ACC 3010: Gleim

In analyzing a company's financial statements, which financial statement will a potential investor primarily use to assess the company's liquidity and financial flexibility?

Balance sheet

The management's discussion and analysis (MD&A) section of an annual report

Covers three financial aspects of a firm's business: liquidity, capital resources, and results of operations.

Which of the following is included in the FASB Accounting Standards Codification?

U.S. GAAP for nongovernmental entities

Which operating segment(s) can be deemed reportable?

Lion, Monk, and Nevi.

a U.S. publicly traded company's second fiscal quarter ends on March 31. If the company is an accelerated filer, what is the latest date that the 10-Q should be filed with the U.S. SEC?

May 10

A measure of profit or loss and total assets must be disclosed for each reportable segment of an entity. If depreciation expense included in that measure is regularly provided to the segment's chief operating decision maker, it

Must be separately disclosed

An external auditor's involvement with Form 10-Q that is being prepared for filing with the SEC most likely will consist of a(n)

Review of the interim financial statements included in Form 10-Q

Which of the following should be disclosed as supplemental information in the statement of cash flows? cash flow per share conversion of debt to equity

no;yes

According to the FASB's conceptual framework, which of the following is an essential characteristic of a liability?

obligations resulting from previous transactions or events.

regarding financial accounting for public companies, the role of the SEC as currently practiced is to

make rules and regulations pertaining more to disclosure of financial information than to the establishment of accounting recognition and measurement principles.

Fact Pattern: On January 2, Year 3, Emme Co. sold equipment with a carrying amount of $480,000 in exchange for a $600,000 noninterest-bearing note due January 2, Year 6. There was no established exchange price for the equipment, and the market value of the note cannot be reasonably approximated. The prevailing rate of interest for a note of this type at January 2, Year 3, was 10%. The present value of 1 at 10% for three periods is 0.75. [ 24 ] In Emme's Year 3 income statement, what amount should be reported as gain (loss) on sale of equipment?

$(30,000)

Aln Co. incurred the following expenses during the current period: Routine on-going efforts to improve an existing product $ 50,000 Trouble-shooting in connection with breakdowns during commercial production 75,000 Routine testing of products during commercial production for quality-control purposes 100,000 What is the total amount of research and development expense incurred by Aln during the current period?

$0

Brill Co. made the following expenditures during Year 1: Costs to develop computer software for internal use in Brill's general management information system $100,000 Costs of market research activities 75,000 What amount of these expenditures should Brill report in its Year 1 income statement as research and development expenses?

$0

During the year, Granite Co. sold a building for $100,000, resulting in a gain of $20,000. The building has a net book value of $80,000 at the time of the sale. Granite uses the indirect method when preparing its statement of cash flows. What is the amount that would be included in Granite's financing activities section because of the building sale?

$0

On January 1, Year 1, Chertco acquired a patent for $500,000 and, using the straight-line method, began amortizing it properly over its estimated useful life of 10 years. The asset has no residual value. At December 31, Year 4, a significant change in the business climate caused Chertco to assess the recoverability of the carrying amount of the patent. Chertco estimated that the undiscounted future net cash inflows from the patent would be $325,000 and that its fair value was $275,000. Accordingly, for the year ended December 31, Year 4, Chertco should recognize an impairment loss of

$0

Tech Co. bought a trademark 2 years ago on January 2. Tech accounted for the trademark as instructed under the provisions of the Accounting Standards Codification during the current year. The intangible was being amortized over 40 years. The carrying amount at the beginning of the year was $38,000. It was determined that the cash flow will be generated indefinitely at the current level for the trademark. What amount should Tech report as amortization expense for the current year?

$0

A company owns a financial asset that is actively traded on two different exchanges (market A and market B). There is no principal market for the financial asset. The information on the two exchanges is as follows: Quoted Price of Asset Transaction Costs Market A $1,000 $ 75 Market B 1,050 150 What is the fair value of the financial asset?

$1,000

The following information relates to Jay Co.'s accounts receivable for the year just ended: Accounts receivable, 1/1 $ 650,000 Credit sales for the year 2,700,000 Sales returns for the year 75,000 Accounts written off during the year 40,000 Collections from customers during the year 2,150,000 Estimated uncollectible accounts at 12/31 110,000 What amount should Jay report for accounts receivable, before allowance for uncollectible accounts, at December 31?

$1,085,000

The following information is available for Sweden Company for its most recent year: Net sales $1,800,000 Freight-in 45,000 Purchase discounts 25,000 Ending inventory 120,000 The gross margin is 40% of net sales. What is the cost of goods available for sale?

$1,200,000

Ward Company incurred research and development costs in Year 1 as follows: Equipment acquired for use in various research and development projects $975,000 Depreciation on the above equipment 135,000 Materials used 200,000 Compensation costs of personnel 500,000 Outside consulting fees 150,000 Indirect costs appropriately allocated 250,000 The total research and development costs charged in Ward's Year 1 income statement should be

$1,235,000

Dell Company's inventory at December 31, Year 1, was $1.2 million based on a physical count of goods priced at cost, and before any necessary year-end adjustments relating to the following: Included in the physical count were goods billed to a customer FOB shipping point on December 30, Year 1. These goods had a cost of $25,000 and were picked up by the carrier on January 7, Year 2. Goods shipped FOB shipping point on December 28, Year 1, from a vendor to Dell were received on January 4, Year 2. The invoice cost was $60,000. What amount should Dell report as inventory in its December 31, Year 1, balance sheet?

$1,260,000

On June 1, Year 1, Yola Corp. lent Dale $500,000 on a 12% note, payable in five annual installments of $100,000 beginning January 2, Year 2. In connection with this loan, Dale was required to deposit $5,000 in a noninterest-bearing escrow account. The amount held in escrow is to be returned to Dale after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, Year 1. Dale made timely payments through November 1, Year 1. On January 2, Year 2, Yola received payment of the first principal installment plus all interest due. At December 31, Year 1, Yola's interest receivable on the loan to Dale is

$10,000

Orr Co. prepared an aging of its accounts receivable at December 31 and determined that the net realizable value of the receivables was $250,000. Additional information is available as follows: Allowance for uncollectible accounts at 1/1 -- credit balance $ 28,000 Accounts written off as uncollectible during the year 23,000 Accounts receivable at 12/31 270,000 Uncollectible accounts recovered during the year 5,000 For the year ended December 31, Orr's uncollectible accounts expense is

$10,000

Rye Co. purchased a machine with a 4-year estimated useful life and an estimated 10% salvage value for $80,000 on January 1, Year 6. In its income statement, what should Rye report as the depreciation expense for Year 8 using the double-declining-balance (DDB) method?

$10,000

Foster Co. adjusted its allowance for uncollectible accounts at year end. The general ledger balances for the accounts receivable and the related allowance account were $1,000,000 and $40,000, respectively. Foster uses the percentage-of-receivables method to estimate its allowance for uncollectible accounts. Accounts receivable were estimated to be 5% uncollectible. What amount should Foster record as an adjustment to its allowance for uncollectible accounts at year end?

$10,000 increase.

On December 31, Jet Co. received two $10,000 notes receivable from customers in exchange for services rendered. On both notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity. The note from Hart Corp., made under customary trade terms is due in 9 months and the note from Maxx, Inc., is due in 5 years. The market interest rate for similar notes on December 31 was 8%. The compound interest factors to convert future values into present values at 8% follow: Present value of $1 due in 9 months .944 Present value of $1 due in 5 years .680 At what amounts should these two notes receivable be reported in Jet's December 31 balance sheet?

$10,000; $7,820

A company acquired an aircraft for $120 million, with the cost consisting of the airframe, $60 million; the engine, $40 million; and other components, $20 million. The company applies the cost model and uses the straight-line method of depreciation. The aircraft has a total estimated useful life of 20 years and no residual value. The estimated useful lives of the components are as follows: Airframe 20 years Engine 16 years Other components 4 years Under IFRS, what amount should the company record as annual depreciation expense?

$10.5 million

Clay Company started construction of a new office building on January 1, Year 8, and moved into the finished building on July 1, Year 9. Of the building's $2.5 million total cost, $2 million was incurred in Year 8 evenly throughout the year. Clay's incremental borrowing rate was 12% throughout Year 8, and the total amount of interest incurred by Clay during Year 8 was $102,000. What amount should Clay report as capitalized interest at December 31, Year 8?

$102,000

During January, Yana Co. incurred landscaping costs of $120,000 to improve leased property. The estimated useful life of the landscaping is 15 years. The remaining term of the lease is 8 years, with an option to renew for an additional 4 years. However, Yana has not reached a decision with regard to the renewal option. In Yana's December 31 balance sheet, what should be the net carrying amount of landscaping costs?

