Intermediate Accounting FINAL - Multiple Choice
How are abnormal shortages handled when using the retail inventory method to estimate ending inventory?
Deducted in both the cost and retail columns before the calculation of the cost-to-retail percentage
Saunders Company purchased equipment by signing a noninterest-bearing note of $21,000 with payment due in three years. The equipment is custom-built, so its cash price is unavailable. Using a rate of 9%, which reflects the appropriate interest rate for a loan of this type of loan, the present value of the note is $16,216. Prepare the appropriate journal entry to record the purchase of the equipment.
Equipment $16,216 Discount on notes payable $4,784 Notes payable $21,000
Boston Company purchased equipment by signing a noninterest-bearing note with a face value of $64,800. The list price of the equipment is $50,000. Prepare the appropriate journal entry to record the purchase of the equipment.
Equipment $50,000 Discount on Note Payable $14,800 Note Payable $64,800
**Regarding property, plant and equipment (PP&E), GAAP requires companies to disclose which of the following in the notes to their financial statements? I. An estimate of the amount by which the fair value of assets reported at historical cost exceeds their reported amount. II. A general description of the method or methods used in computing depreciation. III. Major repairs or replacements of long-lived assets anticipated in the upcoming operating cycle.
II only.
During 20X0, Burr Company had the following transactions pertaining to its new office building: Purchase price of land $60,000 Legal fees for contracts to purchase land $2,000 Architects' fees $8,000 Demolition of old building on site $5,000 Sale of scrap from old building $3,000 Construction cost of new building (fully completed) $350,000 In Burr's December 31, 20X0, balance sheet, what amounts should be reported as the cost of land and cost of building?
$64,000 cost of land, $358,000 cost of building.
During the current year, Beta Motor Company incurred the following costs related to a new solar-powered car: Salaries of laboratory employees researching how to build the new car $250,000 Legal fees for the patent application for the new car $20,000 Engineering follow-up during the early stages of commercial production (the follow-up occurred during the current year) $50,000 Marketing research to promote the new car $30,000 Design, testing, and construction of a prototype $400,000 What amount should Beta Motor report as research and development expense in its income statement for the current year?
$650,000
Which of the following statements about LIFO liquidations in periods in which costs are rising is true?
They distort the income statement
On January 1, year 2, X Company made modifications to an asset used in its manufacturing operations in order to extend its useful life. The asset had an original cost of $30,000 and accumulated depreciation of $12,000, with a remaining useful life of 5 years. As a result of the modification, which cost $6,000, the remaining useful life was increased to 8 years. If X Company uses straight-line depreciation, in year 2, X Company:
Will capitalize the cost of the modification and will recognize depreciation expense of $3,000.
Which of the following inventory valuation methods produce(s) the same dollar amount as the balance in ending inventory under both periodic and perpetual inventory systems? FIFO LIFO a. Yes. Yes b. No. Yes c. Yes. No d. No. No
Yes No
Rhode, Incorporated, began business in Year 1. Inventory reported in the Year 3 year-end balance sheet, determined using the average cost method, was $170,000. In Year 4, the company decided to change its inventory method to FIFO. If the company had used the FIFO method in Year 3, ending inventory would have been $220,000. Prepare the appropriate journal entry to record this change.
inventory 50,000 retained earnings 50,000
patent
legal protection for 20 years to use a process or product
copy right
legal protection for 70 years + life of the creator for creative works
Under the conventional retail method, which of the following is not included in the denominator of the cost-to-retail percentage?
net markdowns
Carrington Corp. uses a periodic system and the LIFO method. Carrington had beginning inventory of 30 units purchased at $120 each and made the following purchases during the year: Jan. 15: 34 units at $110 May 30: 61 units at $84 Oct. 20: 160 units at $60 Sales during the year totaled 271 units. What is the cost of ending inventory?
1,680
When the current expected credit losses method is used, which of the following statements is true regarding the impact a collection of an account previously written off would have on Accounts Receivable and Allowance for Credit Losses balances?
Accounts Receivable would not change and Allowance for Credit Losses would increase.
