rrrr

Investments in debt securities are generally recorded at _________ on the acquisition date. a. cost including accrued interest. b. maturity value. c. cost of purchase including brokerage and other fees. d. maturity value with a separate discount or premium account.

. cost of purchase including brokerage and other fees.

Transaction price for multiple performance obligations should be allocated a. based on selling price from the company's competitors. .b based on what the company could sell the goods for on a standalone basis. c. based on forecasted cost of satisfying performance obligation. d. based on total transaction price less residual value.

.b based on what the company could sell the goods for on a standalone basis.

A requirement for a security to be classified as held-to-maturity is a. ability to hold the security to maturity. b. positive intent. c. the security must be a debt security. d. All of these are required.

A requirement for a security to be classified as held-to-maturity is a. ability to hold the security to maturity. b. positive intent. c. the security must be a debt security. d. All of these are required.

Securities which could be classified as held-to-maturity are a. redeemable preferred stock. b. warrants. c. municipal bonds. d. treasury stock.

C. Municipal Bonds

*115. Horner Construction Co. uses the percentage-of-completion method. In 2017, Horner began work on a contract for $16,500,000; it was completed in 2018. The following cost data pertain to this contract: Year Ended December 31 2017 2018 Cost incurred during the year $5,850,000 $4,200,000 Estimated costs to complete at the end of year 3,900,000 — The amount of gross profit to be recognized on the income statement for the year ended December 31, 2018 is a. $2,400,000. b. $2,580,000. c. $2,700,000. d. $6,450,000.

a

1. In 2017, the company postponed the payment of 2017's expenses to the future period. At the end of 2017, this transaction will result in: a. DTA b. DTL c. Permanent difference d. No difference between financial income and taxable income

a

1. In 2017, the company received advance payments from customers for services to be performed in 2018. At the end of 2017, this transaction will result in: a. DTA b. DTL c. Permanent difference d. No difference between financial income and taxable income

a

86. Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2018 with a performance bonus of $50,000 if the building is completed by July 31, 2018. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2018 65% August 7, 2018 25% August 14, 2018 5% August 21, 2018 5% The transaction price for this transaction is a.1$995,000 b. $950,000 c. $652,500 d. $685,000

a

Bella Pool Company sells prefabricated pools that cost $100,000 to customers for $180,000. The sales price includes an installation fee, which is valued at $25,000. The fair value of the pool is $160,000. The installation is considered a separate performance obligation and is expected to take 3 months to complete. The transaction price allocated to the pool and the installation is a. $155,676 and $24,324 respectively b. $160,000 and $25,000 respectively c. $180,000 and $25,000 respectively d. $138,378 and $21,622 respectively

a

On November 1, 2017, Green Valley Farm entered into a contract to buy a $75,000 harvester from John Deere. The contract required Green Valley Farm to pay $75,000 in advance on November 1, 2017. The harvester (cost of $55,000) was delivered on November 30, 2017. The journal entry to record the delivery of the equipment includes a a. debit to Unearned Sales Revenue for $75,000. b. credit to Unearned Sales Revenue for $75,000. c. credit to Cost of Goods Sold for $55,000. d. debit to Inventory for $55,000.

a

Roche Pharmaceuticals entered into a licensing agreement with Zenith Lab for a new drug under development. Roche will receive $8,100,000 if the new drug receives FDA approval. Based on prior approval, Roche determines that it is 85% likely that the drug will gain approval. The transaction price of this arrangement should be a. $8,100,000. b. $6,885,000. c. $1,215,000. d. $0 until approval is received.

a

Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $350,000. Based on standalone values, the company estimates the consulting services and support have a value of $100,000 and the software license has a value of $250,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes a. a credit to Sales Revenue for $250,000 and a credit to Unearned Service Revenue of $100,000. b. a credit to Service Revenue of $100,000. c. a credit to Unearned Service Revenue of $100,000. d. a credit to Sales Revenue of $350,000.

a

Signing of the contract by the two parties is a. not recorded until one or both parties perform under the contract. b. recorded at the time the contract is approved by both parties. c. not recorded until both parties perform under the contract. d. recorded immediately after the contract is signed.

a

The third step in the process for revenue recognition is to a. determine the transaction price. b. identify the separate performance obligations in the contract. c. allocate transaction price to the separate performance obligations. d. recognize revenue when each performance obligation is satisfied.

