FAR Final Exam #1

$50,000/$17,000/$500,000

The Appleton Museum was established in the current year as a not-for-profit organization. It operates as a privately-funded museum and curator of the historical and artistic treasures of the Town of Appleton. The museum received a $500,000 donation of securities from Uri Appleton with the stipulation that the donation would be kept intact but that earnings from the principal could be used for the museum's art acquisition program. During the year, the museum received $50,000 in unrestricted contributions to fund operations. The donation of Mr. Appleton yielded $30,000 in dividends and the fair market value of the donation was $525,000 at year-end. The museum purchased local treasures for display in the museum valued at $38,000 during the year. What were the values of the net asset classes at the end of the year? Unrestricted/Temporarily Restricted/Permanently Restricted $12,000/$55,000/$500,000 $12,000/$30,000/$525,000 $50,000/$17,000/$500,000 $50,000/$0/$517,000

No/Yes

The financial statements of governments have focused on two forms of accountability. Government-wide financial statements focus the reader on accountability in which way(s): Fiscal Accountability Operational Accountability Yes/No Yes/Yes No/No No/Yes

a. $55,000 12/31/Year 2 $ 155,000 12/31/Year 1 (100,000) Unrealized gain, reflected in income $ 55,000

The following data pertains to Tyne Co.'s investment in marketable equity securities: Classification->Cost ->Fair Value 12/31/Year 2->Fair Value12/31/Year 1 Trading->$ 150,000->$ 155,000->$ 100,000 Available-for-sale->150,000->130,000->120,000 What amount should Tyne report as unrealized holding gain in its Year 2 income statement? a. $55,000 b. $65,000 c. $50,000 d. $80,000

1. Interest Cost=PBO*Discount Rate 600,000*.085=51,000 2. Expected Rate of Return= FV of Pension Plan Asset*Expected rate of return 620,000*.10=62,000 3. Actual Return= Beginning FV+Contributions+Actual Return-Benefits Paid 720,000=620,000+110,000+x-72,000; x=62,000 4. Amortization of prior period costs: Unrecognized prior service costs/average service life: 240,000/10=$24,000 5. Minimum Amortization of unrecognized net gain: Step 1: Greater of PBO vs FV; Step 2: 10% threshold (corridor); Step 3: Unrecognized pension gain-Corridor; Step 4: Step 3/average service life Step 1: PBO: 600,000 vs FV 620,000; Step 2: 620,000*.10=62,000; Step 3: 96,000-62,000=34,000; Step 4: 34,000/10 years= $3,400 6. SIRAGE Service Cost: 90,000 Interest Cost: 51,000 Return on Plan Assets: (62,000) Amortization: 24,000 Gain: (3400) Existing Obligation Amortization: 0 Net Pension Expense: 99,600 7. 0 because PBO>FV 8. Fair Value-PBO YE 720,000-950,000=230,000

The following information pertains to Green Industries' defined benefit pension plan. Green Industries uses U.S. GAAP. Discount rate: 8.5% Expected rate of return: 10% Average service life: 10 years At January 1, Year 1: Projected benefit obligation: 600,000 Fair value of pension plan assets: 620,000 Unrecognized prior service costs: 240,000 Unrecognized net gain:96,000 At December 31, Year 1 Projected benefit obligation: 950,000 Fair value of pension plan assets: 720,000 For the year ended December 31, Year 1 Service costs: 90,000 Contributions made:110,000 Benefits paid: 72,000 Green Industries uses the straight-line method of amortization over the maximum period permitted. The company has an effective tax rate of 30%. 1. Interest Costs 2. Expected Return on Plan Assets 3. Actual Return on Plan Assets 4. Amortization of Prior Service Cost 5. Minimum Amortization of unrecognized net gain 6. Net pension expense for the year ended 12/31/Year 1 7. Pension Benefit Asset at 12/31/Year 1 8. Pension Benefit Liability at 12/31/Year 1

$14,000 Unrecognized prior service cost $ 50,000 Unrecognized net gain (30,000) Total items not yet recognized in net periodic pension cost $ 20,000*.70=$14,000

The following information pertains to the defined benefit pension plan of the Cabot Corporation as of December 31, Year 11 and Year 12: 12/31/ Year 11 12/31/ Year 12 Projected benefit obligation $250,000 $285,000 Fair value of plan assets $200,000 $295,000 The pension plan had unrecognized prior service cost of $50,000 and unrecognized net gain of $30,000 at December 31, Year 11. Service cost for Year 12 was $30,000. The discount rate was 8% and the expected and actual return on plan assets was 10% for both Year 11 and Year 12. Cabot's employees have an average remaining service life of 10 years. For the last three years, Cabot has made benefit payments of $15,000 per year. The company expects to pay the same amount in Year 13. Cabot's effective tax rate is 30%. What amount will Cabot report in accumulated other comprehensive income for this pension plan on December 31, Year 11 under U.S. GAAP? $14,000 $56,000 $80,000 $20,000

a. $240,000 Parent's net income $240,000 Less: equity in sub's income (60,000) Parent's income only $180,000 Sub's income $75,000 Percentage 80% Sub's income (parent's share) $ 60,000 Less: Goodwill impairment $ 0 Net income: $240,000

The separate condensed balance sheets and income statements of Potter Corp. and its 80% owned subsidiary, Squire Corp. are as follows: Balance Sheets December 31 Assets->Potter/Squire Current assets $ 696,000/$ 455,000 Property, plant and equipment 300,000/405,000 Investment in Squire (equity method) 644,000/−− Total assets $ 1,640,000/$ 850,000 Liabilities and Stockholders' Equity Liabilities $ 300,000/$ 150,000 Stockholder equity: Common stock 500,000/200,000 Additional paid-in capital 100,000/100,000 Retained earnings 740,000/400,000 Total Liabilities and Stockholders' Equity $ 1,640,000/$ 850,000 Income Statements For the Year Ended December 31 Potter/Squire Sales $ 750,000/$ 300,000 Less: Cost of goods sold (350,000)/(50,000) Gross margin 400,000/250,000 Less: Operating expenses (160,000)/(150,000) Operating income 240,000/100,000 Equity in the earnings of Squire 60,000/−− Income before income taxes 300,000/100,000 Less: Provision for income taxes (60,000)/(25,000) Net income $ 240,000/$ 75,000 Additional Information: -On January 1, of the current year, Potter acquired 80% of Squire's outstanding voting common stock for $600,000. On January 1, the fair values of Squire's assets and liabilities equaled their carrying values of $850,000 and $205,000 respectively. Potter's policy is to amortize intangible assets over a 10-year period. No impairment of goodwill occurred during the year. -During the current year, Potter and Squire paid cash dividends of $90,000 and $20,000, respectively. -There were no intercompany transactions except for Potter's receipt of dividends from Squire and Potter's recording of its share of Squire's earnings. In the Dec 31 consolidated F/S of Potter and Squire, total consolidated net income should be a. $240,000 b. $229,500 c. $304,500 d. $315,000

$14,000 $20,000*.70

Topper Company began operations during the current year and experienced the following events: I. Unrealized holding gains from trading securities of $12,000. II. Realized gains from selling available-for-sale securities of $15,000. III. Unrealized holding gains from available-for-sale securities of $20,000. Topper's tax rate is 30%. In Toppers December 31 balance sheet, Accumulated Other Comprehensive Income would be: $32,900 $20,000 $47,000 $14,000

d. At the beginning of the prior period. Under IFRS, when an entity records a change in accounting principle, the entity must (at a minimum) present three balance sheets (end of current period, end of prior period, and beginning of prior period) and two of each other financial statement (current period and prior period). The cumulative effect adjustment is shown as an adjustment to beginning retained earnings on the balance sheet for the beginning of the prior period.

Under IFRS, when a change in accounting principle is made in the current period, the cumulative effect adjustment for the change is shown as an adjustment to the beginning retained earnings on the balance sheet: a. At the end of the current period. b. At the end of the prior period. c. As of the date of the change. d. At the beginning of the prior period.