Landry Company purchased $15,000 in inventory on April 1 under terms of 1/10, net 30. Landry missed the prompt payment deadline and still holds all the inventory. Under the gross method and the net method, at what amount is the inventory carried on Landry's balance sheet? Gross Method. Net Method a. $15,000 $15,000 b. $15,150. $15,150 c. $15,000. $14,850 d. $14,850 $15,000
$ 15,000. $14,850
On January 1, year 8 Harper Company finances the purchase of equipment by issuing a $15,000 non-interest-bearing note payable. The note will be paid off in 10 equal annual installments beginning on December 31, year 8. The market rate of interest for notes of this type is 5%. Considering the information below, at what amount should Harper Company report the equipment on its balance sheet dated December 31, year 8? The present value of $1 at 5% for 10 periods 0.61391 The present value of an ordinary annuity of $1 at 5% for 10 periods 7.72173 The present value of an annuity due of $1 at 5% for 10 periods is 8.10782
$11,583
Castille Corporation purchases, for $600,000, land upon which a building and a dilapidated shed are situated. Castille plans to use the building as-is for operations but immediately razes the shed at a cost of $5,000 minus scrap recovery of $1,000. A recent tax appraisal of the property allocated $100,000 to the land and $400,000 to the building. In the entry to record the acquisition of the property, at what amount will Castille debit Land?
$120,800
X Company purchased a patent on January 3, year 7 from Y Company for $145,000. An attorney drew up the contract between X and Y at a total cost of $15,000, which was split equally by the parties. The patent had a carrying value of $90,000 on Y's books. X expects to be able to benefit from the patent for 10 years, after which it is expected to be of little to no value. What will be the carrying value of the patent on X Company's December 31, year 8 balance sheet?
$122,000
In January 20X4, Vorst Company purchased a mineral mine for $2,640,000 with removable ore estimated at 1,200,000 tons. After it has extracted all the ore, Vorst will be required by law to restore the land to its original condition at an estimated cost of $180,000. Vorst believes it will be able to sell the property afterwards for $300,000. During 20X4, Vorst incurred $360,000 of development costs preparing the mine for production and removed and sold 60,000 tons of ore. In its 20X4 income statement, what amount should Vorst report as depletion?
$144,000
Roster Company adjusts its Allowance for Credit Losses at year end. The general ledger balances for the Accounts Receivable and the related allowance account before adjustment were $1,500,000 and $45,000, respectively. Roster estimates its necessary balance in its Allowance for Credit Losses as 4% of the Accounts Receivable balance. What amount should Roster record as an adjustment to its Allowance for Credit Losses at year end?
$15,000 increase
A wholesaler which prepares its financial statements according to International Financial Reporting Standards (IFRS) has the following per-unit costs for one of its products: Cost. $18.00 Net realizable value $15.00 Net realizable value less normal profit margin $14.40 Current replacement cost $14.70 In accordance with IFRS, what is the per-unit carrying value of inventory in the statement of financial positions?
$15.00
During the current year ended December 31, Metal, Incorporated incurred the following costs: Laboratory research aimed at discovery of new knowledge $75,000 Design of tools, jigs, molds, and dies involving new technology $22,000 Quality control during commercial production, including routine testing $35,000 Equipment acquired two years ago, having an estimated useful life of five years with no salvage value, used in various R & D projects $150,000 Research and development services performed by Stone Company for Metal, Incorporated $23,000 Research and development services performed by Metal, Incorporated for Clay Company $32,000 What amount of research and development expenses should Metal report in its current-year income statement?
$150,000
Regarding the topics of accounting for inventory and IFRS / U.S. GAAP characteristics or differences, which of the following statements is true?
If U.S. GAAP were to converge with IFRS regarding the use or non-use of LIFO, shareholders for many companies would likely see a surge in reported net income.
On January 2, year 7, X Company purchased equipment for $240,000. The equipment has an estimated useful life of 5 years and an estimated salvage value of $30,000. The equipment is being depreciated using the double-declining-balance method. What will be the balance in accumulated depreciation at December 31, year 8?
$153,600
The following costs pertain to Pete Company's purchase of inventory in year 4, Pete Company's first year of operations: 1200 units of product X $12,500 Insurance cost during transit of purchased goods $200 Freight-in $350 Cost of labor to bring product X to saleable condition $3,200 Total $16,250 None of the inventory was sold during year 4. What will be the ending balance in Pete Company's inventory?
$16,250
Underwater, Incorporated had a flood in its plant that destroyed most of its inventory. Its records show that beginning inventory was $20,000. Underwater made purchases of $250,000 and sales of $300,000 during the year. Its normal gross profit percentage is 35%. It can sell some of its damaged inventory for $7,500. The insurance company will reimburse Underwater for 75% of its loss. What amount should Underwater report as loss from the flood?