a

Use the following information for questions 113 and 114. Kiner, Inc. began work in 2017 on a contract for $16,800,000. Other data are as follows: 2017 2018 Costs incurred to date $7,200,000 $11,200,000 Estimated costs to complete 4,800,000 — Billings to date 5,600,000 16,800,000 Collections to date 4,000,000 14,400,000 *113. If Kiner uses the percentage-of-completion method, the gross profit to be recognized in 2017 is a. $2,880,000. b. $3,200,000. c. $4,320,000. d. $4,800,000.

a

Which of the following temporary differences results in a deferred tax asset in the year the temporary difference originates? I. Accrual of interest expense. II. Subscriptions received in advance. III. Prepaid insurance expense. a. I and II only. b. II only. c. III only. d. I and III only.

a

Lyons Company deducts insurance expense of $126,000 for tax purposes in 2016, but the expense is not yet recognized for accounting purposes. In 2017, no insurance expense will be deducted for tax purposes, but $126,000 of insurance expense will be reported for accounting purposes. Lyons Company has a tax rate of 40% and income taxes payable of $108,000 at the end of 2016. There were no deferred taxes at the beginning of 2016. 70. What is the amount of the deferred tax liability at the end of 2016? a. $50,400 b. $43,200 c. $18,000 d. $0 71. What is the amount of income tax expense for 2016? a. $158,400 b. $151,200 c. $126,000 d. $108,000

a,a

The cost-to-cost basis measures progress towards completion by a. comparing costs incurred to date with total costs to complete the contract. b. tracking results of work completed to date; it is an output measure. c. tracking floors of a building completed versus floors still to be completed. d. tracking miles of a highway completed versus miles of highway still to be completed.

a.

Assuming that Moss Company uses the straight-line method, what is the amount of premium amortization that would be recognized in 2018 related to these bonds? a. $1,925 b. $1,266 c. $1,380 d. $1,506

a. $1,925

The amount of unrealized loss to appear as a component of comprehensive income for the year ending December 31, 2017 is a. $30,000. b. $20,000. c. $10,000. d. $0.

a. $30,000.

Landis Company purchased $2,000,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2017, with interest payable on July 1 and January 1. The bonds sold for $2,083,160 at an effective interest rate of 7%. Using the effective-interest method, Landis Company decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2017 and December 31, 2017 by the amortized premiums of $7,080 and $7,320, respectively. At December 31, 2017, the fair value of the Ritter, Inc. bonds was $2,120,000. What should Landis Company report as other comprehensive income and as a separate component of stockholders' equity? a. $51,240. b. $36,840. c. $14,400. d. No entry should be made.

a. $51,240.

On its December 31, 2016, balance sheet, Trump Companyreported its investment in available-for-sale securities, which had cost $600,000, at fair value of $550,000. At December 31, 2017, the fair value of the securities was $585,000. What should Trump report on its 2017 income statement as a result of the increase in fair value of the investments in 2017? a. $0. b. Unrealized loss of $15,000. c. Realized gain of $35,000. d. Unrealized gain of $35,000.

a. 0

Bista Corporation declares and distributes a cash dividend that is a result of current earnings. How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods? Fair Value Method Equity Method a. No Effect Decrease b. Increase Decrease c. No Effect No Effect d. Decrease No Effect

a. No Effect Decrease

Byner Corporation accounts for its investment in the common stock of Yount Company under the equity method. Byner Corporation should ordinarily record a cash dividend received from Yount as a. a reduction of the carrying value of the investment. b. additional paid-in capital. c. an addition to the carrying value of the investment. d. dividend income.

a. a reduction of the carrying value of the investment.

Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as other comprehensive income and as a separate component of stockholders' equity are a. available-for-sale securities where a company has holdings of less than 20%. b. trading securities where a company has holdings of less than 20%. c securities where a company has holdings of between 20% and 50%. d. securities where a company has holdings of more than 50%.

a. available-for-sale securities where a company has holdings of less than 20%.

An available-for-sale debt security is purchased at a discount. The entry to record the amortization of the discount includes a a. debit to Debt Investments (Available-for-Sale). b. debit to the discount account. c. debit to Interest Revenue. d. none of these.

a. debit to Debt Investments (Available-for-Sale).

Debt securities that are accounted for at amortized cost, not fair value, are a. held-to-maturity debt securities. b. trading debt securities. c. available-for-sale debt securities. d. never-sell debt securities.

a. held-to-maturity debt

The percentage-of-completion method a. recognizes revenue and gross profit each period based upon progress. b. is used primarily for short-term contracts. c. accumulates construction costs in the Billings on Construction in Progress account. d. recognizes revenue and gross profits only when contract is completed.

a. recognizes revenue and gross profit each period based upon progress.