$1,080 Date/Amount/Rate/Time 11/1/Year 5 Loan $ 10,000×12%× 10/12 mo= $ 1,000 2/1/Year 6 Loan 30,000×12%× 6/12 mo =+1,800 5/1/Year 6 Loan 16,000×12%×8/12 mo= +1,280 =4,080 Stated interest expense on the cash basis (3,000) Understated interest expense $ 1,080

Troop Co. frequently borrows from the bank to maintain sufficient operating cash. The following loans were at a 12% interest rate, with interest payable at maturity. Troop repaid each loan on its scheduled maturity date. Date of Loan/Amount/Maturity Date/Term of Loan 11/1/Year 5/$ 10,000/10/31/Year 6/1 year 2/1/Year 6/30,000/7/31/Year 6/6 months 5/1/Year 6/16,000/1/31/Year 7/9 months Troop records interest expense when the loans are repaid. Accordingly, interest expense of $3,000 was recorded in Year 6. If no correction is made, by what amount would Year 6 interest expense be understated? $1,240 $1,080 $1,280 $1,440

$25,000 Beginning balance $ 370,000 Additions: Depreciation expense 55,000 Subtract: Retirements (squeeze) x Ending balance $ 400,000 x=$25,000

Weir Co. uses straight-line depreciation for its property, plant, and equipment, which, stated at cost, consists of the following: Current Year/Prior Year Land $ 25,000/$ 25,000 Buildings 195,000/195,000 Machinery & Equipment 695,000/650,000 Total: 915,000/870,000 Less accumulated depr. (400,000)/(370,000) Total: $ 515,000/$ 500,000 Weir's depreciation expense for the current year and the prior year was $55,000 and $50,000, respectively. What amount was debited to accumulated depreciation during the current year because of property, plant, and equipment retirements? $20,000 $15,000 $25,000 $30,000

c. Form 8-K

Which of the following SEC forms is not a periodic (quarterly, semi-annual, annual) filing? a. Form 10-K b. Form 11-K c. Form 8-K d. Form 6-K

No/Yes Conversion of debt to equity should be disclosed as supplemental information in the statement of cash flows. Cash flow per share should not be disclosed.

Which of the following information should be disclosed as supplemental information in the statement of cash flows? Cash flow per share/Conversion of debt to equity Yes/No Yes/Yes No/Yes No/No

Capitalizing inventory.

Which of the following is a common modification used to prepare modified cash basis financial statements? Recognizing expenses based on the methods and principles used to prepare the tax return. Recognizing revenues when earned. Matching expenses to related revenues. Capitalizing inventory

Basis of accounting used by an entity to comply with the financial reporting requirements of a lending institution.

Which of the following is not a comprehensive basis of accounting other than generally accepted accounting principles? Basis of accounting used by an entity to file its income tax return. Cash receipts and disbursements basis of accounting. Basis of accounting used by an entity to comply with the financial reporting requirements of a lending institution. Basis of accounting used by an entity to comply with the financial reporting requirements of a government regulatory agency.

Costs associated with the retirement of a fixed asset.

Which of the following is not a cost associated with exit and disposal activities? Benefits related to involuntary employee termination. Costs to relocate employees. Costs to terminate contract that is not a capital lease. Costs associated with the retirement of a fixed asset.

a. Disclosure of vulnerability due to all identified concentrations.

Which of the following is not a disclosure requirement related to risks and uncertainties under U.S. GAAP? a. Disclosure of vulnerability due to all identified concentrations. b. Disclosure of the relative importance of each business when an entity operates multiple businesses. c. Estimates of the effects of changes in significant estimates. d. A statement that actual results could differ from the estimates included in the financial statements.

No/No/No/No Revenues are recognized when measurable and available. Revenues are accrued when earned. Revenues must not only be earned but also collected (generally) within 60 days of year end for recognition in governmental fund financial statements.

Which of the following revenues should generally be recorded in the accounting period in which they become susceptible to accrual (regardless of timing of collection) by a state or local governmental body? Property Tax Revenues/Public Parking Revenues/ Income Tax Revenues/Sales TaxRevenues Yes/Yes/Yes/Yes Yes/No/Yes/No Yes/No/Yes/Yes No/No/No/No

Statement of retained earnings.

Which of the following statements is not required of not-for-profit organizations? Statement of financial position. Statement of cash flows. Statement of activities. Statement of retained earnings.

c. Yes, Yes, Yes. Comprehensive income is the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Which of the following would be considered an element of Comprehensive Income? Operating Losses/Revenues/Foreign Currency Trans Adj a. No/No/Yes b. Yes/No/Yes c. Yes/Yes/Yes d. No/No/No

A statement of financial condition and a statement of changes in net worth.

Which statements are usually included in a set of personal financial statements? A statement of net worth, an income statement, and a statement of cash flows. A statement of financial condition, a statement of changes in net worth, and a statement of cash flows. A statement of financial condition and a statement of changes in net worth. A statement of net worth and an income statement.

$275,000 Machine A (no alternate use) $ 250,000 Machine B (alternate use) ($250,000 ÷ 10 years) 25,000 Total $ 275,000

Wizard Co. purchased two machines for $250,000 each on January 2 of the current year. The machines were put into use immediately. Machine A has a useful life of five years and can only by used in one research project. Machine B will be used for two years on a research and development project and then used by the production division for an additional eight years. Wizard uses the straight-line method of depreciation. What amount should Wizard include in the current year research and development expense under U.S. GAAP? $375,000 $50,000 $275,000 $500,000

$75,000 Under IFRS, gains and losses that are remeasurements of the net defined benefit liability are reported in other comprehensive income. Therefore, Zulu would report $75,000 in accumulated other comprehensive income. The past service cost and current service cost are both reported on the income statement under IFRS.

Zulu Transportation Inc.'s pension trustee provided the company with the following information for its defined benefit pension plan at December 31: Past service cost $ 240,000 Remeasurement of the net defined benefit liability (net gain) 75,000 Current service cost 385,000 Under IFRS, what amount would Zulu report in accumulated other comprehensive income related to its pension plan on its December 31 balance sheet? $0 $75,000 $165,000 $385,000

$14.30 8% cumulative preferred stock $ 1,000,000+Common stock 500,000+Additional paid in capital 75,000+Retained earnings 450,000 =$ 2,025,000 Less: preferred stock: liquidation value (10,000 × $107) 1,070,000 Dividends in arrears (10,000 × $8 × 3 years) +240,000= (1,310,000) Total value of common stock $ 715,000 Divided by common shares outstanding ÷ 50,000 Book value per share of common stock $ 14.30

Baker, Inc. reported the following stockholders' equity balances: 8% cumulative preferred stock, par value $100 per share; 10,000 shares issued and outstanding (liquidation value $107) $ 1,000,000 Common stock, par value $10 per share, 50,000 shares issued and outstanding 500,000: Additional paid-in capital 75,000 Retained earnings 450,000 Dividends are in arrears on the preferred stock for three years including the current year. What is book value per share of common stock? $15.70 $14.30 $20.50 $19.10

$800,000/$320,000 $1,400,000 × .40 =$ 560,000 Gross Profit Def. Rev. $ 560,000 Earned (240,000) Unearned $ 320,000 Realized Profit= 240,000 ÷ 40% Total Collections $ 600,000 A/R Sales $ 1,400,000 Collections (600,000) A/R Uncollected $ 800,000

Bear Co., which began operations on January 2, appropriately uses the installment method of accounting. The following information is available for the current year: Installment sales $ 1,400,000 Realized gross profit on installment sales 240,000 Gross profit percentage on sales 40% For the year ended December 31, what amounts should Bear report as accounts receivable and deferred gross profit? Accounts receivable/Deferred gross profit $600,000/$320,000 $600,000/$360,000 $800,000/$360,000 $800,000/$320,000

b. $4,750 Annual (years 2 - 6) $ 10,600 Term (years 2 - 6) × 5 yrs Expense (years 2 - 6) $ 53,000 Expense (1st year) +8,000 Free rent (4,000) Total rent to be paid $ 57,000 Total years ÷ 6 yrs Annual rental expense $ 9,500 Period (July - Dec.) × 1/2 yr Period rental expense $ 4,750

