ACC 3314 Exam 2 & 3

Bella Pool Co. sells prefabricated pools that cost $80,000 to customers for $144,000. The sales price includes an installation fee, which is valued at $20,000. The fair value of the pool is $128,000. The installation is considered a separate performance obligation & is expected to take 3 months to complete. The transaction price allocated to the pool & the installation is: A. $128,000 & $20,000 respectively B. $144,000 & $20,000 respectively C. $124,541 & $19,459 respectively D. $110,702 & $17,298 respectively

$124,541 & $19,459 respectively

on August 5, 2021, Crane Furniture shipped 70 dining sets on consignment to Furniture Outlet Inc. The cost of each dining set was $340 each. The cost of shipping the dining sets amounted to $2,500 and was paid for by Crane Furniture. On December 30, 2021, the consignee reported the sale of 40 dining sets at $840 each. The consignee remitted payment for the amount due after deducting a 5% commission, advertising expense of $590, and installation & setup costs of $770. The amount of cash received by Crane Furniture is: A. $30,560 B. $31,330 C. $27,060 D. $31,920

A. $30,560

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 experience, Roche is uncertain whether the FDA will approve the drug for treatment. The transaction price of this arrangement should be A. 0 until FDA approval is received B. $6,885,000 C. $1,215,000 D. $8,100,000

A. 0 until FDA approval is received

if a company offers additional considerations to convertible bondholders in order to encourage conversion, it is called a A. end conversion expenses B. sweetner C. additional conversion expenses D. forced conversion expenses

B. sweetner

on January 2, 2017, Humpty Corp. purchased 12% of Ranger Corp.'s common stock for $50,000 buying 30,000 shares. Ranger's net income for the year ended December 31, 2017 was $100,000. During 2017, Ranger declared & paid a dividend of $0.60 per share. The fair value of the Ranger stock owned by Humpty had increased to $70,000 on December 31, 2017. How much will Humpty's 2017 net income increase due to their investment in Ranger? A. $138,000 B. $18,000 C. $38,000 D. $20,000

C. $38,000

a transaction price for multiple performance obligations should be allocated: A. based on selling price from the company's competitors B. based on forecasted cost of satisfying performance obligation C. based on their relative fair values D. based on total transaction price less residual value

C. based on their relative fair values

which of the following investment securities held by Covidian Inc. are not reported at fair value in its balance sheet? A. common stock help in ZZZ company that accounts for 15% of ownership B. debt securities held as available for sale securities C. common stock help in XYZ company that accounts for 25% of ownership D. debt securities held as trading securities

C. common stock help in XYZ company that accounts for 25% of ownership

which of the following best describes a possible result of treasury stock transactions by a corporation? A. may increase but not decrease retained earnings B. may increase net income if the cost method is used C. may decrease but not increase retained earnings D. may decrease but not increase net income

C. may decrease but not increase retained earnings

noncash consideration should generally be: A. recognized on the basis of original cost paid by customer B. recognized on the basis of fair value of equivalent goods or services C. recognized on the basis of fair value of what is received D. recognized on the basis of book value of what is received

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

on January 15, 2014, Bella Vista Co. enters into a contract to build custom equipment for ABC Carpet Co. The contract specified a delivery date of March 3. The equipment was delivered on March 15. The contract required full payment of $75,000 30 days after delivery. ABC paid the amount in full on March 20. For Bella Vista, Sales Revenue related to this contract should be: A. recorded on January 15, 2014 B. recorded on March 3, 2014 C. recorded on March 15, 2014 D. recorded on March 20, 2014

C. recorded on March 15, 2014

in a consignment sale, the consignee: A. records advertising paid for the consignment as an expense B. recognizes commission expenses C. records commission revenue from sale of consigned goods D. recognizes both commission revenue & sales revenue

C. records commission revenue from sale of consigned goods

proceeds from an issue of debt securities having stock warrants should not be allocated between debt & equity features when A. exercise of the warrants within the next few fiscal periods seems remote B. the market value of the warrants is not readily available C. the warrants issued with the debt securities are nondetachable D. the allocation would result in a discount on the debt security

C. the warrants issued with the debt securities are nondetachable

Landis Co. purchased $3,000,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $3,124,740 at an effective interest rate of 7%. Using the effective-interest method, Landis Co. decreased the Held-to-Maturity Securities account for the Ritter, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $10,620 and $10,980, respectively. At December 31, 2021, the fair value of the Ritter, Inc. bonds was $3,180,000. What should Landis Co. report as other comprehensive income and as a separate component of stockholders' equity? A. $21,600 B. $76,860 C. $55,260 D. $0