The principal advantage of the completed-contract method is that a. reported revenue is based on final results rather than estimates of unperformed work. b. it reflects current performance when the period of a contract extends into more than one accounting period. c. it is not necessary to recognize revenue at the point of sale. d.a greater amount of gross profit and net income is reported than is the case when the percentage-of-completion method is used

a. reported revenue is based on final results rather than estimates of unperformed work.

If a contract involves a significant financing component, a. the time value of money is used to determine the fair value of the transaction. b. the time value of money is not required to determine transaction price, if the payment is more than a year. c. the transaction amount should be based on the current sales price of goods or services. d. interest must be accrued on the current sales price of goods or services.

a. the time value of money is used to determine the fair value of the transaction.

103. Garrison should report investment revenue for 2017 of a. $320,000. b. $256,000. c. $64,000. d. $0.

a.320,000

1. In 2017, the company made an advance payment for next year's rent. At the end of 2017, this transaction will result in: a. DTA b. DTL c. Permanent difference d. No difference between financial income and taxable income

b

1. In 2017, the company recognized revenue at the point of delivery and will collect cash in 2018. At the end of 2017, this transaction will result in: a. DTA b. DTL c. Permanent difference d. No difference between financial income and taxable income

b

114. If Kiner uses the completed-contract method, the gross profit to be recognized in 2018 is a. $2,720,000. b. $5,600,000. c. $2,800,000. d. $11,200,000.

b

At December 31, 2017, Atlanta Company has a stock portfolio valued at $80,000. Its cost was $66,000. If the Securities Fair Value Adjustment (Available-for-Sale) has a debit balance of $4,000 at the beginning of the year, which of the following journal entries is required at December 31, 2017? a. Fair Value Adjustment 14,000 (available-for-sale) Unrealized Holding Gain or Loss-Equity 14,000 b. Fair Value Adjustment 10,000 (available-for-sale) Unrealized Holding Gain or Loss-Equity 10,000 c. Unrealized Holding Gain or Loss-Equity 14,000 Fair Value Adjustment 14,000 (available-for-sale) d. Unrealized Holding Gain or Loss-Equity 10,000 Fair Value Adjustment 10,000 (available-for-sale)

b

Cross Company reported the following results for the year ended December 31, 2017, its first year of operations: 2017 Income (per books before income taxes) $ 750,000 Taxable income 1,200,000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2018. What should Cross record as a net deferred tax asset or liability for the year ended December 31, 2017, assuming that the enacted tax rate in effect is 35% in all years? a. $180,000 deferred tax liability b. $157,500 deferred tax asset c. $180,000 deferred tax asset d. $157,500 deferred tax liability

b

Kraft Company made the following journal entry in late 2016 for rent on property it leases to Danford Corporation. Cash 120,000 Unearned Rent Revenue 120,000 The payment represents rent for the years 2017 and 2018, the period covered by the lease. Kraft Company is a cash basis taxpayer. Kraft has income tax payable of $184,000 at the end of 2016, and its tax rate is 35%. What amount of income tax expense should Kraft Company report at the end of 2016? a. $106,000 b. $142,000 c. $163,000 d. $226,000

b

Taxable income of a corporation a. differs from accounting income due to differences in intraperiodallocation between the two methods of income determination. b. differs from accounting income due to temporary differences and permanent differences between the two methods of income determination. c. is based on generally accepted accounting principles. d. is reported on the corporation's income statement.

b

The deferred tax expense is the a. increase in balance of deferred tax asset minus the increase in balance of deferred tax liability. b. increase in balance of deferred tax liability minus the increase in balance of deferred tax asset. c. increase in balance of deferred tax asset plus the increase in balance of deferred tax liability. d. decrease in balance of deferred tax asset minus the increase in balance of deferred tax liability.

b

The first step in the process for revenue recognition is to a. determine the transaction price. b. identify the contract with customers. c. allocate transaction price to the separate performance obligations. d. identify the separate performance obligations in the contract.

b

The last step in the process for revenue recognition is to a. allocate transaction price to the separate performance obligations. b. recognize revenue when each performance obligation is satisfied. c. determine the transaction price. d. identify the contract with customers.

b

When multiple performance obligations exists in a contract, they should be accounted for as a single performance obligation when a. each service is interdependent and interrelated. b. both performance obligations are distinct but interdependent. c. the product is distinct within the contract. d. determination cannot be made.