$105,000

At January 1, Jamin Co. had a credit balance of $260,000 in its allowance for uncollectible accounts. Based on past experience, 2% of Jamin's credit sales have been uncollectible. During the year, Jamin wrote off $325,000 of uncollectible accounts. Credit sales for the year were $9 million. In its December 31 balance sheet, what amount should Jamin report as allowance for uncollectible accounts?

$115,000

The following information pertained to Azur Co. for the year: Price of goods purchased $102,800 Price discounts 10,280 Freight-in 15,420 Freight-out 5,140 Beginning inventory 30,840 Ending inventory 20,560 What amount should Azur report as cost of goods sold for the year?

$118,220

Vorst depreciates asset A on the double-declining-balance method. How much depreciation expense should Vorst record in Year 4 for asset A?

$14,400

West Retailers purchased merchandise with a list price of $20,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. West should record the cost of this merchandise as

$14,400

On Slad's books, the assets acquired should be recorded at what amount if the exchange lacked commercial substance?

$140,000

On March 15, Year 4, Krol Company paid property taxes of $180,000 on its factory building for the Year 4 calendar year. On April 1, Year 4, Krol made $300,000 in unanticipated repairs to its plant equipment. The repairs will benefit operations for the remainder of the calendar year. What total amount of these expenses should be included in Krol's quarterly income statement for the 3 months ended June 30, Year 4?

$145,000

Minor Baseball Company had a player contract with Doe that was recorded in its accounting records at $145,000. Better Baseball Company had a player contract with Smith that was recorded in its accounting records at $140,000. Minor traded Doe to Better for Smith by exchanging player contracts. The fair value of each contract was $150,000. Evidence suggested that the contract exchange lacked commercial substance. At what amount should the contracts be valued in accordance with generally accepted accounting principles at the time of the exchange of the player contracts?

$145,000; $140,000

During a reporting period, a computer manufacturing company used raw materials of $50,000, had direct labor costs of $75,000, and factory overhead of $30,000. Other expenses were for advertising of $5,000, staff salaries of $10,000, and bad debt of $3,000. The company did not have a beginning balance in any inventory account. All goods manufactured during the period were sold during the period. What amount was the company's cost of goods sold during the reporting period?

$155,000

Carr, Inc., purchased equipment for $100,000 on January 1, Year 1. The equipment had an estimated 10-year useful life and a $15,000 salvage value. Carr uses the 200% declining balance depreciation method. In its Year 2 income statement, what amount should Carr report as depreciation expense for the equipment?

$16,000

Albright Company uses the sum-of-the-years'-digits (SYD) method of depreciation. On January 1, the company purchased a machine for $50,000. It had an estimated life of 5 years and no residual value. Depreciation for the first year would be

$16,667

The following information applies to Nichola Manufacturing Company, which has a 6- month operating cycle: Cash sales $100,000 Credit sales during the sixth month with net 30 days terms 150,000 Credit sale during the fifth month with special terms of net 9 months 10,000 Interest earned and accrued on an investment that matures during month 3 of the next cycle 2,000 The total of Nichola's trade accounts receivable at the end of the current cycle is

$160,000

Rand, Inc., accepted from a customer a $40,000, 90-day, 12% interest-bearing note dated August 31. On September 30, Rand discounted the note at the Apex State Bank at 15%. However, the proceeds were not received until October 1. In Rand's September 30 balance sheet, the amount receivable from the bank, based on a 360-day year, includes accrued interest revenue of

$170

A company manufactured 1,000 units of product during the year and sold 800 units. Costs incurred during the current year are as follows: Direct materials and direct labor $7,000 Indirect materials and indirect labor 2,000 Insurance on manufacturing equipment 3,000 Advertising 1,000 What amount should be reported as inventory in the company's year-end balance sheet?

$2,400

Brand Co. incurred the following research and development project costs at the beginning of the current year: Equipment purchased for current and future projects $100,000 Equipment purchased for current projects only 200,000 Research and development salaries for current project 400,000 Equipment has a 5-year life and is depreciated using the straight-line method. What amount should Brand record as depreciation for research and development projects at December 31?

$20,000

Ward Distribution Company has determined its December 31 inventory on a LIFO basis at $200,000. Information pertaining to that inventory follows: Estimated selling price $204,000 Estimated cost of disposal 10,000 Normal profit margin 30,000 Current replacement cost 180,000 Ward records losses that result from applying the lower-of-cost-or-market rule. At December 31, the loss that Ward should recognize is

$20,000

Carver Co., a retailer, uses the perpetual inventory method. Carver uses the moving average method to determine the value of its inventory. The following information relates to inventory transactions that took place during the month of March: 3/1 Beginning inventory 30,000 units at $10 3/5 Purchase 10,000 units at $12 3/10 Sales at $20 per unit 20,000 units 3/20 Purchase 20,000 units at $13 What amount should Carver report as cost of goods sold on its income statement at the end of March?

$210,000

Under the lower-of-cost-or-market rule, what amount should Chewy report as chocolate inventory in its December 31 balance sheet?

$24,000

Young Corp. purchased equipment by making a down payment of $4,000 and issuing a note payable for $18,000. A payment of $6,000 is to be made at the end of each year for 3 years. The applicable rate of interest is 8%. The present value of an ordinary annuity factor for 3 years at 8% is 2.58, and the present value for the future amount of a single sum of one dollar for 3 years at 8% is .735. Shipping charges for the equipment were $2,000, and installation charges were $3,500. What is the capitalized cost of the equipment?

$24,980

The following information has been compiled by Able Manufacturing Company: Sale of company products for the period to customers with net 30-day terms amounting to $150,000. Sale of company products for the period to a customer, supported by a note for $25,000, with special terms of net 180 days. Balance of trade receivables at the end of the last period was $300,000. Collections of open trade receivables during the period was $200,000. Rental income for the period, both earned and accrued but not yet collected, from the Able Employees' Credit Union for use of company facilities was $2,000. The open trade receivables balance to be shown on the statement of financial position for the period is

$250,000

Cody Corp. incurred the following costs during Year 1: Design of tools, jigs, molds, and dies involving new technology $125,000 Modification of the formulation of a process 160,000 Trouble-shooting in connection with break- downs 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 Year 1 income statement, Cody should report research and development expense of

$285,000

Lialia Co. has determined the cost of its fiscal year-end unfinished FIFO inventory to be $300,000. Information pertaining to that inventory at year-end is as follows: Estimated selling price $330,000 Estimated cost of disposal 20,000 Normal profit margin 15% Current replacement cost 280,000 Estimated completion costs 15,000 What amount should Lialia report as inventory on its year-end balance sheet?

$295,000

Campbell Corp. exchanged delivery trucks with Highway, Inc. Campbell's truck originally cost $23,000, its accumulated depreciation was $20,000, and its fair value was $5,000. Highway's truck originally cost $23,500, its accumulated depreciation was $19,900, and its fair value was $5,700. Campbell also paid Highway $700 in cash as part of the transaction. The transaction lacks commercial substance. What amount is the new book value for the truck Campbell received?

$3,700

Spiro Corp. uses the sum-of-the-years'-digits method to depreciate equipment purchased in January Year 2 for $20,000. The estimated salvage value of the equipment is $2,000, and the estimated useful life is 4 years. What should Spiro report as the asset's carrying amount as of December 31, Year 4?

$3,800

Based on the industry average, Davis Corporation estimates that its bad debts should average 3% of credit sales. The balance in the allowance for uncollectible accounts at the beginning of Year 3 was $140,000. During Year 3, credit sales totaled $10,000,000, accounts of $100,000 were deemed to be uncollectible, and payment was received on a $20,000 account that had previously been written off as uncollectible. The entry to record bad debt expense at the end of Year 3 would include a credit to the allowance for uncollectible accounts of

$300,000

During the year just ended, Jase Co. incurred research and development costs of $136,000 in its laboratories relating to a patent that was granted on July 1. Costs of registering the patent equaled $34,000. The patent's legal life is 20 years, and its estimated economic life is 10 years. In its December 31 balance sheet, what amount should Jase report for the patent, net of accumulated amortization?

$32,300

Wren Company had the following account balances at December 31: Accounts receivable $ 900,000 Allowance for uncollectible accounts (before any provision for the year uncollectible accounts expense) 16,000 Credit sales for the year 1,750,000 Wren is considering the following methods of estimating uncollectible accounts expense for the year: Based on credit sales at 2% Based on accounts receivable at 5% What amount should Wren charge to uncollectible accounts expense under each method?

$35,000; $29,000

Lorraine Co. has determined its fiscal year-end inventory on a LIFO basis to be $400,000. Information pertaining to that inventory follows: Estimated selling price $408,000 Estimated cost of disposal 20,000 Normal profit margin 60,000 Current replacement cost 360,000 Lorraine records losses that result from applying the lower-of-cost-or-market (LCM) rule. At its year end, what should be the net carrying value of Lorraine's inventory?