Bentley Company leased equipment from Babson Company for a six year term beginning July 1, Year 1. The lease was appropriately accounted for as an operating lease. The rent for the first lease year is $8,000, and the rental charge for each of the remaining five years is $10,600. However, as an incentive to lease its equipment, Babson provided the first six months of the lease rent free. In its December 31, Year 1 income statement, what was Bentley's rental expense? a. $4,000 b. $4,750 c. $8,000 d. $9,500

$30,000

Bluebell, Inc. incurred $85,000 of research and development costs which led to the grant of a patent. Also, Bluebell incurred $12,000 of legal and other costs to register the patent. Additionally, Bluebell incurred $18,000 of legal fees to successfully defend the patent. Under U.S. GAAP, Bluebell's patent should be capitalized at: $115,000 $97,000 $30,000 $12,000

$55,000 Investment $ 300,000 Less: NBV ($600,000 × 35%) 210,000 Total excess $ 90,000 Allocation to identifiable net assets FMV $ 700,000 NBV (600,000) 100,000 × 35% $ 35,000 Excess to goodwill ($90,000 − $35,000) $ 55,000

Burgess Co. purchase 35% of Egg Co's outstanding common stock on December 31 for $300,000. On that date, Egg's stockholders' equity was $600,000, and the fair value of its identifiable assets was $700,000. On December 31, what amount of goodwill should Burgess attribute to this acquisition? $55,000 $0 $90,000 $35,000

1. Anti-Dilutive. Exerciseable $50>Average Market $40 2. Dilutive. Exerciseable $35<Average Market $40 3. Dilutive. 25,000 shares*100*5%=125,000 preferred stock Basic EPS= (1,000,000-125,000)/500000=$1.75 Diluted EPS= 1,000,000/600,000 shares= $1.67

Complex Casting Company has 500,000 shares of common stock outstanding. The company also has the following potentially dilutive securities: 50,000 stock options exercisable at $50 each and 60,000 stock warrants exercisable at $35 each. The average market price for the company's common stock is $40/share. 25,000 shares of $100 par 5% cumulative preferred stock. Each share of preferred stock is convertible to 4 shares of common stock. Net income for the year is $1,000,000 and the company's tax rate is 40%. Determine whether each of the potentially dilutive securities is dilutive or anti-dilutive. 1. Stock Options 2. Stock Warrants 3. Convertible Preferred Stock

c. $45,000 .50*90,000=45,000

Davis & Earnest have a partnership with capital accounts of $50,000 and $40,000, respectively, as of December 31, Year 1. Davis and Earnest split profits 60:40. Frost will be admitted to the partnership effective January 1, Year 2 with a one-third interest. The partnership elects to use the exact method. What is the amount of Frost's contribution to the partnership? a. $40,000 b. $30,000 c. $45,000 d. $50,000

Current deferred tax asset and noncurrent deferred tax liability.

Denton Corporation records tax depreciation in excess of book depreciation and accrues warranty expense in the period in which sales are recognized. Under U.S. GAAP, as a result of these transactions, Denton would most likely display: Net noncurrent deferred tax asset or net noncurrent deferred tax liability. Net current deferred tax asset or net current deferred tax liability. Noncurrent deferred tax asset and current deferred tax liability. Current deferred tax asset and noncurrent deferred tax liability.

Decrease/Decrease

During Year 1, Tidal Co. began construction on a project scheduled for completion in Year 3. At December 31, Year 1, an overall loss was anticipated at contract completion. What would be the effect of the project on Year 1 operating income under the percentage-of-completion method and the completed-contract method under U.S. GAAP? Percentage-of- completion/Completed-contract No effect/No effect No effect/Decrease Decrease/Decrease Decrease/No effect

Interest incurred after completion/All interest incurred

During the current year, Bay Co. constructed machinery for its own use and for sale to customers. Bank loans were used to finance these assets during both the construction and post-completion periods. How much of the interest incurred should be reported as interest expense in the current year income statement? Interest incurred for machinery for own use/Interest incurred for machinery held for sale Interest incurred after completion/Interest incurred after completion All interest incurred/Interest incurred after completion Interest incurred after completion/All interest incurred All interest incurred/All interest incurred

$537,000 Beginning balance $100,000 Additions: Freight in 12,000 Purchase 625,000 Transportation 10,000 $ 747,000 Subtract: COGS x (squeeze) Ending balance $ 210,000 x=$537,000

During the current year, Patti Co. began offering its goods to selected retailers on a consignment basis. The following was taken from Patti's accounting records: Beginning inventory $ 100,000 Freight out 18,000 Freight in 12,000 Purchases 625,000 Transportation to consignees 10,000 Ending inventory held by Patti 175,000 Ending inventory held by consignee 35,000 Based on this information, what amount should Patti report as cost of goods sold? $537,000 $572,000 $555,000 $590,000

$35,000 G GRaSPP Change in Governmental Fund Balance $ 20,000 O Other Financing Sources: Debt Proceeds 0 E Expenditures: Capital Outlay 50,000 (net of depreciation) (35,000) S Internal Service Fund Net Income 0 Change in Net Position in Government-wide Financial Statements $ 35,000

During the year, the City of Exeter reported a $20,000 net increase in fund balance for governmental funds. Also during the year, Exeter purchased general capital assets of $50,000, and recorded depreciation expense of $35,000. What amount should Exeter report as the change in net position for governmental activities in the government-wide financial statements? $20,000 $70,000 $5,000 $35,000

$20,000 Cap:30,000/.25=120,000 Original: $45,000+$25,000=($70,000) Contributed by Robb: (30,000) $20,000

Eagle and Falk are partners with capital balances of $45,000 and $25,000, respectively. They agree to admit Robb as a partner. After the assets of the partnership are revalued, Robb will have a 25% interest in capital and profits, for an investment of $30,000. What amount should be recorded as goodwill to the original partners? $7,500 $5,000 $0 $20,000

1. Change in Accounting Estimate, Prospective 2. Change in accounting principle, Prospective 3. Change in accounting principle, retrospective 4. Change in accounting principle that is inseparable from a change in accounting estimate, Prospective

For each change made indicate the following: Type of Change (Change in accounting estimate, Change in accounting principle, change in accounting principle that is inseperable from a change in accounting estimate) and Accounting Treatment (Prospective, Retrospective) 1. Changed the useful life of its factory equipment from 10 years to 5 years. 2. Changed from FIFO to LIFO for domestic inventory accounting purposes. 3. Changed from FIFO to weighted average method for foreign inventory accounting purposes 4. Changed from sum-of-the-years' digigts to straight-line depreciation.

Yes/No

A company used the percentage-of-completion method of accounting for a four-year construction contract. Which of the following items would be used to calculate the income recognized in the second year? Income previously recognized/Progress billings to date Yes/Yes No/No No/Yes Yes/No

A section titled Management's Discussion and Analysis as part of the city's required supplementary information before the basic financial statements.

A municipality preparing its basic financial statements and required supplementary information in accordance with GASB #34 would introduce the basic financial statements and provide analytical overview of the government's financial statements in: A section titled Management's Discussion and Analysis only in the event that the basic financial statements are issued in connection with a public bond offering. A section titled Management's Discussion and Analysis as part of the city's required supplementary information before the basic financial statements. A section titled Management's Discussion and Analysis included as part of the city's required supplementary information following the financial statements. A section titled Management's Discussion and Analysis included as part of the city's optional supplementary information immediately following the notes to the financial statements but before the required supplementary information.

