FAR MC

On March 1, Year 1, Harbour Corporation issued 10% debentures dated January 1, Year 1, in the face amount of $1,000,000, with interest payable on January 1 and July 1. The debentures were sold at par and accrued interest. How much should Harbour debit to cash on March 1, Year 1?

$1,016,667 1,000,000+16,667(1,000,000x10%x2/12)

Tyson Corp. purchased trading securities in March 1, Year 1, for $200,000. Tyson uses a December 31 year-end. The following information pertains to a property divided of the trading securities purchased in March. Fair Value Declaration date: December 20, Year 1 300,000 Record date: January 10, Year 2 310,000 Distribution date: January 28, Year 2 305,000 How much gain should Tyson recognize in Year 1 as a result of this property dividend?

$100,000 300,000-200,000

On January 2, Year 4, Raft Corp. discovered that it had incorrectly expensed a $210,000 machine purchased on January 2, Year 1. Raft estimated the machine's original useful life to be 10 years and its salvage value to be $10,000. Raft uses the straight-line method of depreciation and is subject to a 30% tax rate. In its December 31, Year 4, financial statements, what amount should Raft report as a prior period adjustment?

$105,000 Depreciation=$20,000 SL= $20,000[($210,000-$10,000)/10 years] =$60,000 30%x$150,000 ($210,000-$60,000) = $45,000

A company reports the following information as of December 31: Sales Revenue $800,000 COGS $600,000 Operating Expense $90,000 Unrealized holding gain on available-for-sale securities, net of taxes $30,000 What amount should the company report as comprehensive income as of December 31?

$140,000 Net income= $110,000(800,000-600,000-90,000) >110,000-30,000=140,000

Madden Company owns a tract of land, which it purchased in Year 1 for $100,000. The land is held as a future plant site and has a fair market value of $140,000 on July 1, Year 4. Hall Company also owns a tract of land held as a future plant site. Hall paid $180,000 for the land in Year 3, and the land has a fair market value of $200,000 on July 1, Year 4. On this date, Madden exchanged its land and paid 50,000 cash for the land owned by Hall. It is expected that the cash flows from the two tracts of land will not be significantly different. At what amount should Madden record the land acquired in the exchange?

$150,000 50,000+100,000

The following information pertains to Klein Corp. and its operating segments for the year ended December 31, Year 1: Combined profit of segments reporting profit: 600,000 Combined loss of segments reporting loss: (400,000) Combined profit and loss of all segments: 200,000 Klein has a reportable segment if that segment's operating profit or loss is

$60,000 profit 600,000x10%

Wolf Co.'s grant of 30,000 stock appreciation rights enables key employees to receive cash equal to the difference between $20 and the market price of the stock on the date each right is exercised. The service period is 20X1 through 20X3, and the rights are exercisable in 20X4 and the following year. The market price of the stock was $25 and $28 on December 31, 20X1 and 20X2, respectively. Assuming that the fair value of the stock appreciation rights was $5 at December 31, 20X1, and $8 at December 31, 20X2, what amount should Wolf report as the liability under the stock appreciation rights plan in its December 31, 20X2, balance sheet?

$160,000 Compensation expense: 240,000[30,000x(28-20)] Liability: 160,000(2/3x240,000)

On January 1, Year 1, Beal Corporation adopted a plan to accumulate funds for a new plant building to be erected beginning July 1, Year 6, at an estimated cost of $1,200,000. Beal intends to make five equal annual deposits in a fund that will earn interest at 8% compounded annually. The first deposit is made on July 1, Year 1. Present value and future amount factors are as follows: Present value of 1 at 8% for 5 periods: 0.68 Present value of 1 at 8% for 6 periods: 0.63 Future amount of ordinary annuity of 1 at 8% for 5 periods: 5.87 Future amount of annuity in advance of 1 at 8% for 5 periods: 6.34 Beal should make five annual deposits (rounded) of

$189,300 1,200,000/6.34

E&S Partnership purchased land for $500,000 on May 1, Year 1, paying $100,000 cash and giving a $400,000 note payable to Big State Bank. E&S made three annual payments on the note totaling $179,000, which included interest of $89,000. E&S then defaulted on the note. Title to the land was transferred by E&S to Big State, which canceled the note, releasing the partnership from further liability. At the time of the default, the fair value of the land approximated the note balance. In E&S's Year 4 income statement, the amount of the loss should be

$190,000 Note payable: 179,000-89,000= 90,000 Account balance = 310,000 (400,000-90,000) Loss: 500,000-310,000

Evergreen Company purchased a patent on January 1, Year 1, for $178,500. The patent was being amortized over its remaining legal life of 15 years, expiring on January 1, Year 16. During Year 4, Evergreen determined that the economic benefits of the patent would not last longer than 10 years from the date of acquisition. What amount should be charged to patent amortization expense for the year ended December 31, Year 4?

$20,400 Yearly amort. 1-3: 178,500/15 = $11,900 Book Value at 1/1/Y4: 178,500-(3-11,900) = $142,800 Year 4 amort: 142,800/7 = $20,400

Lin Co. sells its merchandise at a gross profit of 30%. The following figures are among those pertaining to Lin's operations for the 6 months ended June 30, Year 2: Sales 200,000 Beginning Inventory 50,000 Purchases 130,000 On June 30, Year 2, all of Lin's inventory was destroyed by fire. The estimated cost of this destroyed inventory was

$40,000 50,000+130,000 =180,000 -140,000 =40,000

Ball Corporation had the following infrequent gains during Year 1: A $240,000 gain on sale of a plant facility; Ball continue similar operations at another location A $90,000 gain on repayment of a long-term note denominated in a foreign current. A $190,000 gain on reacquisition and retirement of bonds. In its Year 1 income statement, how much should Ball report as total infrequent gains, which are not considered extraordinary?