$360,000

Flex Co. uses a periodic inventory system. The following are inventory transactions for the month of January: 1/1 Beginning inventory 10,000 units at $3 1/5 Purchase 5,000 units at $4 1/15 Purchase 5,000 units at $5 1/20 Sales at $10 per unit 10,000 units Flex uses the average pricing method to determine the value of its inventory. What amount should Flex report as cost of goods sold on its income statement for the month of January?

$37,500

Corbet Co. purchased a copyright near the beginning of the current year from an author for $20,000. The legal life of the copyright is equivalent to the life of the author plus 50 years. Corbet expects to sell the book for five years. What amount should Corbet report as amortization expense related to the copyright at the end of the current year?

$4,000

On November 1, Year 1, an entity sold 50 machines to a customer for $100 each. The cost of each machine is $20. The entity allows customers to return any unused machine within 6 months and receive a full refund. The entity uses the expected value method to estimate the variable consideration. Based on the entity's experience and other relevant factors, it reasonably estimates that 10 machines (6 in Year 1 and 4 in Year 2) will be returned. What amount of revenue is recognized by the entity from the sale of these machines on November 1, Year 1?

$4,000

On March 31, Vale Co. had an unadjusted credit balance of $1,000 in its allowance for uncollectible accounts. An analysis of Vale's trade accounts receivable at that date revealed the following: Estimated Age Amount Uncollectible 0-30 days $60,000 5% 31-60 days 4,000 10% Over 60 days 2,000 70% What amount should Vale report as allowance for uncollectible accounts in its March 31 balance sheet?

$4,800

What amount of gain from the transaction should Potsdam report in its income statement?

$4,800

On January 1, the Fulmar Company sold personal property to the Austin Company. The personal property had cost Fulmar $40,000. Fulmar frequently sells similar items of property for $44,000. Austin gave Fulmar a noninterest-bearing note payable in six equal annual installments of $10,000 with the first payment due this December 31. Collection of the note is reasonably assured. A reasonable rate of interest for a note of this type is 10%. The present value of an annuity of $1 in arrears at 10% for six periods is 4.355. What amount of sales revenue from this transaction should be reported in Fulmar's income statement for the year ended December 31?

$44,000

Fact Pattern: On January 2, Year 3, Emme Co. sold equipment with a carrying amount of $480,000 in exchange for a $600,000 noninterest-bearing note due January 2, Year 6. There was no established exchange price for the equipment, and the market value of the note cannot be reasonably approximated. The prevailing rate of interest for a note of this type at January 2, Year 3, was 10%. The present value of 1 at 10% for three periods is 0.75. [ 23 ] In Emme's Year 3 income statement, what amount should be reported as interest income? B

$45,000

What amount should Heller report as research and development costs in its income statement for the year ended December 31, Year 1?

$460,000

Miller Mining, a calendar-year corporation, purchased the rights to a copper mine on July 1, Year 1. Of the total purchase price, $2.8 million was appropriately allocable to the copper. Estimated reserves were 800,000 tons of copper. Miller expects to extract and sell 10,000 tons of copper per month. Production began immediately. The selling price is $25 per ton. Miller uses percentage depletion (15%) for tax purposes. To aid production, Miller also purchased some new equipment on July 1, Year 1. The equipment cost $76,000 and had an estimated useful life of 8 years. After all the copper is removed from this mine, however, the equipment will be of no use to Miller and will be sold for an estimated $4,000. If sales and production conform to expectations, what is Miller's depreciation expense on the new equipment for financial accounting purposes for the Year 1 calendar year?

$5,400

Leaf Co. purchased from Oak Co. a $20,000, 8%, 5-year note that required five equal, annual year-end payments of $5,009. The note was discounted to yield a 9% rate to Leaf. At the date of purchase, Leaf recorded the note at its present value of $19,485. What should be the total interest revenue earned by Leaf over the life of this note?

$5,560

During the first quarter of Year 4, Tech Co. had income before taxes of $200,000, and its effective income tax rate was 15%. Tech's Year 3 effective annual income tax rate was 30%, but Tech expects its Year 4 effective annual income tax rate to be 25%. In its first quarter interim income statement, what amount of income tax expense should Tech report?

$50,000

Delar Co. completed its year-end physical count of inventory. The inventory was valued at first-in, first-out (FIFO) costs and totaled $500,000. Delar subsequently noted the following two items: 1,000 units of inventory with a FIFO cost of $10 each were shipped and billed to a customer, f.o.b. destination. These items were included in the physical count. 6,000 units at a FIFO cost of $5 each were held on consignment for one of its suppliers, but were excluded from the physical count. What amount should Delar report as inventory at year end?

$500,000

On January 1, Year 1, Nobb Corp. signed a 12-year lease for warehouse space. Nobb has an option to renew the lease for an additional 8-year period on or before January 1, Year 5. During January Year 3, Nobb made substantial improvements to the warehouse. The cost of these improvements was $540,000, with an estimated useful life of 15 years. At December 31, Year 3, Nobb is reasonably certain to exercise the renewal option. Nobb has taken a full year's amortization on this leasehold. In Nobb's December 31, Year 3, balance sheet, the carrying amount of this leasehold improvement should be

$504,000

Clem's cost of sales was

$512,000

On January 2 of the current year, LTTI Co. entered into a 3-year, noncancelable contract to buy up to 1 million units of a product each year at $.10 per unit with a minimum annual guarantee purchase of 200,000 units. At year end, LTTI had only purchased 80,000 units and decided to cancel sales of the product. What amount should LTTI report as a loss related to the purchase commitment as of December 31 of the current year?

$52,000

Neue Co. incurred the following costs during its first year of operations: Legal fees for incorporation and other related matters $55,000 Underwriters' fees for initial stock offering 40,000 Exploration costs and purchases of mineral rights 60,000 Neue had no revenue during its first year of operation. What amount must Neue expense as organizational costs?

$55,000

For the year ended December 31, Beal Co. estimated its allowance for uncollectible accounts using the year-end aging of accounts receivable. The following data are available: Allowance for uncollectible accounts, 1/1 $42,000 Uncollectible accounts written off, 11/30 46,000 Estimated uncollectible accounts per aging, 12/31 52,000 After year-end adjustment, the uncollectible accounts expense should be

$56,000

What amount should Mill report as the correct pretax income for the year ended December 31?

$58,500

Bard Co., a calendar-year corporation, reported income before income tax expense of $10,000 and income tax expense of $1,500 in its interim income statement for the first quarter of the year. Bard had income before income tax expense of $20,000 for the second quarter and an estimated effective annual rate of 25%. What amount should Bard report as income tax expense in its interim income statement for the second quarter?

$6,000

Cobb, Inc.'s inventory at May 1 consisted of 200 units at a total cost of $1,250. Cobb uses the periodic inventory method. Purchases for the month were as follows: Date No. of Units Unit cost Total Cost May 4 20 $5.80 $116.00 May 17 80 $5.50 $440.00 Cobb sold 10 units on May 14 for $120. What is Cobb's weighted average cost of goods sold for May?

$60.20

On January 2, Year 1, Lava, Inc., purchased a patent for a new consumer product for $90,000. At the time of purchase, the patent was valid for 15 years; however, the patent's useful life was estimated to be only 10 years due to the competitive nature of the product. On December 31, Year 4, the product was permanently withdrawn from sale under governmental order because of a potential health hazard in the product. What amount should Lava charge against income during Year 4, assuming amortization is recorded at the end of each year but the pattern of consumption of the economic benefits of the patent is not reliably determinable?

$63,000

Hy Corp. bought Patent A for $40,000 and Patent B for $60,000. Hy also paid acquisition costs of $5,000 for Patent A and $7,000 for Patent B. Both patents were challenged in legal actions. Hy paid $20,000 in legal fees for a successful defense of Patent A and $30,000 in legal fees for an unsuccessful defense of Patent B. What amounts should Hy capitalize for patents?

$65,000

During the current year, Beta Motor Co. 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

An internal auditor is deriving cash flow data based on an incomplete set of facts. Bad debt expense was $2,000. Additional data for this period follows: Credit sales $100,000 Gross accounts receivable -- beginning balance 5,000 Allowance for bad debts -- beginning balance (500) Accounts receivable written off 1,000 Increase in net accounts receivable (after subtraction of allowance for bad debts) 30,000 How much cash was collected this period on credit sales?

$68,000

On April 1, Aloe, Inc., factored $80,000 of its accounts receivable without recourse. The factor retained 10% of the accounts receivable as an allowance for sales returns and charged a 5% commission on the gross amount of the factored receivables. What amount of cash did Aloe receive from the factored receivables?