1. DR. New Building (plug) $72,000 DR. Cash 25,000 Dr Accumulated Dep. $60,000 CR Old Building $150,000 CR Gain 7,000 (125,000-90,000)*25,000/125,000 2. DR New Building (plug) $105,000 DR Acc Dep $15,000 CR Old Building$95,000 CR Cash 25,000

ABC Company and XYZ Company entered into a nonmonetary exchange lacking commerical substance. In the exchange, ABC gave XYZ a building with a book value of $90,000 ($150,000 cost- $60,000 accumulated depreciation) and a fair value of $125,000 in exchange for $25,000 and an XYZ building with a book value of $80,000 ($95,000 cost-$15,000 accumulated depreciation) and a fair value of $100,000. 1. JE to Record Exchange in ABC's books. 2. JE to Record the Exchange in XYZ's Books

$20,000

Able, Baker and Cone form a partnership on January 1. Cone contributes his pickup truck with a book value of $10,000 and a fair market value of $20,000 to the partnership in exchange for a one-third interest, properly accounted for using the bonus method. Able and Baker both contribute $10,000. The asset has a projected useful life of ten years. At the time the partnership is formed, the asset will be recorded at: $20,000 $9,000 $10,000 $18,000

Present value of future cash flows.

According to the FASB conceptual framework, which of the following attributes would not be used to measure inventory? Historical cost. Present value of future cash flows. Replacement cost. Net realizable value.

Unrealized holding loss from AFS Securities-->Component of OCI, which is not included in net income and would thus cause earnings fto differ from comprehensive income

According to the FASB conceptual framework, which of the following would cause earnings to differ from comprehensive income? a. Realized gain from sale of held-to-maturity securities b. Unrealized holding gain from trading securities c. Unrealized holding loss from AFS securities d. Dividends declared by not paid

Materiality

According to the Statement of Financial Accounting Concepts #8, which of the following is an entity-specific aspect of relevance? Neutrality Confirmatory value Materiality Predictive value

$170,000 260,000-90,000

Adam Corp. had the following infrequent transactions during the current year: A $190,000 gain on reacquisition and retirement of bonds that is unusual and infrequent. A $260,000 gain on the disposal of a portion of a business. Adam continues similar operations at another location. A $90,000 loss on the abandonment of equipment. In its income statement, what amount should Adam report as total infrequent net gains that are not considered extraordinary under U.S. GAAP? $450,000 $170,000 $100,000 $360,000

A $15,000 noncurrent deferred tax asset. $75,000 DTL − $90,000 DTA = Net $15,000 DTA reported as noncurrent

At December 31, Bren Co. had the following deferred tax items: A deferred tax asset of $90,000 related to a current asset. A deferred tax liability of $75,000 related to a noncurrent asset. Which of the following will Bren report on its December 31 balance sheet under IFRS? A noncurrent deferred tax liability of $75,000 and a current deferred tax asset of $90,000. A $15,000 noncurrent deferred tax asset. A $15,000 current deferred tax asset. A noncurrent deferred tax liability of $75,000 and a noncurrent deferred tax asset of $90,000.

$115,000 Beginning Balance $260,000 Additions: ($9,000,000 × 2%) 180,000 Subtract: write-offs (325,000) Ending Balance $ 115,000

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 $9,000,000. In its December 31, balance sheet, what amount should Jamin report as allowance for uncollectible accounts? $440,000 $180,000 $245,000 $115,000

b. $4,500 Assets are reported in a personal statement of financial condition at estimated current fair market value (FMV). The asset "cash surrender value" of a life insurance policy should be reported net of any loans against the policy value. In this question, the $4,500 value is "net of loans of $2,500."

At May 31, 1997, Quay owned a $10,000 whole-life insurance policy with a cash surrender value of $4,500, net of loans of $2,500. In Quay's May 31, 1997, personal statement of financial condition, what amount should be reported as investment in life insurance? a. $7,000 b. $4,500 c. $10,000 d. $7,500

No effect No effect Decrease

How would a 5% stock dividend affect each of the following? Assets Total stockholders' equity Retained earnings Increase Increase Decrease No effect Decrease Decrease Decrease Decrease No effect No effect No effect Decrease

Decrease/Increase

How would the purchase of treasury stock affect each of the following? Total stockholders' equity/Earnings per share Increase/Decrease Decrease/No effect Decrease/Increase No effect/No effect

Plus the gain In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment plus the gain (or, the proceeds from the sale).

In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment: Plus the gain. Plus both the gain and the amount of tax attributable to the gain. Plus the gain and less the amount of tax attributable to the gain. With no addition or subtraction.

a. $71,000 Beginning balance $229,000 Additions: recoveries 26,000 Expense (squeeze) 71,000 Subtract: write-offs (61,000) Ending balance ($700,000 − 435,000) $ 265,000

Morris Co. determined that the net realizable value of its accounts receivable at December 31, was $435,000. This estimate was based on an aging schedule. Additional information is as follows: Allowance for uncollectible accounts - January 1 $229,000 Uncollectible accounts written off $61,000 Accounts written off in prior years recovered $26,000 Accounts receivable at December 31 $700,000 What is Morris's uncollectible accounts expense for the year ended December 31? a. $71,000 b. $97,000 c. $123,000 d. $61,000

$940,000 NRV=965,000-25,000=940,000 Cost=$950,000 LCM=940,000

Moss Co. has determined its December 31 inventory on a FIFO basis to be $950,000. Information pertaining to that inventory follows: Estimated selling price $ 965,000 Estimated cost of disposal 25,000 Normal profit margin 330,000 Current replacement cost 970,000 Moss records losses that result from applying the IFRS lower of cost or net realizable value rule. At December 31, what should be the carrying value of Moss' inventory? $970,000 $940,000 $610,000 $950,000

$0/$0 Loans, $0; profits, $0. All of the $200,000 intercompany loans and $500,000 intercompany profits should be eliminated.

Mr. Cord owns four corporations. Combined financial statements are being prepared for these corporations, which have intercompany loans of $200,000 and intercompany profits of $500,000. What amount of these intercompany loans and profits should be included in the combined financial statements? Intercompany Loans/Intercompany Profits $200,000/$0 $0/$500,000 $200,000/$500,000 $0/$0

d. $230,500 Ownership=No Written Bargain=No Ninety % FMV=Unknown Seventy-five % of life= Yes 6 of 8=75% $50,000×4.61= $ 230,500

On December 31, Day Co. leased a new machine from Parr with the following pertinent information: Lease term 6 years Annual rental payable at beginning of each year: $ 50,000 Useful life of machine: 8 years Day's incremental borrowing rate: 15% Implicit interest rate in lease (known by Day): 12% Present value of an annuity of 1 in advance for 6 periods at: 12%->4.61 15%->4.35 Day Co. uses U.S. GAAP for its financial reporting method. The lease is not renewable, and the machine reverts to Parr at the termination of the lease. The cost of the machine on Parr's accounting records is $375,000. At the beginning of the lease term, Day should record a lease liability of: a. $217,500 b. $375,000 c. $0 d. $230,500

A revaluation gain of $15,000 in other comprehensive income. Carrying Value $365,000-105,000=$260,000 FV=$275,000 FV-CV=Gain/Loss $275,000-$260,000=$15,000 gain

On December 31, Year 1, an entity revalued its equipment. On that date, the entity gathered the following information to aid in the revaluation: Historical cost $ 365,000 Accumulated depreciation 105,000 Fair value 275,000 On December 31, Year 1, the entity will report: A revaluation gain of $15,000 on the income statement. A revaluation loss of $90,000 in other comprehensive income. A revaluation loss of $90,000 on the income statement. A revaluation gain of $15,000 in other comprehensive income.

a. $340,000 Begin Add Subtract End Property and equipment 1,450,000 250,000 200,000 1,500,000 Accumulated depreciation (500,000) (340,000) 190,000 (650,000) Net book value 950,000 (90,000) 390,000 850,000 Additions Purchased asset 250,000 Disposals Historical cost 200,000 Accumulated depreciation 190,000 Net book value 10,000 Proceeds 20,000 Gain 10,000

On December 31, Year 1, the Exeter Corporation had property and equipment of $1,450,000 and accumulated depreciation of $500,000. During Year 2, the company acquired an asset for $250,000 in a transaction properly classified as a capital lease. The new asset was used to replace a similar piece of equipment with a historical cost of $200,000 that had been sold for $20,000, resulting in a gain of $10,000. The net book value of all of Exeter's equipment at December 31, Year 2 was $850,000. What was the amount of depreciation expense used in Exeter's Statement of Cash Flows, prepared using the indirect method, to reconcile net income to cash flows from operations? a. $340,000 b. $160,000 c. $350,000 d. $150,000