$520,000

Beck, the active partner in Beck & Cris, receives an annual bonus of 25% of partnership net income after deducting the bonus. For the year ended, December 31, Year 1, partnership net income before the bonus amounted to $300,000. Beck's Year 1 bonus should be

$60,000 0.25(300,000-B) 75,000-0.25B 1.25B=75,000 B= 60,000

Loft Co. reviewed its inventory values for proper pricing at year-end. The following summarizes two inventory items examined for the lower of cost or market: Inventory 1 Inventory 2 Original Cost 210,000 400,000 Replacement cost 150,000 370,000 Net realizable value 240,000 410,000 Net realizable value less profit margin 208,000 405,000 What amount should Loft include in inventory at year-end if it uses the total of the inventory to apply the lower of cost or market?

$610,000 (210,000+400,000)

In its December 31, Year 1, balance sheet, Fleet Co. reported accounts receivable of $100,000 before allowance for uncollectable accounts of $10,000. Credit sales during Year 2 were $611,000, and collections from customers, excluding recoveries, totaled $591,000. During Year 2, accounts receivable of $45,000 were written off and $17,000 was recovered. Fleet estimated that $15,000 of the accounts receivable at December 31, Year 2, was uncollectable. In its December 31, Year 2, balance sheet, what amount should Fleet report as accounts receivable before allowance for uncollectable accounts?

$75,000 100,000+611,000-591,000-45,000

Purl Company began operations on January 1, Year 1. It recognizes income from construction type contracts under the percentage-of-completion method for financial reporting. However, on its income tax returns, Purl appropriately reports revenues under the completed-contract method. Information concerning income recognition under each method is as follows: Year. % of completion completed contract 1 450,000 0 2 675,000 425,000 3 825,000 925,000 For all affected years, assume the income tax rate is 30% and there are no other temporary differences. For Year 3, Purl should record an increase (decrease) in the deferred tax liability account of

($30,000) 100,000x30% = 30,000

A business interest that constitutes a large part of an individual's total assets should be presented in a personal statement of financial condition as

A single amount equal to the estimated current value of the business interest

In a statement of cash flows (operating activities shown using the indirect approach), a decrease in prepaid expenses should be

Added to net income

UVW Broadcast Co. entered into a contract to exchange unsold advertising time for travel and lodging services with Hotel Co. As of June 30, advertising commercials of $10,000 were used. However, travel and lodging services were not provided. How should UVW account for advertising in its June 30 financial statements?

An asset and revenue for $10,000 is recognized

How would the amortization of discount on bonds payable affect each of the following?

Carrying value of bond: increase Net income: decrease

Sun Co. is a wholly owned subsidiary of Star Co. Both companies have separate general ledgers and prepare separate financial statements. Sun requires stand-alone financial statements. Which of the following statements is correct?

Consolidated financial statements should be prepared only by Star and NOT by Sun

On September 1, Year 1, a company borrowed cash and signed a 2-year interest-bearing note on which both the principal and interest are payable on September 1, Year 3. The company did not elect the fair value option for reporting this note. On December 31, Year 2, the liability for accrued interest should be

For 16 months of interest

The market price of the common stock of an investee company increased during the year. How will the investor's investment account be affected by the increase in market price of that common stock under each of the following accounting methods? Assume the fair value option is not elected:

Cost adjusted for fair value method: increase equity method: no effect

An inventory loss from a market price decline occurred in the first quarter, and the decline was not expected to reverse during the fiscal year. However, in the third quarter the inventory's market price recovery exceeded the market decline that occurred in the first quarter. For interim financial reporting, the dollar amount of net inventory should:

Decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of decrease in the first quarter

A machine with a 4-year estimated useful life and an estimated 15% salvage value was acquired on January 1. Would depreciation expense using the sum-of-the-years' digits method of depreciation be higher or lower than depreciation expense using the double-declining balance method of depreciation in the first and second years?

First year: lower Second year: higher

When a company estimates its bad debt expense using the percent of net credit sales method, which of the following statement is true?

Matching is being followed

On December 1 of the current year, Bann Co. entered into an option contract to purchase 2,000 shares of Norta Co. stock fot $40 per share (the same as the current market price) by the end of the next two months. The time value of the option contract is $600. At the end of December, Norta's stock was selling for $43, and the time value of the option is now $400. If Bann does not exercise its option until January of the subsequent year, which of the following changes would reflect the proper accounting treatment for this transaction of Bann's December 31 year-end financial statements?

Net income will increase by $5,800 (43-40)= 3shares >3x2,000+400 =6,400 >6,400-600

A necessary condition for the recording of a pension liability is present when

Projected benefit obligation exceeds pension plan asset

The premium on a 3-year insurance policy expiring on December 31, Year 3, was paid in total on January 1, Year 1. Assuming that the original payment was initially debited to an expense account and that appropriate adjusting entries have been recorded on December 31, Year 2, the balance in the prepaid asset account on December 31, Year 2, would be

The same as it would have been if the original payment had been initially debited to a prepaid asset account

On January 1, Year 1, JCK Co. signed a contract for an 8-year lease of its equipment with a 10-year life. The present value of the 16 equal semiannual payments in advance equaled 85% of the equipment's fair value. The contract had no provision for JCK, the lessor, to give up legal ownership of the equipment. Should JCK recognize rent or interest revenue in Year 2, and should the revenue recognized in Year 2 be the same or smaller than the revenue recognized in Year 1?

Year 2 revenues recognized: interest Year 2 amount recognized compared to year 1: smaller