$68,000

The following information applies to the income statement of Addison Company: Gross sales $1,000,000 Net sales 900,000 Freight-in 10,000 Ending inventory 200,000 Gross profit margin 40% Addison's cost of goods available for sale is?

$740,000

At January 31, what should be the net carrying amount of Rose's inventory?

$80,000

An analysis and aging of Jay Co.'s accounts receivable at December 31 disclosed the following: Accounts receivable $900,000 Allowance for uncollectible accounts, per books 50,000 Amounts deemed uncollectible 64,000 The net realizable value of the accounts receivable at December 31 should be

$836,000

Gold Co. purchased equipment from Marshall Co. on July 1. Gold paid Marshall $10,000 cash and signed a $100,000 noninterest-bearing note payable, due in 3 years. Gold recorded a $24,868 discount on notes payable related to this transaction. What is the acquired cost of the equipment on July 1?

$85,132

Beck Co.'s inventory is as follows: Beginning inventory 10 trees at $ 50 March 4 purchased 6 trees at 55 March 12 sold 8 trees at 100 March 20 purchased 9 trees at 60 March 27 sold 7 trees at 105 March 30 purchased 4 trees at 65 What was Beck's cost of goods sold using the last-in, first-out (LIFO) perpetual method?

$850

On the December 31 balance sheet of Mann Co., the current receivables consisted of the following: Trade accounts receivable $ 93,000 Allowance for uncollectible accounts (2,000) Claim against shipper for goods lost in transit (November) 3,000 Selling price of unsold goods sent by Mann on consignment at 130% of cost (not included in Mann's ending inventory) 26,000 Security deposit on lease of warehouse used for storing some inventories 30,000 Total $150,000 At December 31, the correct total of Mann's current net receivables was

$94,000

On January 16, Tree Co. paid $60,000 in property taxes on its factory for the current calendar year. On April 2, Tree paid $240,000 for unanticipated major repairs to its factory equipment. The repairs will benefit operations for the remainder of the calendar year. What amount of these expenses should Tree include in its third quarter interim financial statements for the 3 months ended September 30?

$95,000

A machine with a 5-year estimated useful life and an estimated 10% salvage value was acquired on January 1, Year 1. On December 31, Year 4, accumulated depreciation using the sum-of-the-years'-digits method would be

(Original cost less salvage value) multiplied by 14/15

On January 1 of the current year, Barton Co. paid $900,000 to purchase two-year, 8%, $1,000,000 face value bonds that were issued by another publicly-traded corporation. Barton plans to sell the bonds in the first quarter of the following year. The fair value of the bonds at the end of the current year was $1,020,000. At what amount should Barton report the bonds in its balance sheet at the end of the current year?

1,020,000 (1.02 million)

Cook Co. had the following balances at December 31, Year 1: Cash in checking account $350,000 Cash in money-market account 250,000 U.S. Treasury bill, purchased 12/1/Yr 1, maturing 2/28/Yr 2 800,000 U.S. Treasury bond, purchased 3/1/Yr 1, maturing 2/28/Yr 2 500,000 Cook's policy is to treat as cash equivalents all highly liquid investments with a maturity of 3 months or less when purchased. What amount should Cook report as cash and cash equivalents in its December 31, Year 1, balance sheet?

1,400,000 (1.4 million)

Ala Company acquired Mish Company on January 1, Year 1. A goodwill of $480,000 was recognized on this acquisition. Ala is a private company, and it applies the accounting alternative to account for goodwill recognized in this business combination. The synergies expected from combining the operations of the two businesses are estimated to last over the next 20 years. However, due to Ala expecting to discontinue some of the activities of Mish in the future, Ala estimates that the useful life of goodwill is 14 years. Over how many years, if at all, should the goodwill recognized be amortized by Ala?

10

An enterprise must separately report information about an operating segment when the segment's revenue meets what minimum percentage of the combined revenue of all reported operating segments?

10%

Rand, Inc., accepted from a customer a $40,000, 90-day, 12% interest-bearing note dated August 31. On September 30, Rand discounted the note at the Apex State Bank at 15%. However, the proceeds were not received until October 1. In Rand's September 30 balance sheet, the amount receivable from the bank, based on a 360-day year, includes accrued interest revenue of

170

On July 1, Lee Co. sold goods in exchange for a $200,000 8-month noninterestbearing note receivable. At the time of the sale, the note's market rate of interest was 12%. What amount did Lee receive when the note was discounted at a bank at 10% on September 1?

190,000

Janson traded stock in Flax Co. marketable equity securities during Year 1 as follows: Number of shares purchased (sold) Price per share February 3, Year 1 1,100 $11 April 15, Year 1 2,500 9 May 28, Year 1 (750) 13 July 5, Year 1 1,400 12 September 30, Year 1 (4,000) 15 No other transactions took place for Flax during the remainder of the year. At December 31, Year 1, Flax is trading at $10 per share. Janson trades securities on a last in, first out basis. What amount is the net value of the investment in Flax at year end?

2,500

During Year 6, Wall Co. purchased 2,000 shares of Hemp Corp. common stock for $31,500. They represent 2% of ownership in Hemp Corp. The fair value of this investment was $29,500 at December 31, Year 6. Wall sold all of the Hemp common stock for $14 per share on December 15, Year 7, incurring $1,400 in brokerage commissions and taxes. In its income statement for the year ended December 31, Year 7, Wall should report a recognized loss of

2,900

An asset group is being evaluated for an impairment loss. The following financial information is available for the asset group: Carrying value $100,000,000 Sum of the undiscounted cash flows 95,000,000 Fair value 80,000,000 What amount of impairment loss, if any, should be recognized?

20 mil

Jent Corp. purchased bonds at a discount of $10,000. Subsequently, Jent sold these bonds at a premium of $14,000. During the period that Jent held this investment, amortization of the discount amounted to $2,000. What amount should Jent report as gain on the sale of bonds?

22,000

Plack Co. purchased 10,000 shares (2% owner ship) of Ty Corp. on February 14 and did not elect the fair value option. Plack received a stock dividend of 2,000 shares on April 30, when the market value per share was $35. Ty paid a cash dividend of $2 per share on December 15. In its income statement for the year, what amount should Plack report as dividend income?

24,000

A company recently acquired a copyright that now has a remaining legal life of 30 years. The copyright initially had a 38-year useful life assigned to it. An analysis of market trends and consumer habits indicated that the copyrighted material will generate positive cash flows for approximately 25 years. What is the remaining useful life, if any, over which the company can amortize the copyright for accounting purposes?

25 years

Star Corp. had the following accounts and balances in its general ledger as of December 31: Petty cash $ 500 XYZ Bank -- checking account 20,000 Marketable equity security 10,000 Marketable debt security 7,500 ABC Bank -- depository account 5,000 What amount should Star report as cash and cash equivalents in the balance sheet as of December 31?

25,500

The following are held by Smite Co.: Cash in checking account $20,000 Cash in bond sinking fund account 30,000 Post-dated check from customer dated one month from balance sheet date 250 Petty cash 200 Commercial paper (matures in two months) 7,000 Certificate of deposit (matures in six months) 5,000 What amount should be reported as cash and cash equivalents on Smite's balance sheet?

27,200

On December 31, Ott Co. had investments in equity securities as follows: Fair Cost Value Man Co. $10,000 $ 8,000 Kemo, Inc. 9,000 11,000 Fenn Corp. 11,000 9,000 $30,000 $28,000 Ott's December 31 balance sheet should report the equity securities as

28,000

The following information pertains to Lark Corp.'s available-for-sale debt securities: December 31 Year 2 Year 3 Cost $100,000 $100,000 Fair value 90,000 120,000 Differences between cost and fair values are considered to be temporary. The decline in fair value was properly accounted for at December 31, Year 2. Ignoring tax effects, by what amount should other comprehensive income (OCI) be credited at December 31, Year 3?

30,000

Alton Co. had a cash balance of $32,300 recorded in its general ledger at the end of the month, prior to receiving its bank statement. Reconciliation of the bank statement reveals the following information: Bank service charge - $15 Check deposited and returned for insufficient funds check - $120 Deposit recorded in the general ledger as $258 but should be $285 Checks outstanding - $1,800 After reconciling its bank statement, what amount should Alton report as its cash account balance?

32,192

A company that is a large accelerated filer must file its Form 10-Q with the SEC within how many days after the end of the period?

40 days

Fact Pattern: Sun Corp. had investments in trading debt securities costing $650,000. On June 30, Year 2, Sun decided to hold the investments indefinitely and accordingly reclassified them as available-for-sale debt securities on that date. The investments' fair value was $575,000 at December 31, Year 1, $530,000 at June 30, Year 2, and $490,000 at December 31, Year 2. [ 17 ] What amount of loss should Sun report in its Year 2 earnings?