b

Which of the following are temporary differences that are normally classified as expenses or losses that are deductible on tax returns after they are recognized in financial income? a. Prepaid expenses that are deducted on the tax return in the period paid. b. Accrual of wages expense. c. Depreciable property. d. Fines and expenses resulting from a violation of law.

b

Rowen, Inc. had pre-tax accounting income of $900,000 in 2017, its first year of operations. During 2017 the company had the following transactions: Received rent from Jane, Co. for 2018 $32,000 Municipal bond income $40,000 Depreciation for tax purposes in excess of book depreciation $20,000 Credit sales revenue to be collected in 2018 $54,000 The tax rate is 40% in all years. 179. For 2017, what is the amount of income taxes payable for Rowen, Inc? a. $301,600 b. $327,200 c. $343,200 d. $386,400 180. At the end of 2017, which of the following deferred tax accounts and balances is reported on Rowen, Inc.'s balance sheet? Account _ Balance a. Deferred tax asset $12,800 b. Deferred tax liability$12,800 c. Deferred tax asset $20,800 d. Deferred tax liability$20,800

b,a

O'Malley Corporation prepared the following reconciliation for its first year of operations: Pretax financial income for 2017 $ 900,000 Tax exempt interest (75,000) Originating temporary difference (225,000) Taxable income $600,000 The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2017 is 35%. 62. What amount should be reported in its 2017 income statement as the current portion of income taxes expense? a. $240,000 b. $210,000 c. $360,000 d. $315,000 63. What amount should be reported in its 2017 income statement as the deferred portion of income taxes expense? a. $90,000; this amount will be added to the current portion to get income tax expense. b. $120,000;this amount will be added to the current portion to get income tax expense. c. $90,000; this amount will be subtracted from the current portion to get income tax expense. d. $105,000; this amount will be subtracted from the current portion to get income tax expense. 64. In O'Malley's 2017 income statement, what amount should be reported for total income tax expense? a. $330,000 b. $315,000 c. $300,000 d. $210,000 65. In O'Malley's 2017 income statement, what is effective tax rate? a. 33.33% b. 50% c. 35% d. 23.33%

b,a,c,a

Use the following information for questions 57 through 59. Frizell Co. at the end of 2017, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $ 750,000 Estimated salaries expense 1,000,000 Extra depreciation for taxes (1,500,000) Taxable income $ 250,000 The estimated salaries expense of $1,000,000 will be deductible in 2018 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years. The income tax rate is 30% for all years. 57. Income tax payable is a. $0. b. $75,000. c. $150,000. d. $225,000. 58. The deferred tax asset to be recognized is a. $75,000. b. $150,000. c. $225,000. d. $300,000. 59. The deferred tax liability to be recognized is a. $150,000 b. $300,000 c. $450,000 d. $375,000

b,d,c

Use the following information for questions 79 and 80. On its December 31, 2016 balance sheet, Klugman Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment (Available-for-Sale) account. There was no change during 2017 in the composition of Klugman's portfolio of marketable bond securities held as available-for-sale securities. The following information pertains to that portfolio: Security Cost Fair value at 12/31/17 X $125,000 $160,000 Y 100,000 95,000 Z 175,000 125,000 $400,000 $380,000 79. What amount of accumulatedunrealized gain/loss on these securities should be included in Klugman's stockholders' equity section of the balance sheet at December 31, 2017? (This is to ask the balance of the FV Adj.) a. $30,000 loss. b. $20,000 loss. c. $10,000 loss. d. $0.

b. $20,000 loss.

Use the following information for questions 87 and 88. Instrument Corporation has the following investments which were held throughout 2017-2018: Fair Value Cost 12/31/17 12/31/18 Trading $600,000 $800,000 $760,000 Available-for-sale 600,000 640,000 720,000 87. What amount of gain or loss would Instrument Corporation report in its income statement for the year ended December 31, 2018 related to its investments? a. $40,000 gain. b. $40,000 loss. c. $280,000 gain. d. $160,000 gain.

b. $40,000 loss.

73. For the year ended December 31, 2017, Patton Company should report interest revenue from the Scott Company bonds of: a. $95,382. b. $93,169. c. $93,078. d. $90,000.

b. $93,169.

When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies? a. The investor should always use the equity method to account for its investment. b. The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee. c. The investor must use the fair value method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. d. The investor should always use the fair value method to account for its investment.

b. The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee.

Use of the effective-interest method in amortizing bond premiums and discounts results in a. a greater amount of interest income over the life of the bond issue than would result from use of the straight-line method. b. a varying amount being recorded as interest income from period to period. c. a variable rate of return on the book value of the investment. d. a smaller amount of interest income over the life of the bond issue than would result from use of the straight-line method.

b. a varying amount being recorded as interest income from period to period.