$35,000 Step 1: CV>Undiscounted future cash flows Step 2: 215,000-250,000=(35,000)

On December 31, an entity analyzed equipment with a net carrying value of $250,000 for impairment. The entity determined the following: Fair value $ 215,000 Undiscounted future cash flows 240,000 What is the impairment loss that will be reported on the December 31 income statement under U.S. GAAP? $25,000 $0 $10,000 $35,000

$280,000

On January 1, American Realty sold an office building (useful life of 30 years, carrying value $450,000) to Barkin Corporation for $780,000 and immediately leased the building back for a period of 7 years in an operating lease. American Realty uses U.S. GAAP. The present value of the minimum lease payments associated with the leaseback period was $280,000. At the time the lease is recorded, American Realty's deferred gain should be equal to: $50,000 $330,000 $280,000 $0

c. $459,650 $500,000 × .676= $ 338,000 $15,000 × 8.11= 121,650 $ 459,650

On January 1, Delta Co. issued five-year bonds with a face amount of $500,000. The bonds pay interest semiannually on June 30 and December 31 at a stated interest rate of 6%. The bonds were sold to yield 8%. Present value factors are as follows 6%/8% Present value of 1 for 5 periods .747/.680 Present value of 1 for 10 periods .558/.463 Present value of annuity of 1 for 5 periods 4.21/3.99 Present value of annuity of 1 for 10 periods 7.36/6.71 3%/4% Present value of 1 for 5 periods .863/.822 Present value of 1 for 10 periods .744/.676 Present value of annuity of 1 for 5 periods 4.58/4.45 Present value of annuity of 1 for 10 periods 8.58/8.11 What was the total issue price for these bonds? a. $544,700 b. $500,700 c. $459,650 d. $338,000

b. $47,500 Bond face $1,000,000 Net carrying value (890,000)-> $940,000-50,000= 110,000 ÷ 10 years Amortization per year 11,000 Jan Year 1 - July Year 8 × 7.5 Total amortization 82,500 Original net carrying value 890,000 Current net carrying value 972,500 Call price @ 102 (1,020,000) Loss on call of bonds $ (47,500)

On January 1, Year 1, David Corp. issued 1000 of its $1,000 bonds at 94. David Corp. uses U.S. GAAP. The bonds mature in 10 years but are callable at 102 any time after issuance. On January 1, Year 1, David incurred bond issue costs of $50,000. On July 1, Year 8, David called all of the bonds and retired them. Assuming that bond discount and issue costs were amortized using the straight-line method, what amount of pretax loss would David report from this extinguishment of debt? a. $58,500 b. $47,500 c. $20,000 d. $85,000

$29,182 Dep: 162120/10=16,212 Accretion: 162,120*.08=12,970

On January 1, Year 1, an entity recorded an asset retirement obligation of $162,120. The asset retirement obligation is expected to be paid at the end of ten years. The entity uses straight-line depreciation and an accretion rate of 8%. What is the total Year 1 expense related to the asset retirement obligation? $3,242 $12,970 $16,212 $29,182

b. $388,000 January 1, Year 2 is the date of issue of the bonds and on that date, the bonds will be reported at their issuance price of $388,000 (97% × $400,000).

On January 1, Year 2, Oak Co. issued 400 of its 8%, $1,000 bonds at 97 plus accrued interest. The bonds are dated October 1, Year 1, and mature on October 1, Year 11. Interest is payable semiannually on April 1 and October 1. Accrued interest for the period October 1, Year 1, to January 1, Year 2, amounted to $8,000. On January 1, Year 2, what amount should Oak report as bonds payable, net of discount? a. $392,000 b. $388,000 c. $388,300 d. $380,300

b. 333,950

On January 1, Year 2, West. Co Adopted the dollar-value LIFO inventory method. Inventory data for year 2 and year 3 are as follows Date->Inventory CY Cost->Relevant Price Index 1/1/Year 2->$250,000->1.00 12/31/Year 2->$278,250->1.05 12/31/Year 3->$364,000->1.12 West's dollar-value LIFO inventory under US GAAP at Dec 31, Year 3 is: a. 364,000 b. 333,950 c. 328,750 d. 325,000

1. Dr. Equipment $850,000 Cr Capital Finance Lease Liability $850,000 $100,000*8.5=$850,000 2. Dr. Interest Expense (.10*850,000) 85,000 Dr Capital Finance Lease Liability 15,000 (plug) Cr Cash $100,000 3. Dr Depreciation Expense $34,000 Cr Accumulated Depreciation $34,000 $850,000/25 years=$34,000. Use 25 years because equipment passes to lessee

On January 2, Year 4, Elsee Co. leased equipment from Grant, Inc. Lease payments are $100,000 payable annually every December 31 for twenty years. Title to the equipment passes to Elsee at the end of the lease term. The lease is noncancelable and is classified as a capital (finance) lease. Additional facts: The equipment has a $750,000 carrying amount on Grant's books. Its estimated economic life was 25 years on January 2, Year 4. The rate implicit in the lease, which is known to Elsee, is 10%. Elsee's incremental borrowing rate is 12%. Elsee uses the straight-line method of depreciation. The rounded present value factors of an ordinary annuity for 20 years are as follows: 12%=7.5 10%=8.5 Prepare Elsee's journal entries to properly record its lease activity. 1. Entering into the lease on 1/2/Year 4 2. Making the lease payment on 12/31/Year 4 3. Other Expenses related to the lease for the year ended 12/31/Year 4

Present value of payments $10,000 × 6.71 = $ 67,100 Less: Carrying value (45,000) Gain on sale: 22,100

On July 1, Year 1, Tracy Co. sold a machine to Chester Co. for a non-interest bearing note. The note requires ten annual payments of $10,000. Chester made the first payment on June 30, Year 2. The market interest rate for similar notes was determined to be 8%. Information on present value factors is as follows: Period 9->PV of $1 at 8%->0.5; PV of Ordinary annuity of $1 at 8% 6.25 Period 10-> PV of $1 at 8%->0.46; PV of Ordinary Annuity of $1 at 8% 6.71 Assume that the machine had a carrying value of $45,000 on Tracy's books on July 1, Year 1. In Tracy's Year 1 income statement, what amount should be reported as gain on sale of machinery? $55,000 $22,100 $1,000 $17,500

d. January 1, Year 14 Under IFRS, if an entity is presenting one year of comparative information, the first IFRS financial statements must include three balance sheets (end of current period, end of prior period, and beginning of prior period), and two of each other statement. The date of transition to IFRS is the opening balance sheet date, which would be the date of the beginning of the prior period. For this entity, the date of the beginning of the prior period is January 1, Year 14.

On March 31, Year 15, an entity adopted IFRS. The end of the company's first IFRS reporting period is December 31, Year 15. The company will present one year of comparative information. The company's date of transition to IFRS is: a. March 31, Year 15 b. December 31, Year 14 c. December 31, Year 15 d. January 1, Year 14

Net income will decrease by $300. Gain on derivative = $9,700 Loss on inventory = $315,000 FV − $325,000 BV = $(10,000) Net loss on fair value hedge = $(10,000) loss + $9,700 gain = $(300) loss

On November 1 of the current year, a U.S. company entered into a futures contract to hedge the value of its inventory. The inventory was reported on the balance sheet at its cost of $325,000 on November 1. On December 31, the market value of the inventory had decreased to $315,000. The entity had a gain of $9,700 on the futures contract at December 31. What is the proper accounting for this hedging transaction on the December 31 year-end financial statements, assuming that the hedge is considered to be highly effective? Net income will decrease by $300. Other comprehensive income will decrease by $300. Net income will increase by $9,700. Other comprehensive income will increase by $9,700.