D. $0

Copper Construction Co. had a contract starting April 2021, to construct a $24,000,000 building that is expected to be completed in September 2023, at an estimated cost of $22,000,00. At the end of 2021, the costs to date were $10,120,000 and the estimated total costs to complete had not changed. The progress billings during 2021 were $4,800,000 and the cash collected during 2021 was $3,200,000. Copper uses completed contract method. For the year ended December 31, 2021, Copper would recognize gross profit on the building of: A. $0 B. $920,000 C. $843,333 D. $1,080,000

A. $0

Hernandez Company has 350,000 shares of $10 per value common stock outstanding. During the year, Hernandez declared a 10% stock dividend when the market price of the stock was $30 per share. Four months later Hernandez declared a $.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by A. $1,242,500 B. $175,000 C. $192,500 D. $525,000

A. $1,242,500

Norton Company issues 4,000 shares of its $5 par value common stock having a market value of $25 per share and 6,000 shares of its $15 par value preferred stock having market value of $20 per share for a lump sum of $192,000. What amount of the proceeds should be allocated to the preferred stock (TOTAL, both the Preferred Stock & the APIC-PS accounts)? A. $104,727 B. $172,000 C. $120,000 D. $90,000

A. $104,727

on January 1, 2013, Nana Co. paid $100,000 for 8,000 shares of Papa Co. common stock. The ownership in Papa Co. is 10%. Papa reported net income of $52,000 for the year ended December 31, 2013. The fair value of the Papa stock on that date was $25 per share. What amount will be reported in the balance sheet of Nana Co. for the investment in Papa at December 31, 2013? A. $200,000 B. $300,000 C. $284,400 D. $360,000

A. $200,000

Seasons construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2021, Seasons estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long-Term Contracts recognized for 2021? A. $5,580,000 B. $6,200,000 C. $5,325,000 D. $1,550,000

A. $5,580,000

Guragai Inc. is a software & technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Sharma Corp. purchased computer equipment, installation & training for a total cost of $120,000 on March 15, 2019. Estimated standalone fair values of the equipment , installation, & training are $75,000; $50,000; & $25,000 respectively. The transaction price allocated to equipment, installation & training is A. $60,000; $40,000; & $20,000 respectively B. $40,000; $40,000; & $40,000 respectively C. $120,000 for the entire bundle D. $75,000; $50,000; & $25,000 respectively

A. $60,000; $40,000; & $20,000 respectively

in computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is the A. annual preferred dividends B. preferred dividends times (one minus the income tax rate) C. annual preferred dividend times (one minus the income tax rate) D. cash dividend paid to common stockholders

A. annual preferred dividends

in applying the treasury stock method to determine the dilutive effect of stock options & warrants, the proceeds assumed to be received upon exercise of the options and warrants A. are used to calculate the # of common shares repurchased at the average market price, when computing diluted earnings per share B. are added, net of tax, to the numerator of the calculation for diluted earnings per share C. are disregarded in the computation of earnings per share if the exercise price of the options & warrants is less than the ending market price of common stock D. none of these

A. are used to calculate the # of common shares repurchased at the average market price, when computing diluted earnings per share

when using the percentage-of-completion method of accounting for long-term contracts, the percentage of completion used to recognize gross profit in the first year usually is determined by measuring: A. costs incurred in the first year, divided by estimated total project costs B. total project costs by gross revenues C. costs incurred in the first year, divided by estimated gross profit D. costs incurred in the first year, divided by estimated remaining costs to complete the project

A. costs incurred in the first year, divided by estimated total project costs

Carla Vista Choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. The sales returns period extends 60 days. On February 10, 2021, a customer purchases $3,500 of products (cost $1,750). Assuming that based on prior experience, estimated returns are 20%. The journal entry to record the actual return of $200 of merchandise includes a A. debit to Returned Inventory for $100 B. credit to Allowance for Sales Returns for $100 C. debit to Estimate Inventory Returns for $100 D. credit to Returned Inventory for $100

A. debit to Returned Inventory for $100

Simone collects a nonrefundable up-front fee of $120 when a new customer signs up for a 12-month contract for services. A monthly fee of $32 is also assessed for each customer. How much revenue does she record on the date the contract is signed? A. $120 B. $0 C. $42 D. $32

B. $0

Berry Corporation has 100,000 shares of $10 par common stock authorized. The following transactions took place during 2017, the first year of the corporation's existence: Sold 20,000 shares of common stock for $13.50 per share. Issued 20,000 shares of common stock in exchange for a patent valued at $300,000. At the end of the Berry's first year, total paid-in capital amounted to A. $300,000. B. $570,000. C. $270,000. D. $120,000.