45,000

On January 1, Year 1, Purl Corp. purchased as a long-term investment $500,000 face amount of Shaw, Inc.'s 8% bonds for $456,200. The bonds were purchased to yield 10% interest. The bonds mature on January 1, Year 6, and pay interest annually on January 1. Purl uses the effective interest method of amortization. What amount (rounded to nearest $100) should Purl report on its December 31, Year 2, balance sheet for these held-to-maturity bonds?

468,000

Leaf Co. purchased from Oak Co. a $20,000, 8%, 5-year note that required five equal, annual year-end payments of $5,009. The note was discounted to yield a 9% rate to Leaf. At the date of purchase, Leaf recorded the note at its present value of $19,485. What should be the total interest revenue earned by Leaf over the life of this note?

5,560

Ace Co. sold to King Co. a $20,000, 8%, 5-year note that required five equal annual year-end payments. This note was discounted to yield a 9% rate to King. The present value factors of an ordinary annuity of $1 for five periods are as follows: 8% 3.992 9% 3.890 What should be the total interest revenue earned by King on this note?

5,561

On July 1, Year 3, Kay Corp. sold equipment to Mando Co. for $100,000. Kay accepted a 10% note receivable for the entire sales price. This note is payable in two equal installments of $50,000 plus accrued interest on December 31, Year 3, and December 31, Year 4. On July 1, Year 4, Kay discounted the note at a bank at an interest rate of 12%. Kay's proceeds from the discounted note were

51,700

Roth, Inc., received from a customer a 1-year, $500,000 note bearing annual interest of 8%. After holding the note for 6 months, Roth discounted the note at Regional Bank at an effective interest rate of 10%. What amount of cash did Roth receive from the bank?

513,000

On January 1, Welling Company purchased 100 of the $1,000 face value, 8%, 10- year bonds of Mann, Inc. The bonds mature on January 1 in 10 years, and pay interest annually on January 1. Welling purchased the bonds to yield 10% interest. Information on present value factors is as follows: Present value of $1 at 8% for 10 periods 0.4632 Present value of $1 at 10% for 10 periods 0.3855 Present value of an annuity of $1 at 8% for 10 periods 6.7101 Present value of an annuity of $1 at 10% for 10 periods 6.1446 How much did Welling pay for the bonds?

87,707

At June 30, Almond Co.'s cash balance was $10,012 before adjustments, while its ending bank statement balance was $10,772. Check number 101 was issued June 2 in the amount of $95, but was erroneously recorded in Almond's general ledger balance as $59. The check was correctly listed in the bank statement at $95. The bank statement also included a credit memo for interest earned in the amount of $35, and a debit memo for monthly service charges in the amount of $50. What was Almond's adjusted cash balance at June 30?

9,961

Iona Co. and Siena Co. exchanged goods held for resale with equal fair values. Each will use the other's goods to promote its own products. The retail price of the wickets that Iona gave up is less than the retail price of the wombles received. What gain should Iona recognize on the nonmonetary exchange?

A gain equal to the difference between the fair value and the cost of the wickets.

Under IFRS, how must an intangible asset be measured after its initial recognition?

According to the cost model or the revaluation model.

A change in the estimate for bad debts should be

Accounted for in the period of change and any affected future periods.

Jel Co., a consignee, paid the freight costs for goods shipped from Dale Co., a consignor. These freight costs are to be deducted from Jel's payment to Dale when the consignment goods are sold. Until Jel sells the goods, the freight costs should be included in Jel's

Accounts Receivable

A major customer of an audit client suffers a fire after the balance sheet date but prior to the date of the auditor's report. The audit client believes that this event could have a significant direct effect on the financial statements. The auditor should

Advise management to disclose the event in notes to the financial statements

Investments classified as held-to-maturity are measured at

Amortized cost, with no unrealized gains or losses reported.

A purchased patent has a remaining legal life of 15 years. It should be

Amortized over its useful life if less than 15 years

On July 1, Year 1, Dewey Co. signed a 20-year building lease that it reported as a finance lease. Dewey paid the monthly lease payments when due. How should Dewey report the effect of the lease payments in the financing activities section of its Year 1 statement of cash flows?

An outflow equal to the Year 1 principal payments only

At the beginning of Year 2, a company invested $40,000 in a debt security. At that time the security was appropriately classified as an available-for-sale security. At the end of Year 2, the security had a fair value of $28,500. The change in fair value is deemed temporary. How should this change in fair value be reported in the financial statements?

As an unrealized loss of $11,500 as part of other comprehensive income.

Long Co. invested in marketable securities. At year-end, fair-value changes in this investment were included in Long's other comprehensive income. How would Long classify this investment?

Available-for-sale debt securities.

According to the FASB's conceptual framework, comprehensive income includes which of the following? Loss on Discontinued Investments Operations by Owners A. Yes Yes B. Yes No C. No Yes D. No No

B

On both December 31, Year 1, and December 31, Year 2, Kopp Co.'s only availablefor-sale debt security had the same fair value, which was below amortized cost. Kopp considered the decline in value to be temporary in Year 1 but other than temporary in Year 2. At the end of both years the security was classified as a noncurrent asset. What should be the effects of the determination that the decline was other than temporary on Kopp's Year 2 net noncurrent assets and net income?

B. No effect on net noncurrent assets and decrease in net income.

Which of the following is the proper treatment of the cost of equipment used in research and development activities that will have alternative future uses?

Capitalized and depreciated over its estimated useful life.

Which of the following items is included in the financing activities section of the statement of cash flows?

Cash effects of transactions obtaining resources from owners and providing them with a return on their investment

Goodwill arises from a business combination. For the purposes of impairment testing, IFRS provide for goodwill to be allocated to which components of the acquirer's entity?

Cash-generating units that benefit from the combination.

Finer Foods, Inc., a chain of supermarkets specializing in gourmet food, has been using the average cost method to measure its inventory. Change to FIFO should be reported on the financial statement as a

Change in an accounting principle.

Which of the following methods should be used to account for research and development costs with no alternative future use?

Charging all costs to expense when incurred

Which of the following should be reflected, net of applicable income taxes, in the statement of equity as an adjustment of the opening balance in retained earnings?

Correction of an error in previously issued financial statements.

A company has outstanding accounts payable of $30,000 and a shortterm construction loan in the amount of $100,000 at year end. The loan was refinanced through issuance of long-term bonds after year end but before issuance of financial statements. How should these liabilities be recorded in the balance sheet?

Current liabilities of $30,000, noncurrent liabilities of $100,000

How should unearned rent that has already been paid by tenants for the next eight months of occupancy be reported in a landlord's financial statements?

Current liability

According to the FASB's conceptual framework, an entity's revenue may result from a(n)

Decrease in a liability from primary operations.

When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account

Decreases both accounts receivable and the allowance for uncollectible accounts.

Land was purchased to be used as the site for the construction of a plant. A building on the property was sold and removed by the buyer so that construction on the plant could begin. The proceeds from the sale of the building should be

Deducted from the cost of the land

A statement of financial position provides a basis for all of the following except

Determining profitability and assessing past performance

A large account receivable from Taylor Industries was considered fully collectible at September 30, Year 5, the balance sheet date. Taylor suffered a plant explosion on October 25, Year 5. Because Taylor was uninsured, it is unlikely that the account will be paid. How should this event be presented in the entity's financial statements?

Disclosure in a note to the financial statements

According to the FASB's conceptual framework, which of the following decreases shareholder equity?

Distributions to owners

For interim financial reporting, a company's income tax provision for the second quarter should be determined using the

Effective tax rate expected to be applicable for the full year as estimated at the end of the second quarter

The computations required to prepare the statement of cash flows include all of the following except

Equipment purchased with a note payable

All of the following are classifications on the statement of cash flows except

Equity activities

In accounting for inventories, GAAP require departure from the historical cost principle when the utility of inventory has fallen below cost. Inventory accounted for under certain cost flow methods can be measured at the lower of cost or net realizable value (NRV). The term "net realizable value (NRV)" as defined here means

Estimated selling price minus estimated costs of completion and disposal.

Red Co. had $3 million in accounts receivable recorded on its books. Red wanted to convert the $3 million in receivables to cash in a more timely manner than waiting the 45 days for payment as indicated on its invoices. Which of the following would alter the timing of Red's cash flows for the $3 million in receivables already recorded on its books?

Factor the receivables outstanding

An entity should report an investment in marketable equity securities that does not result in significant influence or control over the investee at

Fair value, with holding gains and losses included in earnings.