$200,000 Gain on marketable securities $ 25,000 Property dividend (225,000) Net effect on retained earnings $ (200,000)

On November 15, Quazar Co. declared a property dividend of marketable securities to be distributed on December 15 to stockholders of record on December 1. The market value of the securities was as follows: November 15 $ 225,000 December 1 220,000 December 15 250,000 The marketable securities originally cost Quazar $200,000. What is the net effect on Quasar's retained earnings as a result of declaring this property dividend? $225,000 $195,000 $250,000 $200,000

Museum would recognize a beneficial interest in the assets of the trust at fair value as a temporarily restricted contribution. The museum and the bank are not financially interrelated so the trust would be recognized as a temporarily restricted asset (a beneficial interest) and as a temporarily restricted contribution.

First Commercial Bank received a cash contribution to establish an irrevocable charitable trust for the sole benefit of the Olde Towne Museum, a not-for-profit organization. The terms of the trust name First Commercial as the trustee, require distribution of income earned on the trust each year for three years, and, at the end of the three-year period, require distribution of the principal to the museum. The museum would account for this transaction as follows: Museum would recognize an equity interest in the assets of the trust at fair value as a temporarily restricted contribution. Museum would not recognize the asset in the year the trust was established, but would recognize distributed earnings each year as unrestricted earnings. Museum would recognize a beneficial interest in the assets of the trust at fair value as a temporarily restricted contribution. Museum would recognize the asset as a conditional temporarily restricted net asset subject to the terms of the trust.

All applicable investments are measured at fair value and gains and losses on investment will be included in the statement of activities as increases or decreases in unrestricted, temporarily restricted, or permanently restricted net assets.

In accounting for certain investments in equity and debt securities held by non-profit organizations (excluding investments accounted for by the equity method, investments in consolidated subsidiaries, investments whose fair values are not readily determinable, and investments in items not viewed as securities such as trusts, real estate, and joint ventures): Three categories of investment are found as is the case for commercial enterprises (trading securities, available for sale securities, and held to maturity securities). All applicable investments are measured at fair value and gains and losses on investment will be included in the statement of activities as increases or decreases in unrestricted, temporarily restricted, or permanently restricted net assets. All applicable investments are measured at fair value and gains and losses on investments will be included in the statement of activities as increases or decreases in unrestricted net assets. All applicable investments are measured at original historical cost if purchased, or at fair value on the date of donation if donated.

c. Declaration and distribution of stock dividend.

In computing the weighted-average number of shares outstanding during the year, which of the following midyear events must be treated as if it had occurred at the beginning of the year? a. Purchase of treasury stock. b. Sale of additional common stock. c. Declaration and distribution of stock dividend. d. Sale of preferred convertible stock

Restricted to use by the donor, grantor, or other source of the resources.

In not-for-profit hospital accounting, restricted funds, both permanent and temporary, are: Restricted as to use only for board-designated purposes. Restricted to use by the donor, grantor, or other source of the resources. Not available unless the board of directors removes the restrictions. Not available for current operating use; however, the income generated by the funds is available for current operating use.

d. Consolidation used for both Siegel and Pell.

Jessup, Inc., a manufacturing company owns 80% of the common stock of Siegel, Inc., an investment company. Siegel owns 65% of the common stock of Pell, Inc., a manufacturing company. In Jessup's consolidated financial statements, should consolidation accounting or equity method accounting be used for Siegel and Pell? a. Equity method used for Siegel and consolidation used for Pell. b. Equity method used fro both Siegel and Pell. c. Consolidation used for Siegel and equity method used for Pell. d. Consolidation used for both Siegel and Pell.

$605,000 Escrow accounts liability, January 1 $700,000 Escrow receipts 1,580,000 Interest earned ($50,000 less 10%) 45,000 2,325,000 Less: payments for taxes (1,720,000) Escrow liability, December 31 $ 605,000

Kent Co., a division of National Realty, Inc., maintains escrow accounts and pays real estate taxes for National's mortgage customers. Escrow funds are kept in interest-bearing accounts. Interest, less a 10% service fee, is credited to the mortgagee's account and used to reduce future escrow payments. Additional information from the current year follows: Escrow accounts liability, January 1 $ 700,000 Escrow payments received 1,580,000 Real estate taxes paid 1,720,000 Interest on escrow funds 50,000 What amount should Kent report as escrow accounts liability in its December 31 balance sheet? $610,000 $510,000 $605,000 $515,000

Other financing sources. Lemonville Township has the ability and intent to refinance its bond anticipation notes as a long-term obligation. The township would not record the bond anticipation note as a current obligation but would treat it in a manner consistent with other noncurrent obligations. Governmental funds (GRaSPP) use modified accrual accounting and do not record long-term debt. Instead they present "other financing sources" to account for the proceeds from long-term debt.

Lemonville Township issued $75,000 of bond anticipation notes at face amount in the current fiscal period. The proceeds were recorded in the capital projects fund. These notes are due within one year. Lemonville intends to repay the bond anticipation notes with a bond issue. Lemonville has taken legal steps to refinance the notes on a long-term basis. Under these circumstances, what account should be credited in the capital projects fund? Revenues control. Bond anticipation notes payable. Other financing sources. Tax anticipation notes payable.

$151,400 Cash flows from operating activities: Net income: $ 150,000 Adjustments to reconcile net income to net cash provided by operating activities: Change in current assets and liabilities: Increase in accounts receivable (net) (5,800) Decrease in prepaid rent expense 4,200 Increase in accounts payable 3,000 Total adjustments 1,400 Net cash provided by operating activities $ 151,400

Lino Co's worksheet for the preparation of its current year statement of cash flows included the following: December 31/January 1 Accounts receivable $ 29,000/$ 23,000 Allowance for uncollectible accounts 1,000/800 Prepaid rent expense 8,200/12,400 Accounts payable 22,400/19,400 Lino's net income is $150,000. What amount should Lino include as net cash provided by operating activities in the statement of cash flows? $151,000 $148,600 $145,400 $151,400

a. $3,000 Dr. Cash $10,000 Dr. New machine $63,000 Cr. Gain on exchange $3,000 (1/10*$30,000) Old machine (net) $70,000

Lizzy Co. traded an old machine to Chang Co. for a similar new machine. The exchange is assumed to lack commercial substance. Lizzy also received $10,000 in cash. The following information relates to the machines on the date of the exchange: Carrying Value/Fair Value Old machine $70,000/$100,000 New machine $45,000/$90,000 What amount of gain should Lizzy record from this exchange under U.S. GAAP? a. $3,000 b. $30,000 c. $10,000 d. $0

93,775 Payment/10% Interest/Amortization/Principal Beginning balance $0/$0/$0/$ 475,000 12/31/Year 1 $ 125,000/$ 47,500/$77,500/397,500 12/31/Year 2 125,000/39,750/85,250/312,250 12/31/Year 3 125,000/31,225/93,775 218,475

Marvin Corporation signed a five-year lease agreement on January 1, Year 1, in a transaction properly classified as a capital (finance) lease. The present value of the $125,000 minimum lease payments discounted at 10 percent at the date of signing was $600,000. Marvin owed $125,000 at the date of signing and five installments of $125,000 due on December 31 of each year, starting on December 31, Year 1. What should Marvin record as the current maturity on the lease at December 31, Year 2? 93,775 312,250 31,225 85,250

$88,500 300,000-25,000+30,000+5,000+5,000-20,000=2905,000*.35= 88,500

Panda Corporation's income statement for the current year ended December 31 shows pretax income of $300,000. The following items are treated differently on the tax return and on the accounting records: Tax return/Accounting records Depreciation $ 95,000/$ 70,000 Royalty income 80,000/50,000 Premiums on life insurance None/5,000 Bad debt expense 7,000/12,000 Life insurance proceeds None/20,000 Assume that Panda's current year tax rate is 30% and Panda made estimated tax payments during the year of $15,000. What is the current portion of Panda's income tax expense? $103,500 $85,500 $90,000 $88,500

b. $ 0/$ 0 Donated services are recorded as contribution revenue "SOME" of the time: when a specialized skill is required, when the donation is otherwise needed and purchased and when measurable easily. Although the purchase price of the telemarketing appeal can be measured, it does not require a specialized skill (it can be performed by college students) and would not be purchased if it were not donated (the college would use its student volunteers).