$16,875
Hexaco Corporation exchanged a piece of land that was being held for investment purposes for an oil rig that it will use in its drilling operations. The land had a carrying value of $230,000 and a fair value of $250,000 on the date of the exchange. The oil rig received in exchange had a fair value of $200,000 and, as a result, Hexaco received an additional $50,000 in cash in the transaction. The exchange had commercial substance. How much gain, if any, will Hexaco recognize on the exchange?
$20,000
Williams Company uses a periodic inventory system. The following are inventory transactions for the month of March: 3/1. Beginning Inventory. 5,000 units at $2 3/7. Purchase. 2,500 units at $3 3/16. Purchase 2,500 units at $4 3/26. Sales at $8 per unit. 7,500 units Williams uses the weighted average method to determine the value of its inventory. What amount should Williams report as cost of goods sold on the income statement for the month of January?
$20,625
The demand for one of X Company's products has declined in recent years. The product is manufactured using designated equipment that originally cost $1,300,000 and has a carrying value of $720,000. As of the current date, December 31, year 8, it is expected that only an additional 400,000 units are likely to be sold over the remaining life of the equipment. Each unit sells for $3 and has a manufacturing cost of $1.50. Relevant information as of December 31, year 8: The undiscounted future cash inflows from the sale of products over the life of the equipment is expected to be $600,000. The present value of the future cash inflows from the sale of products over the life of the equipment, calculated at the company's cost of capital, is $475,000. The equipment has a fair value of $490,000 on the date of evaluation. How much of an impairment loss will X Company recognize in year 8?
$230,000
Jethroe Company reported a retained earnings balance of $200,000 at December 1, year 4. In June year 5, Jethroe discovered that merchandise costing $50,000 had not been included in inventory in its year 4 financial statements. Jethroe has a 21% tax rate. What amount should Jethroe report as adjusted beginning retained earnings in its statement of retained earnings at December 31, year 5?
$239,500
Willett Company had the following amounts related to the sale of consignment inventory: Cost of merchandise shipped to consignee $100,000 Sales revenue for three fourths of inventory sold by consignee $125,000 Freight cost for merchandise shipped $10,000 Advertising paid for by consignee, to be reimbursed $5,000 10% sales commission due to consignee $12,500 What amount should Willett report as net profit (loss) from this transaction for the year?
$25,000
X Company acquired a machine on January 2, 20X1 for $100,000. The machine, which is depreciated using the double-declining balance method, was estimated to have a 10-year useful life and a salvage value of $10,000. On January 1, 20X3, the company revised its estimations regarding the machine, assigning it a useful life of 5 years beginning from that date, with a salvage value of $15,000 at the end of 5 years. How much will X Company recognize as depreciation expense in 20X3?
$25,600
X Company acquired a machine on January 2, year 6 for $100,000. The machine, which is depreciated using the double-declining-balance method, was estimated to have a 10-year useful life and a salvage value of $10,000. On January 1, year 8, the company revised its estimations regarding the machine, assigning it a useful life of 5 years beginning from that date, with a salvage value of $15,000 at the end of 5 years. How much will X Company recognize as depreciation expense in year 8?
$25,600
Cody Corporation incurred the following costs during 20X3: Design of tools, jigs, molds, and dies involving new technology $125,000 Modification of the formulation of a process $160,000 Troubleshooting in connection with breakdowns during commercial production $100,000 Adaptation of an existing capability to a particular customer's need as part of a continuing commercial activity $110,000 In its 20X3 income statement, Cody should report research and development expense of
$285,000
On July 1, year 7, X Company purchased a machine by paying a $20,000 down payment and signing a noninterest bearing note for $360,000, calling for payments of $6,000 per month for the next 5 years. X also paid an additional $10,000 for delivery and installation. The equipment could have been purchased for $310,000 on the date of acquisition. The equipment has a 10 year useful life with no salvage value and will be depreciated on a straight-line basis. What will be the amount of depreciation recognized in year 8?
$32,000
On January 1, year 8 Banks Company purchased a machine for $500,000 which it intends to use manufacturing one specific product, with production slated to begin October 1, year 8. The machine has no expected salvage value at the end of its 8-year useful life. To best represent the machine's pattern of use, Banks elects the units of production method for depreciating it. At the time of purchase, expected production was 10,000 units for year 8 and 90,000 units in later years. At December 31, year 8, actual production has been 7,000 units and Banks expects to produce 113,000 more units in later years. What amount of depreciation expense should Banks report for the machine on its income statement for the year ending December 31, year 8?