A company issued a purchase order on December 15, Year 1, for a piece of capital equipment that costs $100,000. The capital equipment was shipped from the vendor on December 31, Year 1, and received by the company on January 5, Year 2. The equipment was installed and placed in service on February 1, Year 2. On what date should the depreciation expense begin?

February 1, Year 2.

Integral Corp. is subject to the reporting provisions of the Securities Exchange Act of 1934. For its current fiscal year, Integral filed the following with the SEC: quarterly reports, an annual report, and a periodic report listing newly appointed officers of the corporation. Integral did not notify the SEC of shareholder "short-swing" profits, did not report that a competitor made a tender offer to Integral's shareholders, and did not report changes in the price of its stock as sold on the New York Stock Exchange. Under the SEC reporting requirements, which of the following was Integral required to do?

File the periodic report listing newly appointed officers.

In its segment information for Year 2, how many reportable segments does Correy have?

Five

Which of the following reports would a company file to meet the SEC's requirements for unaudited, interim financial statements reviewed by an independent accountant?

Form 10-Q

ABC Co. is a public company that is required to file financial reports with SEC. ABC acquired a significant related business, Bauer Co., through the registration and issuance of additional shares of common stock to the former stockholders of Bauer. Which of the following forms should ABC file with the SEC as a result of the acquisition of Bauer?

Form 8-K

Form 10-K must be filed within I. 60 days of the last day of the fiscal year by large accelerated filers II. 70 days of the last day of the fiscal year by small accelerated filers III. 75 days of the last day of the fiscal year by accelerated filers IV. 90 days of the last day of the fiscal year by nonaccelerated filers

I, III, and IV

For available-for-sale debt securities included in noncurrent assets, which of the following amounts should be included in the period's net income? I. Unrealized holding losses during the period II. Realized gains during the period III. Changes in fair value during the period

II only

Which one of the following statements with regard to marketable securities is incorrect?

In the available-for-sale portfolio of marketable debt securities, unrealized gains and losses are recorded on the income statement.

Because of a decline in market price in the second quarter, Petal Co. incurred an inventory loss, but the market price was expected to return to previous levels by the end of the year. At the end of the year, the decline had not reversed. Petal accounts for its inventory using the LIFO method. When should the loss be reported in Petal's interim income statements?

In the fourth quarter only

How are discontinued operations and material unusual or infrequently occurring items that occur at midyear initially reported?

Included in net income and disclosed in the notes to interim financial statements

Giaconda, Inc., acquires an asset for which it will measure the fair value by discounting future cash flows of the asset. Which of the following terms best describes this fair value measurement approach?

Income

Unrealized gains and losses on trading debt securities should be presented in the

Income statement.

On August 15, Benet Co. sold goods for which it received a note bearing the market rate of interest on that date. The 4-month note was dated July 15. Note principal, together with all interest, is due November 15. When the note was recorded on August 15, which of the following accounts increased?

Interest receivable

Each of the following would be considered a Level 2 observable input that could be used to determine an asset or liability's fair value except

Internally generated cash flow projections for a related asset or liability

A corporation issues quarterly interim financial statements and uses the lower of cost or market method to measure its LIFO inventory in its annual financial statements. The corporation accounts for its inventory using the LIFO method. Which of the following statements is correct regarding how the corporation should measure its inventory in its interim financial statements?

Inventory losses generally should be recognized in the interim statements.

In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cash inflows from

Investing activities

The sale of available-for-sale debt securities should be accounted for on the statement of cash flows as a(n)

Investing activity

General purpose external financial reporting of a corporation focuses primarily on the needs of which of the following users?

Investors and creditors and their advisors.

A company recently moved to a new building. The old building is being actively marketed for sale, and the company expects to complete the sale in 4 months. Each of the following statements is correct regarding the old building, except:

It will be valued at historical cost.

Inventory accounted for under which of the following cost flow methods is not measured at the lower of cost or net realizable value?

Last-in, first-out (LIFO)

After being held for 40 days, a 120-day, 12% interest-bearing note receivable was discounted at a bank at 15%. The proceeds received from the bank upon discounting is the

Maturity amount *minus* the discount at 15%.

Mend Co. purchased a 3-month U.S. Treasury bill. Mend's policy is to treat as cash equivalents all highly liquid investments with an original maturity of 3 months or less when purchased. How should this purchase be reported in Mend's statement of cash flows?

Not reported

In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for

Operating activities

A statement of cash flows prepared using the indirect method would have cash activities listed in which one of the following orders?

Operating, investing, financing

The original cost of an inventory item is below both replacement cost and net realizable value. The net realizable value minus normal profit margin is below the original cost. Under the lower-of-cost-or-market (LCM) method, the inventory item that is accounted for using the LIFO method should be measured at

Original cost.

A company has experienced operating losses from its appliances division for the past five years. The division is the lowest level of identifiable cash flows. Having determined the division is the lowest level of identifiable cash flows, the company's next step in performing its impairment test is to

Perform a recoverability test on the carrying amount of the division's assets.

Which of the following is not classified as R&D?

Periodic design changes to existing products.

For an available-for-sale security transferred into the trading category, the portion of the unrealized holding gain or loss at the date of the transfer that has not been previously recognized in earnings shall be

Recognized in earnings immediately.

Which of the following should a company classify as a research and development expense?

Redesign of a product prerelease.

SEC regulations for the financial statement presentation and disclosure requirements of SEC filings can be found in

Regulation S-X

In accounting for inventories under the LIFO or retail inventory method, generally accepted accounting principles require departure from the historical cost principle when the utility of inventory has fallen below cost. This rule is known as the "lower-of-cost-ormarket" rule. The term "market" as defined here means

Replacement cost of the inventory.

The correction of an error in the financial statements of a prior period should be reported, net of applicable income taxes, in the current

Retained earnings statement as an adjustment of the opening balance.

Which of the following items requires a prior period adjustment to retained earnings?

Revenue of $5 million that should have been deferred was recorded in the previous year as earned.

Which of the following must be included in a summary of significant accounting policies in the notes to the financial statements?

Revenue recognition policies.

Gar Co. factored its receivables without recourse with Ross Bank. Gar received cash as a result of this transaction, which is best described as a

Sale of Gar's accounts receivable to Ross, with the risk of uncollectible accounts transferred to Ross.

Which of the following transactions should be classified as investing activities on an entity's statement of cash flows?

Sale of property, plant, and equipment

All of the following are defined as elements of an income statement except

Shareholders' equity.

According to the conceptual framework, the most basic objective of financial reporting is to convey information

That enables users to make decisions about a company

Which of the following is a false statement about balance sheet disclosure of accounts receivable?

That portion of installment accounts receivable from customers which falls due more than 12 months from the balance sheet date usually would be excluded from current assets.

A reclassification of available-for-sale debt securities to the held-to-maturity category results in

The amortization of an unrealized gain or loss existing at the transfer date.

A receivable classified as current on the statement of financial position is expected to be collected within

The current operating cycle or 1 year, whichever is longer

Nancarrow Corp. released its financial statements for the year ended December 31, Year 7, on March 15, Year 8. On February 1, Year 8, Nancarrow settled a long-standing lawsuit that resulted in a material loss. No liability for this circumstance had been accrued in the financial statements. How should this event be disclosed or recognized?

The event must be recognized in the financial statements

Under IFRS, the value in use of an asset is

The present value of the future cash flows expected to be derived from the asset.

A firm's ending inventory balance was overstated by $1,000. Which of the following statements is correct according to a periodic inventory system?

The retained earnings were overstated by $1,000.

At October 31, Dingo, Inc., had cash accounts at three different banks. One account balance is segregated solely for a November 15 payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The third account, used for regular corporate operations, has a positive balance. How should these accounts be reported in Dingo's October 31 classified balance sheet?

The segregated account should be reported as a noncurrent asset, the regular account should be reported as a current asset, and the overdraft should be reported as a current liability

Accumulated other comprehensive income is reported in which of the following financial statements?

The statement of financial position

The amount of cash received from the transfer of receivables with recourse is most likely to be reported as a liability under which of the following conditions?

The transferor is entitled and obligated to repurchase the receivables at a later date.

In Year 1, a company reported in other comprehensive income an unrealized holding loss on an investment in available-for-sale debt securities. During Year 2, these securities were sold at a loss equal to the unrealized loss previously recognized. The reclassification adjustment should include which of the following?

The unrealized loss should be *credited* to the other comprehensive income account

In a periodic inventory system that uses the weighted-average cost flow method, the beginning inventory is the

Total goods available for sale minus the net purchases.

Current assets are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business. Current assets most likely include

Trading debt securities.

Debt securities held primarily for sale in the near term to generate income on shortterm price differences are known as

Trading securities.

Which of the following statements is true regarding impairment of long-lived assets?