Held-to-maturity securities are reported at a. acquisition cost. b. acquisition cost plus amortization of a discount. c. acquisition cost plus interest. d. fair value.

b. acquisition cost plus amortization of a discount.

The most popular input measure used to determine the progress toward completion is a. units-of-delivery method. b. cost-to-cost basis. c. labor hours worked. d. tons produced.

b. cost-to-cost basis.

A correct valuation is a. available-for-sale at amortized cost. b. held-to-maturity at amortized cost. c. held-to-maturity at fair value. d.none of these

b. held-to maturity at amortized coat

The transaction price a. excludes discounts, volume rebates, coupons and free products, or services. b. is the amount of consideration that a company expects to receive from a customer c. excludes time value of money if the contract involves a significant financing component. d. does not consider noncash consideration such as donations, gifts, equipment or labor.

b. is the amount of consideration that a company expects to receive from a customer

In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be a. the terms of payment in the contract. b. the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable. c. the method commonly used by the contractor to account for other long-term construction contracts. d. the inherent nature of the contractor's technical facilities used in construction.

b. the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable.

88. P & G Auto Parts sells parts to AAA Car Repair during 2018. P&G offers rebates of 2% on purchases up to $60,000 and 3% on purchases above $60,000 if the customer's purchases for the year exceed $200,000. In the past, AAA normally purchases $300,000 in parts during a calendar year. On March 25, 2018, AAA Car Repair purchased $74,000 of parts. The journal entry to record the purchase includes a a. debit to Accounts Receivable for $74,000. b. debit to Accounts Receivable for $72,800. c. credit to Sales Revenue for $72,380. d. credit to Sales Revenue for $72,800.

c

Assuming a 40% statutory tax rate applies to all years involved, which of the following situations will give rise to reporting a deferred tax liability on the balance sheet? I. A revenue is deferred (i.e., recognized in the future) for financial reporting purposes but not for tax purposes. II. A revenue is deferred for tax purposes but not for financial reporting purposes. III. An expense is deferred for financial reporting purposes but not for tax purposes. IV. An expense is deferred for tax purposes but not for financial reporting purposes. a. item II only b. items I and II only c. items II and III only d. items I and IV only

c

Hayes Construction Corporation contracted to construct a building for $4,500,000. Construction began in 2017 and was completed in 2018. Data relating to the contract are summarized below: Year ended December 31, 2017 2018 Costs incurred $1,800,000 $1,350,000 Estimated costs to complete 1,200,000 — (Note: if there is no 'to date' after 'costs incurred', then 'costs incurred' are for a specific year.) Hayes uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2017, and 2018, respectively, Hayes should report gross profit of a. $810,000 and $540,000. b. $2,700,000 and $1,800,000. c. $900,000 and $450,000. d. $0 and $1,350,000.

c

Hayes Construction Corporation contracted to construct a building for $4,500,000. Construction began in 2017 and was completed in 2018. Data relating to the contract are summarized below: Year ended December 31, 2017 2018 Costs incurred $1,800,000 $1,350,000 Estimated costs to complete 1,200,000 — (Note: if there is no 'to date' after 'costs incurred', then 'costs incurred' are for a specific year.) Hayes uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2017, and 2018, respectively, Hayes should report gross profit of a. $810,000 and $540,000. b. $2,700,000 and $1,800,000. c. $900,000 and $450,000. d. $0 and $1,350,000.

c

If the completed-contract method of accounting was used, the amount of gross profit to be recognized for years 2017 and 2018 would be 2017 2018 a. $6,750,000. $0. b. $6,450,000. $(300,000). c. $0. $6,450,000. d. $0. $6,750,000.

c

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $120,000 on March 15, 2017. Estimated standalone fair values of the equipment, installation and training are $75,000, $50,000 and $25,000 respectively. The journal entry to record the transaction on March 15, 2017 will include a a. credit to Sales Revenue for $120,000. b. debit to Unearned Service Revenue of $25,000. c. credit to Unearned Service Revenue of $20,000. d. credit to Service Revenue of $50,000.

c

On January 1, 2015, Gore, Inc. purchased a machine for $1,350,000 which will be depreciated $135,000 per year for financial statement reporting purposes. For income tax reporting, Gore elected to expense $270,000. Assume a present and future enacted income tax rate of 30%. What amount should be added to Gore's deferred income tax liability for this temporary difference at December 31, 2015? a. $81,000 b. $45,000 c. $40,500 d. $36,000

c

On January 15, 2017, Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company. The contract specified a delivery date of March 1. The equipment was not delivered until March 31. The contract required full payment of $75,000 30 days after delivery. This contract should be a. recorded on January 15, 2017. b. recorded on March 1, 2017. c. recorded on March 31, 2017. d. recorded on April 30, 2017.

