presented in an exhibit prepared using XBRL. The SEC's Interactive Data Rule requires a U.S. public company submitting a Form 10-K to present financial statements, including the balance sheet, statement of comprehensive income, and all footnotes, and any applicable financial statement schedules, in an exhibit prepared using XBRL.
If Hutton inc. sold 100 of inv for 100 cash on December 31 yr2. which of the following ratios would decrease? Working capital turn ROA ROE net profit margin
Net profit margin is calculated as net income divided by net sales. If inventory is sold at cost, net income does not change but net sales increases. Therefore, the numerator does not change but the denominator increases, causing net profit margin to decrease.
Tem co. issued rights to its existing stockholders without consideration. A stockholder received a right to buy one share for each shares held. Ht exercise price was in excess of par val, but less than the current market price. RE decreases when: 1. Rights are issued 2. rights are excercised
No and no when stock rights are issued without consideration, no entry (only disclosure) is made by either the issuer or the recipient.
Scott Co. exchanged similar nonmonetary assets with Dale Co. and no cash was exchanged. The carrying amount of the asset surrendered by Scott exceeded both the fair value of the asset received and Dale's carrying amount of that asset. Scott should: a. Recognize the difference between the carrying amount of the asset it surrendered and the fair value of the asset it surrendered as a loss. b. Recognize the difference between the carrying amount of the asset it surrendered and the fair value of the asset it received as a gain. c. Recognize the difference between the carrying amount of the asset it surrendered and the carrying amount of the asset it received as a loss. d. Recognize no gain or loss.
Recognize the difference between the carrying amount of the asset it surrendered and the fair value of the asset it surrendered as a loss. In all nonmonetary transactions, the fair value given is equal to the fair value received. Therefore, the carrying amount of the asset surrendered must exceed the fair value of the asset surrendered, which means Scott has a loss on the transaction. Losses on nonmonetary transactions must be recognized in full.
U.S. Securities and Exchange Commission (SEC) regulation for the financial statement presentation and disclosure requirements of SEC filings can be found in: Reg S-X Reg S-T Reg S-K Reg S-B
S-X
Which of the following is a governmental funs that uses the current financial resources measurement focus? 1. Private purpose trust fund 2. special revenue fund 3. internal service fund 4. enterprise fund
Special revenue - fund Special revenue fund. The current financial resources measurement focus is used exclusively by the governmental funds. Governmental funds are identified by the GRSPP mnemonic and defined as: General Special Revenue Debt Service Capital Projects Permanent
The purpose of a statement of financial position for a non gov not-for-profit entity is to provide relevant info about:
The A, L and NA and about their relationship to one another at a moment intime.
Assume that a company maintains a Defined benefit pension plan. The co/ net periodic pension cost for the year would be reported on: 1. the companies IS 2. the defined benefit pension plan's statement of changes in Net assets Available for benefits.
The IS
Per U.S. GAAP, which of the following statements is correct regarding accounting changes that result in financial statements that are, in effect, the statements of a different reporting entity? a. Cumulative-effect adjustments should be reported as separate items on the income statement in the year of change. b. No restatements or adjustments are required if the changes involve consolidated methods of accounting for subsidiaries. c. No restatements or adjustments are required if the changes involve the cost or equity methods of accounting for investments. d. The financial statements of all prior periods presented should be restated
The financial statements of all prior periods presented should be restated - when there is an change in entity
On January 1 of the current year, Jambon purchased equipment for use in developing a new product. Jambon uses the SL depreciation method. The equipment could provide benefits over a 10-year period. However, the new product development is expected to take five years, and the equipment can be used only for this project. Jambon 's current year expense equals: 1. 1/10 of the cost of the equipment 2. 0 3. 1/5 of the cost of the equipment. 4. the total cost of the equipment.
The total cost of the equipment since the equipment can be used only for this project it should be expensed immediately, even though the project is expected to take 5 year. It would be capitalized over its useful life, only if the equipment had an alternative use.
how do you calculate total debt ratio?
Total Liabilities / total assets
Sonex Construction co. incurred the following costs and made the following estimates n the first 2 years of a 3 year construction project. actual cy costs 1.2M 1M Est. cost to comp 1.8M .550M contract $ 5M 5M Bill and collect 2.5m 1.5m using the % of completion method of accounting, how much gross profit would Sonex recognize in year 2?
Year 1 Year 2 Contract Price $ 5,000 $ 5,000 Cum actual costs 1,200 2,200 Est. rem. costs 1,800 550 Est. total gp 2,000 2,250 Multiply by completion % 40%* 80%** Cum gp recognized 800 1,800 Less prev recognized gp 0 800 Cy gp to be recognized $ yr1 800 yr2 1,000 *[1,200 ÷ 3,000(1.2+1.8 total cost)] = 40% **[2,200 ÷ 2,750(2.2+.550)] = 80%
For interim financial reporting, the computation of a company's second quarter provision for income taxes uses an effective tax rate expected to be applicable for the full fiscal year. The effective tax rate should reflect anticipated: Foreign Tax rates Available tax planning alternatives
Yes and yes The effective income tax rates for operations for the full year should reflect anticipated foreign tax rates and available tax planning alternatives. In addition, the effect of other anticipated tax credits, capital gains rates, and foreign tax credits should be included.
Liquid industries defines cash an cash equivalents as cash and time certificates of deposit whose original maturity date is less than 90 days. When preparing their FS's, liquid industries would likely present this policy in the: a. summary of significant accounting policies. b. notes to the financial statements other than the summary of significant accounting policies. c. supplemental schedule of Non-cash investing and financing activities. d. face of the statement of cash flows.
a. summary of significant accounting policies. Significant accounting policies should be disclosed in the first or second note to the financial statements and titled "Summary of Significant Accounting Policies." The definition of cash and cash equivalents represents the definition of criteria and policy contemplated for inclusion of this note.