Under U.S. GAAP, but not IFRS, reversal of an impairment loss in subsequent periods is prohibited.

Which of the following statements is false about an item of property, plant, and equipment (PPE)?

Under U.S. GAAP, such an item may be carried at an amount above its historical cost.

On December 30, Year 1, Astor Corp. sold merchandise for $75,000 to Day Co. The terms of the sale were net 30, FOB shipping point. The merchandise was shipped on December 31, Year 1, and arrived at Day on January 5, Year 2. Due to a clerical error, the sale was not recorded until January Year 2, and the merchandise, sold at a 25% markup, was included in Astor's inventory at December 31, Year 1. As a result, Astor's cost of goods sold for the year ended December 31, Year 1, was

Understated by $60,000.

In general, an enterprise preparing interim financial statements should

Use the same accounting principles followed in preparing its latest annual financial statements

Under IFRS, when an entity chooses the revaluation model as its accounting policy for measuring property, plant, and equipment, which of the following statements is correct?

When an asset is revalued, the entire class of property, plant, and equipment to which that asset belongs must be revalued.

When should a long-lived asset be tested for recoverability?

When events or changes in circumstances indicate that its carrying amount may not be recoverable

Kale Co. purchased bonds at a discount on the open market as an investment and has the intent and ability to hold these bonds to maturity. Absent an election of the fair value option, Kale should account for these bonds at

amortized cost

Under IFRS, an entity that acquires an intangible asset may use the revaluation model for subsequent measurement only if

an active market exists for the intangible asset

Arno Co. did not record a credit purchase of merchandise made prior to year end. However, the merchandise was correctly included in the year-end physical inventory. What effect did the omission of reporting the purchase of merchandise have on Arno's balance sheet at year end?

assets: no effect liabilities: understated

A material overstatement in ending inventory was discovered after the year-end financial statements of a company were issued to the public. What effect did this error have on the year-end financial statements?

current assets: overstated gross profit: overstated

A 90-day, 15% interest-bearing note receivable is sold to a bank after being held for 30 days. The proceeds are calculated using an 18% interest rate. The note receivable has been

discounted: yes pledged: no

Goodwill should be tested for value impairment at which of the following levels?

each reporting unit

At December 31, Hull Corp. had the following debt securities that were purchased during the year, its first year of operations: Fair Unrealized Cost value gain (loss) In Current Assets: Security A $ 90,000 $ 60,000 $(30,000) Security B 15,000 20,000 5,000 Totals $105,000 $ 80,000 $(25,000) In Noncurrent Assets: Security Y $ 70,000 $ 80,000 $ 10,000 Security Z 90,000 45,000 (45,000) Totals $160,000 $125,000 $(35,000) All changes in fair value are considered temporary. Security A is a trading security, and the other securities are available-for-sale securities. What amounts should be charged to earnings and other comprehensive income at December 31?

earnings: (30,000) other comprehensive income: (30,000)

Bay Manufacturing Co. purchased a 3-month U.S. Treasury bill. In preparing Bay's statement of cash flows, this purchase would

have no effect

A company recognized an intangible asset. The intangible asset is amortized over its useful life

if that life is determined to be finite.

The per-share amount must be reported on the face of a public company's income statement for which of the following items?

income from continuing operations.

Vanity Corporation holds investments in debt securities. These investments were acquired last year and have been properly classified as available-for-sale (AFS) securities. During the current year, the company sold some of the AFS securities at a loss. At year end, the remaining portfolio of AFS securities had appreciated in total value compared with the value at the end of last year. Based on these facts, which one of the following should Vanity report in its financial statements at the end of the current year?

income statement: Realized loss on sale of AFS securities balance sheet: Unrealized holding gain on appreciation of AFS securities

Companies A and B begin with identical account balances, and their revenues and expenses for the year are identical in amount except that Company A has a higher ratio of cash to noncash expenses. If the cash balances of both companies increase as a result of operations (no financing or dividends), the ending cash balance of Company A as compared to that of Company B will be

lower

When an entity changes the expected service life of a depreciable asset because new information has been obtained, how should the change be reported? By Retrospective Application By Disclosure of Pro Forma Effects on Prior Periods

no; no

Which of the following costs of goodwill should be capitalized and amortized?

no;no

Which of the following should be disclosed as supplemental information in the statement of cash flows?

no;yes

According to the FASB's conceptual framework, which of the following is an essential characteristic of an asset?

provides future benefits.

Earnings per share disclosures are required for

public entities only

In accordance with generally accepted accounting principles, which of the following methods of amortization is required for amortizable intangible assets if the pattern of consumption of economic benefits is not reliably determinable?

straight-line

On January 1, Year 1, Jambon purchased equipment for use in developing a new product. Jambon uses the straight-line depreciation method. The equipment could provide benefits over a 10-year period. However, the new product development is expected to take 5 years, and the equipment can be used only for this project. Jambon's Year 1 expense equals

the total cost of the equipment

A 90-day, 15% interest-bearing note receivable is sold to a bank after being held for 30 days. The proceeds are calculated using an 18% interest rate. The note receivable has been

yes; no

Which of the following is a method to generate cash from accounts receivable?

yes; yes

Legal fees incurred by a company in defending its patent rights should be capitalized when the outcome of litigation is

yes;no

An entity disposes of a nonmonetary asset in a nonreciprocal transfer. A gain or loss should be recognized on the disposition of the asset when the fair value of the asset transferred is determinable and the nonreciprocal transfer is to

yes;yes

Which of the following should be disclosed for each reportable operating segment of an entity? profit or loss;total assets

yes;yes

Which of the following uses the straight-line depreciation method?

yes;yes

A statement of cash flows prepared using the indirect method would have cash activities listed in which one of the following orders?

Operating, investing, financing

Jordan Co. had the following gains during the current period: Gain on disposal of a material operating segment $500,000 Foreign currency translation gain 100,000 What amount of gain from continuing operations should be presented on Jordan's income statement for the current period?

$0

On January 1, Year 7, Colorado Corp. purchased a machine having an estimated useful life of 8 years and no salvage value. The machine was depreciated by the double-declining-balance (DDB) method for both financial statement and income tax reporting. On January 1, Year 9, Colorado justifiably changed to the straight-line method for both financial statement and income tax reporting. Accumulated depreciation at December 31, Year 8, was $525,000. If the straight-line method had been used, the accumulated depreciation at December 31, Year 8, would have been $300,000. The retroactive adjustment to the accumulated depreciation account on January 1, Year 9, as a result of the change in depreciation method is

$0

The $1,000,000 bank loan was refinanced with a 20-year loan on January 15, Year 2, with the first principal payment due January 15, Year 3. Willem's audited financial statements were issued February 28, Year 2. What amount should Willem report as current liabilities at December 31, Year 1?

$1,250,000

In Trey's December 31, Year 6, balance sheet, what amount should be reported as total retained earnings?

$1,330,000

A company decided to sell an unprofitable major line of its business. The company can sell the entire operation for $800,000, and the buyer will assume all assets and liabilities of the operations. The tax rate is 30%. The assets and liabilities of the discontinued operation are as follows: Buildings $5,000,000 Accumulated depreciation 3,000,000 Mortgage on buildings 1,100,000 Inventory 500,000 Accounts payable 600,000 Accounts receivable 200,000 What is the after-tax net loss on the disposal of the division?

$140,000

Fact Pattern: Loire Co., a calendar year-end firm, has used the FIFO method of inventory measurement since it began operations in Year 3. Loire changed to the weighted-average method for determining inventory costs at the beginning of Year 6. Justification for this change was that it better reflected inventory flow. The following schedule shows year-end inventory balances under the FIFO and weighted-average methods: Year FIFO Weighted-Average 3 $ 90,000 $108,000 4 156,000 142,000 5 166,000 150,000 In its Year 6 financial statements, Loire included comparative statements for both Year 5 and Year 4. What amount should Loire report as inventory in its financial statements for the year ended December 31, Year 4, presented for comparative purposes?

$142,000

A company has the following liabilities at year end: Mortgage note payable; $16,000 due within 12 months $355,000 Short-term debt that the company is refinancing with long-term debt 175,000 Deferred tax liability arising from depreciation 25,000 What amount should the company include in the current liability section of the balance sheet?

$16,000

Fact Pattern: Loire Co., a calendar year-end firm, has used the FIFO method of inventory measurement since it began operations in Year 3. Loire changed to the weighted-average method for determining inventory costs at the beginning of Year 6. Justification for this change was that it better reflected inventory flow. The following schedule shows year-end inventory balances under the FIFO and weighted-average methods: Year FIFO Weighted-Average 3 $ 90,000 $108,000 4 156,000 142,000 5 166,000 150,000 In its Year 6 financial statements, Loire included comparative statements for both Year 5 and Year 4. What adjustment, before taxes, should Loire make retrospectively to the balance reported for retained earnings at the beginning of Year 4?