c

On November 1, 2017, Green Valley Farm entered into a contract to buy a $75,000 harvester from John Deere. The contract required Green Valley Farm to pay $75,000 in advance on November 1, 2017. The harvester (cost of $55,000) was delivered on November 30, 2017. The journal entry to record the contract on November 1, 2017 includes a a. credit to Accounts Receivable for $75,000. b. credit to Sales Revenue for $75,000. c. credit to Unearned Sales Revenue for $75,000. d. debit to Unearned Sales Revenue for $75,000.

c

Stuart Corporation's taxable income differed from its accounting income computed for this past year. An item that would create a permanent difference in accounting and taxable incomes for Stuart would be a. a balance in the Unearned Rent account at year end. b. using accelerated depreciation for tax purposes and straight-line depreciation for book purposes. c. a fine resulting from violations of OSHA regulations. d. recording an accounts receivable during the year.

c

The fourth step in the process for revenue recognition is to a. recognize revenue when each performance obligation is satisfied. b. identify the separate performance obligations in the contract. c. allocate transaction price to the separate performance obligations. d.determine the transaction price

c

Wright Co., organized on January 2, 2016, had pretax accounting income of $640,000 and taxable income of $2,080,000 for the year ended December 31, 2016. The only temporary difference is accrued product warranty costs (similar to accrued wage expenses which will be paid in future periods) which are expected to be paid as follows: 2017 $480,000 2018 240,000 2019 240,000 2020 480,000 The enacted income tax rates are 35% for 2016, 30% for 2017 through 2019, and 25% for 2020. If Wrightexpects taxable income in future years, the deferred tax asset in Wright's December 31, 2016 balance sheet should be a. $288,000. b. $336,000. c. $408,000. d. $504,000.

c

Eilert Construction Company had a contract starting April 2018, to construct a $21,000,000 building that is expected to be completed in September 2019, at an estimated cost of $19,250,000. At the end of 2018, the costs to date were $8,855,000 and the estimated total costs to complete had not changed. The progress billings during 2018 were $4,200,000 and the cash collected during 2018 was $2,800,000. Eilert uses the percentage-of-completion method. *118. For the year ended December 31, 2018, Eilert would recognize gross profit on the building of a. $0. b. $737,917. c. $805,000. d. $945,000. *119. At December 31, 2018, Eilert would report Construction in Process in the amount of a. $9,660,000. b. $8,855,000. c. $8,260,000. d. $805,000.

c, a

Melton Construction Co. began operations in 2017. Construction activity for 2017 is shown below. Melton uses the percentage of completion method. Billings Collections Estimated Contract Through Through Costs to Costs to Contract Price 12/31/17 12/31/17 12/31/17 Complete 1 $3,200,000 $3,150,000 $2,600,000 $2,150,000 — 2 3,600,000 1,500,000 1,000,000 800,000 $1,200,000 3 3,900,000 1,900,000 1,800,000 2,400,000 1,200,000 177. Which of the following should be shown on the balance sheet at December 31, 2017 related to Contract 2? a. Inventory, $800,000 b. Inventory, $700,000 c. Current liability, $60,000 d. Current liability, $700,000 178. Which of the following should be shown on the balance sheet at December 31, 2017 related to Contract 3? a. Inventory, $700,000 b. Inventory, $500,000 c. Inventory, $2,400,000 d. Inventory, $3,300,000

c,a

76. Redman Company's trading securities portfolio which is appropriately included in current assets is as follows: December 31, 2017 Fair Unrealized Cost Value Gain (Loss) Arlington Corp. 250,000 200,000 $(50,000) Downs, Inc. 245,000 265,000 20,000 $495,000 $465,000 $(30,000) Ignoring income taxes, what amount should be reported as a charge against income in Redman's 2017 income statement if 2017 is Redman's first year of operation? a. $0. b. $20,000. c. $30,000. d. $50,000.

c. $30,000.

What amount would be reported as accumulatedother comprehensive income (This is to ask the balance of the FV Adj.) related to investments in Instrument Corporation's balance sheet at December 31, 2017? a. $80,000 gain. b. $120,000 gain. c. $40,000 gain. d. $240,000 gain.

c. $40,000 gain.

Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income? a. Subscriptions received in advance. b. Rent received in advance. c. An accounts receivable for products delivered. d. Interest received on a municipal obligation.

c. An accounts receivable for products delivered

An investor has a long-term investment in stocks. Regular cash dividends received by the investor are recorded as Fair Value Method Equity Method a. Income Income b. A reduction of the investment A reduction of the investment c. Income A reduction of the investment d.A reduction of the investmentIncome

c. Income A reduction of the investment

How should the balances of progress billings and construction in process be shown at reporting dates prior to the completion of a long-term contract? a. Progress billings as deferred income, construction in progress as a deferred expense. b. Progress billings as income, construction in process as inventory. c. Net balance, as a current asset if debit balance, and current liability if credit balance. d. Net balance, as income from construction if credit balance, and loss from construction if debit balance.

c. Net balance, as a current asset if debit balance, and current liability if credit balance.

Unrealized holding gains or losses which are recognized in income are from securities classified as a. held-to-maturity. b. available-for-sale. c. trading. d. none of these.

c. Trading

A performance obligation exists when a. a company receives the right to receive consideration. b. a contract is approved and signed. c. a company provides a distinct product or service. d. a company provides interdependent product or service.

c. a company provides a distinct product or service.

Watt Company purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includes a. a debit to Held-to-Maturity Securities at $300,000. b. a credit to Premium on Investments of $15,000. c. a debit to Held-to-Maturity Securities at $315,000. d. None of these answers are correct.

c. a debit to Held-to-Maturity Securities at $315,000.

Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholders' equity are a. held-to-maturity debt securities. b. trading debt securities. c. available-for-sale debt securities. d. never-sell debt securities.

c. available-for-sale debt securities.

The Billings on Construction in Progress account is a(n) a. contract revenue account. b. inventory account. c. contra-inventory account. d. construction expense account.

c. contra-inventory account.

Noncash consideration should be a. recognized on the basis of fair value of what is given up. b. recognized on the basis of original cost paid by customer. c. recognized on the basis of fair value of what is received. d. recognized on the basis of fair value of equivalent goods or services.

c. recognized on the basis of fair value of what is received.

Consideration paid or payable to customers a. includes volume rebates which increases the cost to the customer. b. includes discounts which reduces the cost of purchases to the company. c. reduces the consideration received and the revenue to be recognized. d. includes prompt settlement discount which increases revenues.

c. reduces the consideration received and the revenue to be recognized.

Under the completed-contract method a. revenue, cost, and gross profit are recognized during the production cycle. b. revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed. c. revenue, cost, and gross profit are recognized at the time the contract is completed. d. None of these answers are correct.

c. revenue, cost, and gross profit are recognized at the time the contract is completed.

Karter Company purchased 200 of the 1,000 outstanding shares of Flynn Company's common stock for $300,000 on January 2, 2017. During 2017, Flynn Company declared dividends of $50,000 and reported earnings for the year of $200,000. 108. If Karter Company used the fair value method of accounting for its investment in Flynn Company, its Investment in Flynn Company account on December 31, 2017 should be a. $290,000. b. $330,000. c. $300,000. d. $340,000.

c.300,000

If Karter Company uses the equity method of accounting for its investment in Flynn Company, its Investment in Flynn Company account at December 31, 2017 should be a. $290,000. b. $300,000. c. $330,000. d. $340,000.

c.330,000

Garrison Co. owns 20,000 of the 50,000 outstanding shares of Steele, Inc. common stock. During 2017, Steele earns $800,000 and pays cash dividends of $640,000. 102. If the beginning balance in the investment account was $500,000, the balance at December 31, 2017 should be a. $820,000. b. $660,000. c. $564,000. d. $500,000.

c.564,000

Ziegler Corporation purchased 25,000 shares of common stock of the Sherman Corporation for $40 per share on January 2, 2017. Sherman Corporation had 100,000 shares of common stock outstanding during 2018, paid cash dividends of $90,000 during 2018, and reported net income of $300,000 for 2018. Ziegler Corporation should report revenue from investment for 2018 in the amount of a. $22,500. b. $52,500. c. $75,000. d. $82,500.

c.75,000

Which of the following is nota debt security? a. Convertible bonds b. Commercial paper c. Loans receivable d. All of these are debt securities.

c.Loans receivable

87. On June 1, 2017, Johnson & Sons sold equipment to James Landscaping Services. In exchange for a zero-interest bearing note with a face value of $55,000, with payment due in 12 months. The fair value of the equipment on the date of sale was $50,000. The amount of revenue to be recognized on this transaction in 2017 is a. $55,000. b. $5,000 c. $50,000 d. $50,000 sales revenue and $2,917 interest revenue.