$29,167
Case Company's balances in Allowance for Credit Losses were $25,000 at the beginning of the current year and $18,000 at year end. During the year, receivables of $10,000 were written off as uncollectible. What amount should Case report as credit loss expense at year end?
$3,000
West Company recorded the following inventory information during the month of February: Units Unit Cost Total Cost Units on Hand Balance on 2/1. 800 $2 $1,600 800 Purchased on 2/8. 1,000 $3. $3,000 1,800 Sold on 2/14. 1,500 300 Purchased on 2/17. 2,000. $1. $2,000. 2,300 Sold on 2/23 1,600 700 Purchased on 2/28. 800 $4. $3,200 1,500 West uses the LIFO method to cost inventory. What amount should West report as inventory at the end of February using the periodic inventory method?
$3,700
X Company develops software for sale to other entities. Costs incurred in the current year in relation to its most recent software consist of: Design of program $60,000 Initial coding $230,000 Testing program prior to achieving technological feasibility $35,000 Additional coding and testing after achieving technological feasibility $50,000 Cost of producing masters after achieving technological feasibility $310,000 Production of software to be sold $650,000 Printing of instructions and support documentation to be included with software $40,000 How will the above costs be accounted for?
$325,000 will be reported as research and development expense.
X Company acquired three machines at the beginning of year 2, all of which will be used by its engineering department in performing research and development activities. The three machines consist of: Computer equipment costing $320,000 that will be used for general research and development activities. The computer has a 5-year useful life with no salvage value. Storage equipment costing $240,000 to contain a highly volatile substance that is being used in a specific research project. The storage equipment has a useful life of 5 years with no salvage value. The research project is expected to require 3 years to complete after which the equipment will have no alternative use to the company. A machine costing $180,000 that will be used for a specific research project that is expected to require one year. At the end of the year, the equipment, which has a 5-year useful life and no salvage value, will be used in the Company's manufacturing operations. How much will X Company report as research and development expense on its year 2 income statement?
$340,000
In year 1, X Company recognized an impairment loss on the trade name for its beverage product, reducing the carrying value from $485,000 to $350,000. At December 31, year 3, while preparing its financial statements, X Company has determined that the fair value of the trade name has risen and it is now worth $500,000. What amount will be reported for the trade name on X Company's December 31, year 3 balance sheet?
$350,000
In year 2, Kilroy Company purchased land for a new office building at a purchase price of $325,000. There was an existing building on the site that was demolished at a cost of $12,000. Scrap from the demolition was sold for $3,500. The building was completed during year 2. In addition, the following costs were incurred: Professional Fees: Attorneys for the purchase contract $7,500 Engineers to determine the required grading $18,000 Architects to design new building $40,000 Building permits $8,000 Construction of new building $1,275,000 In Kilroy's December 31, year 2, financial statements, how will the above costs be reported? Land. Building. Expense a. $341,000 $1,323,000 $0 b. $ 351,500. $1,315,000. $15,500 c. $359,000. $1,323,000. $0 d. $333,500. $1,275,000. $73,500
$359,000 $1,323,000 $0
Sylvester Company takes out a 12% loan of $500,000 on 1/1/year 4 to finance construction of a building for the company's own use. Construction begins immediately, and $600,000 is spent on the construction at an even pace during year 4. Another $400,000 is spent at an even pace during year 5, with construction completed on 12/31/year 5. No other construction loans are taken out. Sylvester incurred unrelated interest expenses of $10,000 and $15,000 in year 4 and year 5, respectively, on loans that bear interest at 10%. How much interest can Sylvester capitalize in year 4 and year 5? year 4. year 5 a. $60,000. $96,000 b. $36,900. $96,000 c. $60,000. $60,000 d. $36,000.. $75,000
$36,000. $75,000
In a transaction that lacked commercial substance, Blastor Company traded computer equipment with Pollux Company. Blastor Company's computer had a carrying value of $34,000. In exchange, Blastor received Pollux Company's computer, which had a fair value of $39,000, and $12,000 in cash. As a result of the exchange, what amount of gain will Blastor Company record?