Quentin University is organized as a not-for-profit organization. The university reaches out to its alumni each year in a mass telephonic fund raising appeal that includes scripted dinner hour calls appealing for ongoing support. In Year 1, the university used untrained student volunteers to make the calls. In Year 2, an alumnus who owns a successful telemarketing company offers to perform the task. The university accepts the offer and provides the alumnus with the script along with appropriate phone numbers and contribution accounting forms. Based on the usual and customary charges used in his business, the alumnus anticipates that the value of these services is $10,000. For each year, contributed revenue associated with this transaction would be: Year 1/Year 2 a. $ 10,000/$ 0 b. $ 0/$ 0 c. $ 10,000/$ 10,000 d. $ 0/$ 10,000

$48,500,000 Total student tuitions $ 50,000,000 Less: Tuition refunds (1,500,000) Unrestricted current fund revenue $ 48,500,000

State University assessed its students' tuition and fees totaling $50,000,000 for the year ended June 30. However, its net cash collections were only $42,000,000 as a result of the following reductions: Scholarship, tuition remission, and fellowship $ 6,500,000 Tuition refunds 1,500,000 In this situation, unrestricted current fund revenue from tuition and fees for the year ended June 30 for State University will be reported at: $43,500,000 $50,000,000 $48,500,000 $42,000,000

a. Not recognize the contributed photos as assets and contribution revenue. Regardless of Bygone Historical Society's policies, no asset or contribution revenue will be recognized since the contributed photos are subject to major uncertainties with regard to their value and have no alternative use.

The Bygone Historical Society, a not-for-profit organization, received a donation of fifteen Daguerre-type (metal) photos of Bygone's riverfront from a family estate. The photos were not suitable for display but were accepted by the historical society for their potential value to researchers and historians. The photos have no alternative use. The Bygone Historical Society adopted a policy of capitalizing its contributed works of art and historical treasures. Under these circumstances, Bygone Historical Society would: a. Not recognize the contributed photos as assets and contribution revenue. b. Recognize the photos as assets (historical treasures) and contribution revenue in the amount of the value of the metal. c. Recognize the photos as assets (historical treasures) and contribution revenue in the amount of their fair market value. d. Disclose the receipt of historical treasures not eligible for display.

Accrual basis accounting and going concern.

The IASB's conceptual framework includes two fundamental assumptions. These are: Matching and conservatism. Entity and monetary unit. Going concern and elements of financial statements. Accrual basis accounting and going concern.

$34,500 Service cost $30,000 Interest cost 20,000 1 Return on assets (20,000) 2 Amort.of prior service cost 5,000 3 Gain amortization (500) 4 Existing net obligation amort. 0 Net periodic pension cost $ 34,500 1 Interest cost = Beg. PBO x Discount rate = $250,000 × 8% = $20,000 2 Return on plan assets = Beg. FV assets x Return on plan assets = $200,000 × 10% = $20,000 3 Amortization of prior service cost = Prior service cost / Average remaining service life = $50,000 / 10 years = $5,000 4 Gain amortization = (Excess of unrecognized gain over the greater of 10% of beg. PBO or 10% of beg. FV plan assets) / Average remaining service life = [$30,000 − (10% × $250,000)] / 10 years = $5,000 / 10 years = $500

The following information pertains to the defined benefit pension plan of the Cabot Corporation as of December 31, Year 11 and Year 12: 12/31/Year 11 12/31/Year 12 Projected benefit obligation $250,000 $285,000 Fair value of plan assets $200,000 $295,000 The pension plan had unrecognized prior service cost of $50,000 and unrecognized net gain of $30,000 at December 31, Year 11. Service cost for Year 12 was $30,000. The discount rate was 8% and the expected and actual return on plan assets was 10% for both Year 11 and Year 12. Cabot's employees have an average remaining service life of 10 years. For the last three years, Cabot has made benefit payments of $15,000 per year. The company expects to pay the same amount in Year 13. Cabot's effective tax rate is 30%. Calculate Cabot's net periodic pension expense for Year 12. $32,000 $35,500 $27,800 $34,500

d. $50,000 noncurrent liability. This underfunded pension plan will be reported as a noncurrent liability under U.S. GAAP rather than a current liability because the fair value of the plan assets is sufficient to pay the benefits payable in Year 12.

The following information pertains to the defined benefit pension plan of the Cabot Corporation as of December 31, Year 11 and Year 12: 12/31/Year 11/12/31/Year 12 Projected benefit obligation $250,000/$285,000 Fair value of plan assets $200,000/$295,000 The pension plan had unrecognized prior service cost of $50,000 and unrecognized net gain of $30,000 at December 31, Year 11. Service cost for Year 12 was $30,000. The discount rate was 8% and the expected return on plan assets was 10% for both Year 11 and Year 12. Cabot's employees have an average remaining service life of 10 years. For the last three years, Cabot has made benefit payments of $15,000 per year. The company expects to pay the same amount in Year 13. Cabot's effective tax rate is 30%. How would the funded status of Cabot's pension plan be reported on December 31, Year 11 under U.S. GAAP? a. $50,000 current liability. b. $10,000 noncurrent asset. c. $15,000 current liability and $35,000 noncurrent liability. d. $50,000 noncurrent liability.

$1,330,000 Revenue $ 3,600,000 Expenses (2,600,000) Pre-tax income 1,000,000 Tax expense - 30% (300,000) Net income 700,000 Beginning retained earnings 630,000 Ending retained earnings $ 1,330,000

The following trial balance of Trey Co. at December 31 has been adjusted except for income tax expense. DR (CR) Cash $ 550,000 Accounts receivable, net 1,650,000 Prepaid taxes 300,000 Accounts payable (120,000) Common stock (500,000) Additional paid-in capital (680,000) Retained earnings (630,000) Foreign currency translation adjustment 430,000 Revenues (3,600,000) Expenses 2,600,000 $ 5,530,000 ($ 5,530,000) Additional information During the current year, estimated tax payments of $300,000 were charged to prepaid taxes. Trey has not yet recorded income tax expense. There were no differences between financial statement and income tax income, and Trey's tax rate is 30%. Included in accounts receivable is $500,000 due from a customer. Special terms granted to this customer require payment in equal semiannual installments of $125,000 every April 1 and October 1. In Trey's December 31 balance sheet, what amount should be reported as total retained earnings? $1,029,000 $900,000 $1,630,000 $1,330,000

Year 1: Bad Debt Expense: (2,500,000*.03)=$75,000 Allowance for uncollectible accounts-Dec 31: Beginning $75,000 +Bad debt expense 75,000 -Writeoffs (15,000) Ending Balance: 135,000 Year 2: Allowance for Uncollectible: (1,500,000*.10)=150,000 Begin Allowance for Uncollectibles: 135,000 + Bad Debt Expense x -Write-offs (10,000) End Balance: 150,000 X=25,000

The gross value of Diamond Wholesaler, Inc.'s accounts receivable as of December 31, Year 1 and Year 2 was $860,000, and $1,500,000, respectively. Diamond's sales were $2,500,000 in Year 1 and $3,000,000 in Year 2. Additional information follows: Year 1/Year 2 Allowance for uncollectible accounts - 1/1 $75,000/? Uncollectible accounts written off $30,000/20,000 Uncollectible accounts recovered $15,000/10,000 Percentage of sales deemed uncollectible 3%/0 1. In Year 1, Diamond used the percentage of sales method to estimate uncollectible accounts. Calculate the following for Year 1 (enter the appropriate amounts in the shaded cells): 2. In Year 2, Diamond switched to the percentage of accounts receivable method to estimate uncollectible accounts. Based on the company's records, they determined that 10% of the gross accounts receivable balance is uncollectible. Calculate the following for Year 2 (enter the appropriate amounts in the shaded cells):

Net realizable value less normal profit margin Market (take middle of three) Net realizable value (ceiling) .90 Net realizable value less normal profit margin (floor) .80 Replacement cost .70 Original cost .85 Lower of cost or market (take lower of two) Which is net realizable value less normal profit margin $ .80

The original cost of an inventory item is below the net realizable value and above the net realizable value less a normal profit margin. The inventory item's replacement cost is below the net realizable value less a normal profit margin. Under the lower of cost or market method, the inventory item should be valued at: Net realizable value. Replacement cost. Original cost. Net realizable value less normal profit margin

The integrated approach.