Under IFRS, which of the following would be included in income from continuing operations on the IS? 1. a large loss from a foreigncurrency transaction 2. a union strike that shuts down operations for 3 months 3. a foreign gov takes possession of a company's only plant/ 4. damage to a factory due to an eathquake in an area that had no previously experienced erthquakes
all 4 - same as US GAAP
The market price of a bond issued at a premium is equal to the present value of its principal amount:
and the present value of all interest payments, at the market (effective) interest rate.
Green co. Incurred leasehold improvement costs for its leased property. The estimated useful life of the improvements was 15 years. The remaining term of the nonrenewable lease was 20 years. these costs should be:
capitalized and depreciated over 15 yrs. Leasehold improvements are capitalized and then amortized over the lesser of the life of the improvements or the remaining term of the lease (in this question, the amortization period is the lesser of 15 or 20). The leasehold improvement costs should thus be expensed over a period of 15 years. This rule makes sense because the party making the leasehold improvements will benefit from the improvements for either the life of the improvements or the term of the lease if the term of the lease is shorter than the life of the improvements (in which case, somebody else will benefit from the improvements for the remaining life of the improvements).
Kid company, a toy manufacturer, owns 60% of the voting commons stock of Cone company. kid would not produce consolidated FS if; Cone is real-estate co. cone owns 40% of Kid cone is in legal reorganization or bankruptcy cone is located and does of all of its business in a foreign country
cone is in legal reorganization or bankruptcy
Vadis Co. sells appliances that include a three-year warranty. Service calls under the warranty are performed by an independent mechanic under a contract with Vadis. Based on experience, warranty costs are estimated at $30 for each machine sold. When should Vadis recognize these warranty costs? a. Evenly over the life of the warranty. b. When the service calls are performed. c. When payments are made to the mechanic. d. When the machines are sold.
d. When the machines are sold. Warranty costs should be recognized when the machines are sold. The concept is that of matching revenues and the related expenses in the period of benefit.
Shipping costs incurred by a consignor on transfer of goods to a consignee should be considered as expense to the consignor expense to the consignee inventory cost to the consignor Inventory cost to the consignee.
inventory cost to the consignor
BCA tech, a new co. produces webcams and other computer related software products. the company recently received a contract to produce and deliver over 500 webcams to be distributed evenly over the next 20 months. If the co. would like to use an output method to recognize revenue during the first year of the contract, which of the following methods would be most appropriate? a. labor hours expended b. costs-incurred to total expected cots. c milestones achieved d. resources consumed.
milestones achieved - are an example of an output method used to recognixe rev.
Isle Co. owned a copy machine that cost $5,000 and had accumulated depreciation of $2,000. Isle exchanged the copy machine for a computer that cost $4,000. Isle's future cash flows are not expected to change significantly as a result of the exchange. What amount of gain or loss should Isle report and at what amount should it record the asset? a. 1,000 gain in the income statement, 4,000 asset it in the balance sheet. b. no gain or loss in the income statement, 3,000 asset in the balance sheet. c. No gain or loss in the income statement, 4,000 asset in the balnace sheet d. 1000 gain in the income statement, 3000 asset in the balance sheet
no gain or loss in the income statement, 3,000 asset in the balance sheet. This is an exchange that lacks commercial substance because a copy machine will have very similar cash flows to a computer. The copy machine is presumed to have the same fair value as the computer, which is $4,000. The book value of the copy machine at the time of the exchange was $3,000. The difference represents a gain of $1,000, but the gain is not recognized because no boot is received. The basis of the asset acquired will be equal to the basis of the old asset, which is $3,000.
Cash receipts from grants and subsidies to decrease operating deficits should be classified in which of the following sections of the statement of CF for gov, not-for-profit entities? noncapital financing operating investing capital and related financing
noncapital financing (not used for capital purpose)
Instead of the usual cash dividend, Evie Corp. declared and distributed a property dividend from its overstocked merchandise. The excess of the merchandise's carrying amount over its market value should be: a. Ignored. b. Reported as a separately disclosed reduction of retained earnings. c. Reported as an extraordinary loss, net of income taxes. d. Reported as a reduction in income before extraordinary items.
reported as a reduction in income before income from continuing operations. - A loss recognized for the merchs carrying amounts over its MKT val. This results in a reduction in income cont. ops.
A contract contains multiple service related performance obligations. All of the following criteria below will lead to the treatment of each service as a distinct obligation except: A The buyer can benefit from each service when combined with her other available resouces. B. the promise to deliver each service is separately identifiable from the other services. C the buyer is able to benefit from each service independently D. the services are all similar in nature and provided in the same manner.
the services are all similar in nature and provided in the same manner.
Emma construction company started building new administrative headquarters on Jan 1 yr1. emma intends to occupy the building at the project completion date of Jan 1 yr 3. At decemeber 31, yr1, emma had incurred $2 of construction costs, evenly spread during that first year. Projected remaining costs are $2.5. During yr1 emma incurred interest cost on specific construction debt in the amount of $40 and interest on other unrelated loans in the amount $30. All loans carry 5% interest. How much interest should emma capitalize for yr1? 50 40 70 0
total expenditures = 2,000/2=1,000 1,000*.05 = 50 Compare "avoidable interest (the potential amount to be capitalized) to total actual interest cost incurred and capitalize the lower amount. 50<70. so 50 is capitalized.