$4,000
X Company and Y Company, operating on opposite sides of the country, manufacture equipment that is virtually identical except for a higher grade of metal used by X Company. As a result, the costs and fair values of one piece of equipment to X and Y are: Cost. Fair Value X Company $75,000. $105,000 Y Company $65,000. $91,000 X Company received an order from a customer in Y's state and Y received an order from a customer in X's state. In a transaction that lacks commercial substance, to avoid the cost and effort of shipping the equipment across the country, X and Y exchanged equipment and, essentially, X shipped to Y's customer and vice versa. Due to the difference in metals, however, Y paid X $14,000 in cash. How much profit will X Company recognize as a result of the exchange?
$4,000
On March 31, Year 3, Vale Company had an unadjusted credit balance of $1,000 in its allowance for credit losses. An analysis of Vale's trade accounts receivable at that date revealed the following: Age Amount. Estimated uncollectible 0 - 30 days. $ 60,000. 5% 31-60 days. $ 4,000. 10% Over 60 days $ 2,000 $1,400 What amount should Vale report as allowance for credit losses in its March 31, Year 3, balance sheet?
$4,800
X Company's engineering department incurred certain costs during year 8: Design of peripherals equipment, such as molds and dies $260,000 Development of plan for developing a new manufacturing process $120,000 Computer equipment that will be used exclusively for general research and development activities having a useful life of 5 years and no salvage value $210,000 Corrective actions to production problems during the commercial production of one of the company's products $110,000 How much will X Company report as research and development expense on its year 8 income statement?
$422,000
Mendelson Laboratories purchased engineering equipment at a cost of $420,000. Shipping costs totaled $15,000. Installation cost was $8,000. An additional electrical line had to be run to the equipment at a cost of $3,000. Labor and testing costs totaled $6,000. Materials used up in testing cost $3,000. The capitalized cost is:
$455,000
Very early in year 8, while developing software for sale to others, after achieving technological feasibility but before the commencement of commercial production, X Company incurred $320,000 to produce product masters and to test the software. X Company estimated that the software will be sold for a total of 10 years. After nearly a full year of selling, X had revenues from software sales of $120,000 in year 8. Sales in future periods are expected to amount to $680,000. Costs associated with producing and packaging the software approximate 10% of revenues. What portion, if any, of the $320,000 will be recognized in income in year 8?
$48,000
Fall Company paid $500 in freight-out charges to ship $25,000 of inventory on consignment to Rodgers Company. Rodgers printed and mailed customer promotions for the merchandise at a cost of $250, reimbursable from Fall. At the end of the year, 80% of the inventory was sold for $40,000. The agreement states that commission of 25% will be provided to Rodgers for all sales. What amount of net inventory on consignment remains on the balance sheet at the end of the year for Fall?
$5,100
X Company acquired land in Costa Rica for a total cost of $45,000,000. Engineers conducted a study at an additional cost of $500,000 to determine that there were oil reserves that should yield approximately 1,000,000 barrels of oil. The purchase agreement includes a requirement that the land be restored when the oil has been extracted, which is expected to cost $1,300,000, after which the land is expected to be worth $4,500,000. In year 8, X Company incurred $200,000 in development costs and extracted and sold 130,000 barrels of oil. How much depletion will X Company recognize during year 8?
$5,525,000
Arnold Company has a checking account at Neighbor Bank and an interest-bearing savings account at Stranger Bank. On December 31, year 1, the bank reconciliations for Arnold Company are as follows: Stranger Bank Bank Balance $45,000 Deposit in transit $5,000 Book balance $50,000 Neighbor Bank Bank Balance $15,000 Outstanding checks ($15,500) Book balance ($500) What amount should be classified as cash on Arnold's balance sheet at December 31, year 1?
$50,000
At December 31, Year 1, Gasp Company's allowance for credit losses had a credit balance of $30,000. During Year 2, Gasp wrote off uncollectible accounts of $45,000. At December 31, Year 2, an aging of the accounts receivable indicated that $50,000 of the December 31, Year 2, receivables may be uncollectible. What amount of allowance for credit losses should Gasp report in its December 31, Year 2, balance sheet?
$50,000
Idaho Corporation incurred the following costs for one of its potato processing machines: Purchase of sorting and shrink-wrapping attachment $25,000 Installation of attachment 5,000 Replacement parts for refurbishment of machine 15,000 Labor and overhead related to the refurbishment 9,000 The refurbishment improved machine efficiency by 20%. Neither the attachment nor the refurbishment increased the estimated useful life of the machine. What amount of the above costs should be capitalized?