The presentation of government-wide financial statements prepared using a uniform method of accounting and measurement focus in combination with fund based financial statements that use the method of accounting and measurement focus appropriate to the particular fund types is best referred to as: The integrated approach. The financial reporting pyramid. The public accountability approach. The segregated approach.

a. $161,000 Fair Value of Squire × 80% = Purchase Price 750,000 × 80% = $600,000 Non-controlling Interest = FV of Squire × Non-controlling Interest Percentage $150,000 = $750,000 × 20% Beginning Non-controlling Interest $ 150,000 + 20% × Squire's Net Income 15,000= 20% × 75,000 − 20% × Squire's Dividend (4,000)= 20% × 20,000 Ending Non-controlling Interest $ 161,000

The separate condensed balance sheets and income statements of Potter Corp. and its 80% owned subsidiary, Squire Corp. are as follows: Balance Sheets December 31 Assets->Potter/Squire Current assets $ 696,000/$ 455,000 Property, plant and equipment 300,000/405,000 Investment in Squire (equity method) 644,000/−− Total assets $ 1,640,000/$ 850,000 Liabilities and Stockholders' Equity Liabilities $ 300,000/$ 150,000 Stockholder equity: Common stock 500,000/200,000 Additional paid-in capital 100,000/100,000 Retained earnings 740,000/400,000 Total Liabilities and Stockholders' Equity $ 1,640,000/$ 850,000 Income Statements For the Year Ended December 31 Potter/Squire Sales $ 750,000/$ 300,000 Less: Cost of goods sold (350,000)/(50,000) Gross margin 400,000/250,000 Less: Operating expenses (160,000)/(150,000) Operating income 240,000/100,000 Equity in the earnings of Squire 60,000/−− Income before income taxes 300,000/100,000 Less: Provision for income taxes (60,000)/(25,000) Net income $ 240,000/$ 75,000 Additional Information: -On January 1, of the current year, Potter acquired 80% of Squire's outstanding voting common stock for $600,000. On January 1, the fair values of Squire's assets and liabilities equaled their carrying values of $850,000 and $205,000 respectively. Potter's policy is to amortize intangible assets over a 10-year period. No impairment of goodwill occurred during the year. -During the current year, Potter and Squire paid cash dividends of $90,000 and $20,000, respectively. -There were no intercompany transactions except for Potter's receipt of dividends from Squire and Potter's recording of its share of Squire's earnings. In the December 31 consolidated financial statements of Potter and Squire, non-controlling interest under U.S. GAAP should be: a. $161,000 b. $140,000 c. $150,000 d. $169,000

b. $ 740,000

The separate condensed balance sheets and income statements of Potter Corp. and its 80% owned subsidiary, Squire Corp. are as follows: Balance Sheets December 31 Assets->Potter/Squire Current assets $ 696,000/$ 455,000 Property, plant and equipment 300,000/405,000 Investment in Squire (equity method) 644,000/−− Total assets $ 1,640,000/$ 850,000 Liabilities and Stockholders' Equity Liabilities $ 300,000/$ 150,000 Stockholder equity: Common stock 500,000/200,000 Additional paid-in capital 100,000/100,000 Retained earnings 740,000/400,000 Total Liabilities and Stockholders' Equity $ 1,640,000/$ 850,000 Income Statements For the Year Ended December 31 Potter/Squire Sales $ 750,000/$ 300,000 Less: Cost of goods sold (350,000)/(50,000) Gross margin 400,000/250,000 Less: Operating expenses (160,000)/(150,000) Operating income 240,000/100,000 Equity in the earnings of Squire 60,000/−− Income before income taxes 300,000/100,000 Less: Provision for income taxes (60,000)/(25,000) Net income $ 240,000/$ 75,000 Additional Information: -On January 1, of the current year, Potter acquired 80% of Squire's outstanding voting common stock for $600,000. On January 1, the fair values of Squire's assets and liabilities equaled their carrying values of $850,000 and $205,000 respectively. Potter's policy is to amortize intangible assets over a 10-year period. No impairment of goodwill occurred during the year. -During the current year, Potter and Squire paid cash dividends of $90,000 and $20,000, respectively. -There were no intercompany transactions except for Potter's receipt of dividends from Squire and Potter's recording of its share of Squire's earnings. In the December 31 consolidated financial statements of Potter and Squire, total retained earnings should be: a. $ 900,000 b. $ 740,000 c. $1,060,000 d. $1,224,000

a. $105,000 Book Value+x=FV $645,000+x=$750,000

The separate condensed balance sheets and income statements of Potter Corp. and its 80% owned subsidiary, Squire Corp. are as follows: Balance Sheets December 31 Assets->Potter/Squire Current assets $ 696,000/$ 455,000 Property, plant and equipment 300,000/405,000 Investment in Squire (equity method) 644,000/−− Total assets $ 1,640,000/$ 850,000 Liabilities and Stockholders' Equity Liabilities $ 300,000/$ 150,000 Stockholder equity: Common stock 500,000/200,000 Additional paid-in capital 100,000/100,000 Retained earnings 740,000/400,000 Total Liabilities and Stockholders' Equity $ 1,640,000/$ 850,000 Income Statements For the Year Ended December 31 Potter/Squire Sales $ 750,000/$ 300,000 Less: Cost of goods sold (350,000)/(50,000) Gross margin 400,000/250,000 Less: Operating expenses (160,000)/(150,000) Operating income 240,000/100,000 Equity in the earnings of Squire 60,000/−− Income before income taxes 300,000/100,000 Less: Provision for income taxes (60,000)/(25,000) Net income $ 240,000/$ 75,000 Additional Information: -On January 1, of the current year, Potter acquired 80% of Squire's outstanding voting common stock for $600,000. On January 1, the fair values of Squire's assets and liabilities equaled their carrying values of $850,000 and $205,000 respectively. Potter's policy is to amortize intangible assets over a 10-year period. No impairment of goodwill occurred during the year. -During the current year, Potter and Squire paid cash dividends of $90,000 and $20,000, respectively. -There were no intercompany transactions except for Potter's receipt of dividends from Squire and Potter's recording of its share of Squire's earnings. In the December 31 consolidated financial statements of Potter and Squire, goodwill under U.S. GAAP should be: a. $105,000 b. $36,000 c. $80,000 d. $84,000

Yes/Yes. Trading securites are reported at fair value with unrealized gains and losses included in earnings. Held to maturity securities are reported at their amortized costs

Unrealized holding gains/losses would be included in earnings for which of the following securities? Trading/Held to Maturity a. Yes/Yes b. No/No c. No/Yes d. Yes/No

Will debit the budgetary control account. To reverse an encumbrance upon receipt of the invoice, a debit would be recorded to budgetary control.

Upon receipt of an invoice for a previously encumbered estimated cost of supplies, a special revenue fund: Will credit the budgetary control account. Will debit the vouchers payable account. Will debit the budgetary control account. Will debit the encumbrance control account.

When the machines are sold.

Vadis Co. sells appliances that include a three-year warranty. Service calls under the warranty are performed by an independent mechanic under a contract with Vadis. Based on experience, warranty costs are estimated at $30 for each machine sold. When should Vadis recognize these warranty costs? Evenly over the life of the warranty. When payments are made to the mechanic. When the service calls are performed. When the machines are sold.

$204,000 $176,000 +Increase in A/R 12,000 +Decrease in Unearned Fees 16,000

Victoria, a consultant, keeps her accounting records on a cash basis. During the current year, Victoria received $176,000 in fees from clients. Also, Victoria's balance sheets contained the following data: Prior Year/Current Year Accounts receivable $19,000/$31,000 Unearned fees $28,000/$12,000 On an accrual basis, what amount should Victoria report as revenue for the current year? $192,000 $176,000 $204,000 $188,000