d

A major distinction between temporary and permanent differences is a. permanent differences are not representative of acceptable accounting practice. b. temporary differences occur frequently, whereas permanent differences occur only once. c. once an item is determined to be a temporary difference, it maintains that status; however, a permanent difference can change in status with the passage of time. d.temporary differences reverse themselves in subsequent accounting periods,whereas permanent differences do not reverse

d

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $120,000 on March 15, 2017. Estimated standalone fair values of the equipment, installation, and training are $75,000, $50,000, and $25,000 respectively. The transaction price allocated to equipment, installation and training is a. $75,000, $50,000, $25,000 respectively b. $40,000, $40,000, $40,000 respectively c. $120,000 for the entire bundle. d. $60,000, $40,000 and $20,000 respectively.

d

Revenue from a contract with a customer a. is recognized when the customer receives the rights to receive consideration. b. is recognized even if the contract is still wholly unperformed. c. can be recognized even when a contract is still pending. d. cannot be recognized until a contract exists.

d

The second step in the process for revenue recognition is to a. allocate transaction price to the separate performance obligations. b. determine the transaction price. c. identify the contract with customers. d. identify the separate performance obligations in the contract.

d

To address inconsistencies and weaknesses, a comprehensive revenue recognition model was developed entitled the a. Revenue Recognition Principle. b. Principle-based Revenue Accounting. c. Rules-based Revenue Accounting. d. Revenue from Contracts with Customers.

d

Which of the following will notresult in a temporary difference? a. Accrual of wages expense. b. Advance rental receipts. c. Recording accounts receivables upon credit sales. d. All of these will result in a temporary difference.

d

Patton Company purchased $900,000 of 10% bonds of Scott Company on January 1, 2017, paying $846,225. The bonds mature January 1, 2027; interest is payable each June 30 and December 31. The discount of $53,775 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity. 72. On June 30, 2017, Patton Company should increase its Debt Investmentsaccount for the Scott Company bonds by a. $5,382. b. $3,084. c. $2,691. d. $1,542.

d. $1,542.

On January 3, 2016, Moss Company acquires $300,000 of Adam Company's 10-year, 10% bonds at a price of $319,254 to yield 9%. Interest is payable each December 31. The bonds are classified as held-to-maturity. 82. Assuming that Moss Company uses the effective-interest method, what is the amount of interest revenue that would be recognized in 2017 related to these bonds? a. $30,000 b. $31,925 c. $28,734 d. $28,619

d. $28,619

97.Unruh Corp. began operations in 2017. An analysis of Unruh's equity securities portfolio acquired in 2017 shows the following totals at December 31, 2017 for trading and available-for-sale securities: Trading Available-for-Sale Securities Securities Aggregate cost $90,000 $110,000 Aggregate fair value 65,000 95,000 What amount should Unruh report in its 2017 income statement for unrealized holding loss? a. $40,000. b. $10,000. c. $15,000. d. $25,000.

d. 25,000

Which of the following is notcorrect in regard to trading securities? a. They are held with the intention of selling them in a short period of time. b. Unrealized holding gains and losses are reported as part of net income. c. They are valued at fair value. d. All of these are correct.

d. All of these are correct.

Which of the following differences would result in future taxable amounts? a. Expenses or losses that are tax deductible after they are recognized in financial income. b. Revenues or gains that are taxable before they are recognized in financial income. c. Revenues or gains that are recognized in financial income but are never included in taxable income. d. Expenses or losses that are tax deductible before they are recognized in financial income.

d. Expenses or losses that are tax deductible before they are recognized in financial income.

A company has satisfied its performance obligation when the a. company has received payment for goods or services. b. company has significant risks and rewards of ownership. c. company has legal title to the asset. d. company has transferred physical possession of the asset.

d. company has transferred physical possession of the asset.

Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the a. investor sells the investment. b. investee declares a dividend. c. investee pays a dividend. d. earnings are reported by the investee in its financial statements.

d. earnings are reported by the investee in its financial statements.

An unrealized holding loss on a company's available-for-sale securities should be reflected in the current financial statements as a. an extraordinary item shown as a direct reduction from retained earnings. b. a current loss resulting from holding securities. c. a note or parenthetical disclosure only. d. other comprehensive income and deducted in the equity section of the balance sheet.

d. other comprehensive income and deducted in the equity section of the balance sheet.