$54,000
A fire destroyed most of the inventory in Mick's warehouse on September 1. After the fire, Mick's accounting records showed the following: Inventory, January 1 $55,000 Purchases, January 1 through September 1. $310,000 Sales, January 1 through September 1. $370,000 Inventory not damaged by fire $45,000 Gross profit percentage on sales. 30% What amount of inventory was lost in the fire?
$61,000
On March 15, 20X2, Krol Company paid property taxes of $90,000 on its office building for the calendar year 20X2. On April 1, 20X2, Krol paid $150,000 for unanticipated repairs to its office equipment. The repairs will benefit operations for the remainder of 20X2. What is the total amount of these expenses that Krol should include in its quarterly income statement for the three months ended June 30, 20X2?
$72,500
(IN SET TWICE) Misk, Incorporated received from a customer a one-year, $750,000 note bearing annual interest of 9%. After holding the note for six months, Misk discounted the note at National Bank at an effective interest rate of 12%. What amount of cash did Misk receive from the bank?
$768,450
On December 31, year 7, X Company paid $3,600,000 for 100% of the stock of Y Company when Y's underlying net assets had a fair value of $2,800,000. Almost immediately after the acquisition, X paid $240,000 for an advertising campaign that was designed to maintain goodwill. How much will be reported as goodwill on X Company's December 31, year 8 balance sheet?
$800,000
During year 8, Clark Company manufactured equipment for its own use at a total cost of $2,400,000. The project required the entire year to complete and all costs were incurred uniformly throughout the year. At the beginning of the period, Clark was able to borrow $1,500,000 at 6% specifically for the purchase of materials and the manufacture of the equipment. The entire debt, with interest was repaid on December 31, year 8, replaced with a long-term loan. Throughout year 8, Clark Company had additional debt of $1,000,000 with a weighted average interest rate of 7%. If Clark Company capitalizes the maximum amount of interest allowable under GAAP, how much will Clark report as interest expense in year 8?
$88,000
Cook Company determined that the net value of its accounts receivable at December 31, year 5, based on an aging of the receivables, was $235,000. Additional information is as follows: Allowance for credit losses − 1/1/year 5 $40,000 Uncollectible accounts are written off during year 5 $22,000 Uncollectible accounts recovered during year 5 $8,000 Accounts receivable at 12/31/year 5 $270,000 How much was recognized as credit loss expense?
$9,000
X Company had been depreciating a machine with an original cost of $125,000 and a salvage value of $15,000 over its estimated useful life of 10 years using straight-line depreciation. At the beginning of the seventh year, X Company determined that the machine will actually remain in use for a total of 12 years and will have a salvage value of $5,000. How much depreciation will X Company recognize in the seventh year?
$9,000
Assuming that Xilon prepares its financial statements according to International Financial Reporting Standards, select all the correct alternatives the company has for recording the acquisition of the office building. (grant) (On February 1, 2024, the Xilon Corporation issued 50,000 shares of its no-par common stock in exchange for five acres of land located in the city of Monrovia. On the date of the acquisition, Xilon's common stock had a fair value of $18 per share. An office building was constructed on the site by an independent contractor. The building was completed on November 2, 2024, at a cost of $6,000,000. Xilon paid $4,000,000 in cash and the remainder was paid by the city of Monrovia.)
- deduct the amount of the grant in determining the initial cost of the office building - record the grant as a liability, deferred income, in the balance sheet and recognize it in the income statement systematically over the office building useful life
A company that maintains its books and records under IFRS is applying the revaluation model to a certain fixed asset. In previous years, the value of the asset had declined. In the current year, however, the asset has appreciated in value by an amount that is greater than the cumulative decrease that had occurred previously. How will the company report the asset on the year-end balance sheet for the current year?
- the asset will be valued at its new fair value with the increase - up to the cumulative decrease in previous periods - recognized income and with the remainder recognized in other comprehensive income
On January 1, Greenview Company adopted the dollar-value LIFO method. The inventory cost on January 1 was $112,000. On December 31, ending inventory had a cost of $136,400. The cost index for the year was 1.10. For what amount would ending inventory be reported?
125,200
Zarek Company adopted the dollar-value LIFO inventory method as of January 1, year 2. A single inventory pool and an internally computed price index are used to compute Zarek's LIFO inventory layers. Information about Zarek's dollar value inventory follows: Date. At Base Year Cost. At Current Year Cost 1/1/year 2. $110,000. $110,000 year 2 layer $40,000. $70,000 year 3 layer $70,000 $140,000 What is the price index used to compute Zarek's year 3 dollar value LIFO inventory layer?