B. $570,000

Winger Corp. owned 900,000 shares of Fegan Corporation stock. On December 31, Year 1, when Winger's account "Investment in Common Stock of Fegan Corp." had a carrying (book) value of $5 per share, Winger distributed these shares to its stockholders as a property dividend. The quoted market price for each Fegan share was $7 on the declaration date & $9 on the distribution date. On the property dividend declaration date, Winger corporation will debit Retained Earnings for: A. $8,100,000 B. $6,300,000 C. $4,500,000 D. $3,600,000

B. $6,300,000

on July 1, Year 1, an interest payment date, $60,000 of Parks Co. bonds were converted into 1,200 shares of Parks Co. common stock each having a par value of $45 and a market value of $54. There is $2,400 unamortized discount on the bonds. Using the book value method, Parks would record A. no change in paid-in capital B. a $3,600 increase in paid-in capital in excess of par C. a $7,200 increase in paid-in capital in excess of par D. a $4,800 increase in paid-in capital in excess of par

B. a $3,600 increase in paid-in capital in excess of par

Seadrill Engineering licensed software to XZR Co. In addition to providing the software, the company also provides training service to employees of XZR Co. for 3 years. The total transaction price for software license & training service is $420,000, paid by XZR Co. when Seadrill Engineering installed the software on January 1, 2020. Based on standalone values, Seadrill estimates the software license has a value of $310,000. The standalone value of training service cannot be determined. Assuming software license & training service are separate performance obligations, the journal entry on January 1, 2020 in the books of Seadrill Engineering includes: A. credit to software sales revenue of $420,000 B. credit to software sales revenue of $310,000 C. debit to unearned training service revenue of $110,000 D. credit to training service revenue of $310,000

B. credit to software sales revenue of $310,000

unrealized gains & losses on held-to-maturity securities are: A. reported on the income statement B. not recognized because these securities are reported at their amortized cost C. reported on the Stockholder's Equity section of the Balance Sheet D. reported on the balance sheet

B. not recognized because these securities are reported at their amortized cost

the pre-emptive right of a common stockholder is the right to A. share proportionately in corporate assets upon liquidation B. share proportionately in any new issues of the same class C. receive cash dividends before they are distributed to preferred stockholders D. exclude preferred stockholders from voting rights

B. share proportionately in any new issues of the same class

a company reported net income available to common stockholders of $2,000,000 for the year ended December 31, year 2. The company had 1,500,000 shares of common stock outstanding as of January 1, year 2, and issued 500,000 additional shares of common stock may 1, year 2. What amount is the company's basic earnings per share for the year ended December 31, year 2? A. $1.00 B. $1.20 C. $1.09 D. $1.33

C. $1.09

Fultz Company had 300,000 shares of common stock issued and outstanding at December 31, 2010. During 2015, no additional common stock was issued. On January 1, 2015, Fultz issued 400,000 shares of nonconvertible preferred stock. During 2015, Fultz declared and paid $180,000 cash dividends on the common stock and $150,000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2015, was $960,000. What should be Fultz's 2015 earnings per common share, rounded to the nearest penny? A. $1.16 B. $2.10 C. $2.70 D. $3.20

C. $2.70

on December 31, 2014, Gonzalez Co. granted some of its executives options to purchase 100,000 shares of the company's $10 par common stock at an option price of $50 per share. The Black-Scholes option pricing model determines total compensation expense to be $750,000. The options represent compensation for executives' services over a three-year period beginning January 1, 2015. At December 31, 2015 none of the executives had exercised their options. What is the impact on Gonzalez's net income for the year ended December 31, 2015 as a result of this transaction under the fair value method? A. $750,000 decrease B. $0 C. $250,000 decrease D. $250,000 increase