$18,000 increase.

In its June 30, Year 6 balance sheet, what amount should Gold report as current assets?

$225,000

On January 2, Year 1, Air, Inc., agreed to pay its former president $300,000 under a deferred compensation arrangement. Air should have recorded this expense in Year 1 but did not do so. Air's reported income tax expense would have been $70,000 lower in Year 1 had it properly accrued this deferred compensation. In its December 31, Year 2, financial statements, Air should adjust the beginning balance of its retained earnings by a

$230,000 debit.

Polk Co. acquires a forklift from Quest Co. for $30,000. The terms require Polk to pay $3,000 down and finance the remaining $27,000. On March 1, Year 1, Polk pays the $3,000 down and accepted delivery of the forklift. Polk signed a note that requires Polk to pay principal payments of $1,000 per month for 27 months beginning July 1, Year 1. What amount should Polk report as an investing activity in the statement of cash flows for the year ended December 31, Year 1?

$3,000

The following information pertains to Maynard Corporation's income statement for the 12 months just ended. The company has an effective income tax rate of 40%. Loss on discontinued operations $(70,000) Error in the previous year's income statement discovered during the current period (90,000) Income from continuing operations (net of tax) 72,000 Cumulative effect of change in accounting principle 60,000 Maynard's net income for the year is

$30,000

On Karl's income statement for Year 1, income from continuing operations is

$38,500

Conn Co. reported a retained earnings balance of $400,000 at December 31, Year 2. In August Year 3, Conn determined that insurance premiums of $60,000 for the 3-year period beginning January 1, Year 2, had been paid and fully expensed in Year 2. Conn has a 30% income tax rate. What amount should Conn report as adjusted beginning retained earnings in its Year 3 statement of retained earnings?

$428,000

Fuqua Steel Co. had the following financial events occur during the current year: A foreign government expropriated property held as an investment by Fuqua. This unusual event resulted in a $260,000 gain. A steel-forming operating segment suffered $255,000 in losses from hurricane damage. This unusual event was the fourth similar loss sustained in a 5-year period at that location. A material operating segment, steel transportation, was sold at a net loss of $350,000. This was Fuqua's first divestiture of one of its operating segments. Before income taxes, what amount of gain or loss should Fuqua report separately as a component of income from continuing operations?

$5,000

Dixon Company has the following items recorded on its financial records: Available-for-sale debt securities $200,000 Prepaid expenses 400,000 Treasury stock 100,000 The total amount of the above items to be shown as assets on Dixon's statement of financial position is

$600,000

Clear Co.'s trial balance has the following selected accounts: Cash (includes $10,000 in bond-sinking fund for long-term bond payable) $50,000 Accounts receivable 20,000 Allowance for doubtful accounts 5,000 Deposits received from customers 3,000 Merchandise inventory 7,000 Unearned rent 1,000 Investment in trading debt securities 2,000 What amount should Clear report as total current assets in its balance sheet?

$64,000

Karl Corp.'s trial balance of income statement accounts for the year ended December 31, Year 1, included the following: On Karl's income statement for Year 1, the loss on discontinued operations is

$7,000

Deck Co. had 120,000 shares of common stock outstanding at January 1. On July 1, it issued 40,000 additional shares of common stock. Outstanding all year were 10,000 shares of nonconvertible cumulative preferred stock. What is the number of shares that Deck should use to calculate basic earnings per share?

140,000

Form 8-K ordinarily must be submitted to the SEC after the occurrence of a significant event. All of the following events are reported on Form 8-K except

A change in inventory cost flow method from moving average to firstin, first-out

Which one of the following should be classified as a cash flow from an operating activity on the statement of cash flows?

A decrease in accounts payable during the year

Which of the following documents is typically issued as part of the due-process activities of the FASB for amending the FASB Accounting Standards Codification?

A proposed accounting standards update.

Which of the following statements is correct concerning corporations subject to the reporting requirements of the Securities Exchange Act of 1934?

A report (Form 8-K) must be filed with the SEC after a materially important event occurs.

A significant noncash transaction that need not be reported in disclosures related to the statement of cash flows is

A stock dividend declared during the year

In determining earnings per share, interest expense, net of applicable income taxes, on dilutive convertible debt should be

Added back to net income for diluted earnings per share.

A change in warranty obligations because new information has been obtained is

An accounting change that should be reported in the period of change and future periods if the change affects both.

A building contractor has a fixed-price contract to construct a building on the customer's land. The building is expected to be completed in 2 years. Progress billings will be sent to the customer at quarterly intervals. Which of the following describes the preferable point for revenue recognition for this contract if its outcome can be reasonably measured?

As progress is made toward completion of the contract.

In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for

Operating activities

Which of the following should be disclosed in a summary of significant accounting policies?

Basis of profit recognition on long-term construction contracts.

How should the effect of a change in accounting estimate be accounted for?

By prospectively applying the change to current and future periods.

The FASB's conceptual framework explains both financial and physical capital maintenance concepts. Which capital maintenance concept is applied to currently reported net income, and which is applied to comprehensive income? Currently Reported Net Income Comprehensive Income A. Financial capital Physical capital B. Physical capital Physical capital C. Financial capital Financial capital D. Physical capital Financial capital

C

Which of the following information should be included in Melay, Inc.'s current-year summary of significant accounting policies?

Property, plant, and equipment is recorded at cost with depreciation computed principally by the straight-line method.

During the current year, Beck Co. purchased equipment for cash of $47,000, and sold equipment with a $10,000 carrying amount for a gain of $5,000. How should these transactions be reported in Beck's current-year statement of cash flows?

Cash inflow of $15,000 and cash outflow of $47,000

A company acquired a building, paying a portion of the purchase price in cash and issuing a mortgage note payable to the seller for the remaining balance. In a statement of cash flows, what amount is included in investing activities for this transaction?

Cash payment

In a statement of cash flows, proceeds from issuing equity instruments should be classified as cash inflows from

Financing activities

The FASB Accounting Standards Codification

Is the single authoritative source of U.S. GAAP other than SEC pronouncements.

A company's year-end comparative statement of financial position reflects the following changes from the prior year: cash increased by $40,000, total liabilities increased by $32,000, and all other assets decreased by $65,000. Which of the following statements is correct regarding the current-year change in the company's stockholders' equity?

It decreased by $57,000

On September 30, Year 1, a component that represents a major line of an entity's business was properly classified as held for sale. This transaction is probable and is expected to qualify for recognition as a completed sale within 1 year. The component's operating loss for the period October 1 through December 31, Year 1, should be included in the Year 1 income statement as part of

Operating gain or loss of the discontinued component.

Which accounting change should be applied prospectively?

Straight-line method of depreciation for previously recorded assets to the double-declining-balance method.

In which of the following situations should a company report a prior-period adjustment?

The correction of a mathematical error in the calculation of prior years' depreciation.

Which of the following is not included in the determination of net income for the period?

The effect on prior periods of changes in an accounting principle.

The objectives of financial reporting stem from which of the following sources?

The needs of the external users of the information.

Each of the following events is required to be reported to the SEC on Form 8-K, except

The quarterly results of operations and financial condition of a registrant

What is the purpose of information presented in notes to the financial statements?

To provide disclosures required by GAAP

Which of the following is least likely to be accomplished by providing general-purpose financial information useful for making decisions about providing resources to an entity?

To provide sufficient information to determine the value of the entity.

Which of the following defines equity as it relates to a business entity?

Total assets less total liabilities

Envoy Co. manufactures and sells household products. Envoy experienced losses associated with its small appliance group. The small appliance group represents a major line of Envoy's business. Envoy plans to sell the small appliance group with its operations. What is the earliest point at which Envoy should report the small appliance group as a discontinued operation?

When Envoy classifies it as held for sale.

On December 1, Year 1, Shine Co. agreed to sell an operating segment on March 1, Year 2. As a result, the segment qualified as a component of an entity classified as held for sale. This operating segment represents a major geographical area. Throughout Year 1, the segment had operating losses that were expected to continue until its disposition. However, the gain on disposal was expected to exceed the operating segment's total operating losses in Year 1 and Year 2. The amount of estimated net gain from disposal recognized in discontinued operations in Year 1 equals

Zero

other than SEC pronouncements, which of the following accounting pronouncements applicable to nongovernmental entities is recognized by the FASB as the most authoritative?

the FASB's Accounting Standards Codification

Under SFAC No. 6, Elements of Financial Statements, interrelated elements of financial statements include Distributions to Owners Notes to Financial Statements A. Yes Yes B. Yes No C. No Yes D. No No

yes;no