2.00
A company uses the retail method to estimate inventories. The following information is for the first six months of the current year: beginning inventory at cost and retail were $70,000 and $100,000 respectively, net purchases at cost and retail were $270,000 and $360,000, respectively, and sales during the first six months totaled $320,000. What is the estimated cost of goods sold at the end of the six-month period using the LIFO retail method?
240,000
If a company exchanges an asset with a book value of $260,000, an original cost of $500,000, and a fair value of $300,000 plus cash of $100,000 for a new asset, what is the gain or loss recognized on the transaction?
40,000 gain
X Company, a public entity, has goodwill that consists of five components resulting from three acquisitions. In the first acquisition, the assets and liabilities of the subsidiary were integrated into X Company's books and the goodwill was considered an asset of the entity. The second acquisition involves an additional payment to the seller if certain results are achieved. As a result, separate books are maintained for the subsidiary and goodwill is considered an asset on them. The third acquisition was of a multi-departmental company. For this acquisition X has hired three separate managers, each running a different department, and each with an incentive program based on that department's performance. As a result, three separate sets of books and records are being maintained for this acquisition, one for each department, with goodwill allocated to each of the sets of books. X Company is contemplating performing an impairment evaluation, as it does when it is preparing its financial statements each year. How many separate impairment evaluations is X Company required to perform?
5
Ameson Company uses average cost and a perpetual system. On January 1, the company had 600 units of inventory at an average cost of $55 per unit for a total cost of $33,000. The company purchased and sold inventory during the month as follows: Purchases: January 10: 1,000 units at $59 = $59,000 January 20: 800 units at $62 = $49,600 Sales: January 12: 1,200 units January 28: 900 units What is the average cost per unit that should be used to determine the cost of the units sold on January 28
60.50
Beginning inventory at retail (base year) $120,000 Ending inventory at retail $168,000 Beginning cost-to-retail percentage 40% Current-year cost-to-retail percentage 45% Retail price index for the year 1.12 What is the estimate of ending inventory using the dollar-value LIFO retail method?
63,120
On April 1, Keder, Incorporated factored $90,000 of its accounts receivable without recourse. The factor retained 8% of the accounts receivable as an allowance for sales returns and charged a 4% commission on the gross amount of the factored receivables. What amount of cash did Keder receive from the factored receivables?
79,200
Otis Corp. uses a periodic system and the FIFO method. Otis had beginning inventory of 30 units purchased at $120 each and made the following purchases during the year: Jan. 15: 34 units at $100 May 30: 61 units at $84 Oct. 20: 160 units at $60 Sales during the year totaled 271 units. What is the cost of ending inventory?
840
Under the revaluation model allowed under IFRS for the accounting for identifiable intangible assets:
Assets are periodically revalued and adjusted to their fair values and are amortized in between revaluation dates.
Which of the following are situations where estimates of inventory, rather than a physical count of inventory, may be desirable?
Avoiding the expense of a physical inventory count. Determining the cost of inventory that has been lost, destroyed, or stolen. Estimating inventory and cost of goods sold for interim financial reports.
At the end of the year, inventory has a cost of $200,000, net realizable value of $195,000, replacement cost of $160,000, and normal profit margin of $25,000. Assuming normal business circumstances, prepare the year-end adjusting entry, if any, for inventory using the lower of cost or market approach.
COGS $30,000 Inventory $30,000
At the end of the year, inventory has a cost of $200,000 and a net realizable value of $195,000 due to normal business circumstances. Prepare the year-end adjusting entry, if any, for inventory using the lower of cost or net realizable value approach.
COGS 5,000 Inventory 5,000
Gray Company is concerned that it may not have enough employees to ensure proper separation of duties regarding cash disbursements. Which of the following may be performed by the same individual?
Comparing vendor invoices with associated purchase orders and verifying physical receipt of orders with receiving department.
Octavia Corporation uses perpetual FIFO throughout the year to maintain internal records but at the end of the year adjusts these amounts to LIFO for financial reporting purposes. The company began the year with a credit balance of $50,000 in its LIFO reserve account. By the end of the year, the difference between LIFO and FIFO inventory balances increased to $60,000. Prepare the appropriate adjusting journal entry dated as of the end of the year.