C. $250,000 decrease

on June 1, 2018, Jerry Co. sold equipment to Land Park Landscaping Service in exchange for a zero-interest bearing note with a face value of $110,000, with payment due in 12 months. The fair value of the equipment on the date of the sale was $100,000. The amount of revenue to be recognized on this transaction in 2019 is: A. $100,000 Sales Revenue B. $5,833 Interest Revenue & $100,000 Sales Revenue C. $4,167 Interest Revenue D. $110,000 Sales Revenue

C. $4,167 Interest Revenue

Landis Co. purchased $3,000,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $3,124,740 at an effective interest rate of 7%. Using the effective-interest method, Landis Co. decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $10,620 and $10,980, respectively. At December 31, 2021, the fair value of the Ritter, Inc. bonds was $3,180,000. What should Landis Co. report as other comprehensive income and as a separate component of stockholders' equity? A. $55,260 B. $0 C. $76,860 D. $21,600

C. $76,860

Gunn Honda accounts for its investment in the common stock of Samsunga Co. under the equity method. Gunn Honda should ordinarily record a cash dividend received from Samsunga as A. additional paid-in capital B. dividend income C. a reduction of the carrying value of the equity investment D. an addition to the carrying value of the equity investment

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

Patton Co. purchased $1,500,000 of 10% bonds of Scott Co. on January 1, 2021, paying $1,410,375. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $89,625 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity. For the year ended December 31, 2021, Patton Co. should report interest revenue from the Scott Co. bonds of: A. $155,130 B. $150,000 C. $158,970 D. $155,283

D. $155,283

Romeo Construction enters into a contract with a customer to build a warehouse for $800,000 on March 30, 2014 with an additional performance bonus of $50,000 if the building is completed by July 31, 2014. The bonus is reduced by $10,000 each week that completion is delayed. Romeo commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following outcomes: July 31, 2014 = 70% August 7, 2014 = 30% The transaction price for this transaction, based on most likely outcome, is A. $847,000 B. $835,000 C. $800,000 D. $850,000

D. $850,000

Watt Co. 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 Discount on Debt Investment of $15,000 B. a credit to Premium on Debt Investments of $15,000 C. a credit to Debt Payable of $315,000. D. a debit to Debt Investment of $315,000

D. a debit to Debt Investment of $315,000

an available-for-sale debt security is purchased at a premium. The entry to record the amortization of the premium includes a A. debit to Debt Investment B. debit to Interest Expense C. debit to Interest Revenue D. credit to Debt Investment

D. credit to Debt Investment

on November 1, 2021, Green Valley Farm entered into a contract to buy a $150,000 harvester from John Deere. The contract required Green Valley Farm to pay $150,000 in advance on November 1, 2021. The harvester (cost of $110,000) was delivered on November 30, 2021. The journal entry to record the contract on November 30, 2021 includes a: A. credit to Sales Revenue for $110,000 B. credit to Unearned Sales Revenue for $150,000 C. credit to Accounts Payable for $150,000 D. debit to Unearned Sales Revenue for $150,000

D. debit to Unearned Sales Revenue for $150,000

when a company has an obligation or right to repurchase an asset for an amount greater than or equal to its selling price, the transaction should be treated as a: A. outright sale B. repurchase transaction C. put option D. financing transaction

D. financing transaction

a contract between Caterpillar Inc. & Delta in which Caterpillar Inc. supplies tractors to Delta: A. cannot create multiple performance obligations B. is an agreement that creates enforceable rights & obligations for Caterpillar only C. is considered only unperformed until Caterpillar receives payment from Delta D. is an agreement that creates enforceable rights & obligations for both parties

D. is an agreement that creates enforceable rights & obligations for both parties

if management wishes to "capitalize" part of the earnings, it may issue a A. liquidating dividend B. cash dividend C. property dividend D. stock dividend

D. stock dividend

a company holds between 20% and 50% of the outstanding stock of an investee. Which of the following statements is generally true in this type of investment? A. the investor should always use the equity method to account for its investment B. the investor should consolidate its financial statement with the investee's financial statement C. the investor should always use the fait value method to account for its investment D. 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

D. 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

in bill-and-hold arrangement, which of the following is not one of the criteria which must be met for the customer to have obtained control of the product A. the seller cannot have the ability to use the product or to direct it to another customer B. the reason for the bill-and-hold arrangement must be substantive C. the product currently must be ready for physical transfer to the customer D. the product must be physically located in the seller's warehouse

D. the product must be physically located in the seller's warehouse