Cost of goods sold $10,000 LIFO reserve $10,000
Candy Company exchanged inventory with Dandy Company in a transaction that lacks commercial substance. Both Candy's and Dandy's inventory had fair values that exceeded their costs by 30%. Since Dandy's inventory was more valuable, however, Candy paid Dandy cash to compensate for the difference. Who, if anyone, will recognize a gain on the exchange?
Dandy only
Which of the following statements regarding inventory is (are) true? I. For a merchandising company, the cost of goods available for sale minus the cost of goods sold will equal ending inventory. II. The LIFO inventory cost flow assumption is preferable to FIFO for a company wishing to maximize profits during a period of declining costs. III. A company which ships finished goods FOB destination will keep the inventory in its accounting records up until the point that the goods are delivered to a common carrier acting as an agent for the buyer.
I and II only.
Choose the correct statement(s) below regarding the direct write-off method for calculating credit loss expense. I. It is not normally consistent with GAAP and accrual accounting. II. Its use tends to result in an overstatement of accounts receivable on the balance sheet. III. Under this method, credit loss expense is recognized when a specific account is determined to be uncollectible.
I, II and III.
If costs are rising, which inventory method will result in the highest cost of goods sold?
FIFO
Assuming constant inventory quantities, which of the following inventory-costing methods will produce a higher inventory turnover ratio in an inflationary economy?
LIFO
Taylor Company received a gift of land and building from the town of Saunderstown as an inducement to relocate there. The land and buildings have fair values of $39,000 and $395,000. Prepare the appropriate journal entry for this transaction.
Land 39000 Building 395000 Revenue - Donation of Assets 434000
Spice World Corporation purchased for $180,000 cash the following assets: land with a fair value of $60,000, a building with a fair value of $90,000, equipment with a fair value of $35,000 and inventory with a fair value of $15,000. Prepare the appropriate journal entry for Spice World's purchase.
Land 54000 Building 81000 equipment 31500 Inventory 13500 Cash a/c 180000
**Carter Company records credit losses adhering to the current expected credit loss model. During the year, Carter wrote off a customer's account receivable. What impact does the write-off have on Carter's net income and total assets?
Net income did not change and net assets did not change.
Mokena Company uses the retail method to approximate the average cost of its ending inventory. During the current period, the company changes the selling price of its inventory from the date of acquisition to the end of the period. Which of the following will be included in the denominator of the calculation of the cost-to-retail percentage?
Net markups and net markdowns
**During the year, Hauser Company wrote off a customer's account receivable. Hauser recognizes credit losses according to the current expected credit loss model. What impact would the write-off have on net income and total assets? Comprehensive income. Total assets a. Decrease Decrease b. Decrease No effect c. No effect Decrease d. No effect No effect
No effect No effect
X Company acquired a printing press for $350,000 that is expected to have a useful life of 20 years and a salvage value of $20,000. It is expected that the press will have very little resale value but is essential to the company as it is the company's primary revenue producing asset. When is X Company required to evaluate the asset for impairment?
Only when events or circumstances indicate that the carrying value will not be recovered during the asset's remaining life.
The original cost of an item of inventory is above its replacement cost. The item's replacement cost is below its net realizable value but is higher than its net realizable value minus a normal profit. Under the lower of cost or market method, the inventory item should be valued at
Replacement cost
**May Company and Sty Company exchanged nonmonetary assets. The exchange is not expected to significantly affect the future cash flows for either May or Sty. May paid cash to Sty in connection with the exchange. To the extent that the amount of cash exceeds a proportionate share of the carrying amount of the asset surrendered, a realized gain on the exchange should be recognized by
Sty Company, not May Company
How should a consignee record goods held on consignment?
The goods should not be recorded as inventory or cost of goods sold by the consignee at any point during the consignment arrangement.
Which of the following statements is correct regarding donated assets?
Under GAAP the donation of an asset will result in a credit to either revenue or gain.
Which of the following statements about the accounting for research and development costs are true?
Under US GAAP, research costs are expensed in the periods incurred. Under IFRS, research costs are expensed in the periods incurred. Under IFRS, development costs are capitalized and then amortized if certain criteria are met.
Interest may be capitalized
Whether or not there is specific borrowing for the construction.
**Which of the following statements about changes to the LIFO inventory method from any other method is true?
a disclosure note is needed
goodwill
amount paid over fair value of net assets acquired in the purchase of part or all of a business
which method most likely generates a gain on a sale / highest accumulated depreciation / lowest book value?
double declining balance
