intermediate accounting final exam
10) Which of the following reasons provide the best theoretical support for accelerated depreciation? A. Assets are more efficient in early years and initially generate more revenue. B. Expenses should be allocated in a manner that "smooths" earnings. C. Repairs and maintenance costs will probably increase in later periods, so depreciation should decline. D. Accelerated depreciation provides easier replacement because of the time value of money.
A
An example of a judgment in accounting for Accounts Receivable is ________. A) the percentage of credit sales that may be uncollectible B) the amount a customer paid during the previous month C) the decision whether to extend credit to a new customer D) the percentage that may be deducted to calculate a sales discount
A
Rinky-Dink Inc. incurred research and development costs of $200,000 and legal fees of $100,000 to acquire a patent. The patent has a legal life of 20 years and a useful life of 10 years. What amount should the company record as patent amortization expense in the first year? A) $10,000 B) $15,000 C) $20,000 D) $30,000
A
What is the normal journal entry for recording bad debt expense? A) debit Bad Debt Expense, credit Allowance for Uncollectible Accounts B) debit Allowance for Uncollectible Accounts, credit Bad Debt Expense C) debit Bad Debt Expense, credit Accounts Receivable D) debit Accounts Receivable, credit Bad Debt Expense
A
When a firm sells or abandons an asset, how is the gain or loss to be recognized on the income statement measured? A) The difference between cash proceeds received and the carrying value of the asset. B) The difference between cash proceeds received and the acquisition value of the asset. C) The difference between cash proceeds received and the accumulated depreciation of the asset. D) The difference between the book value of the asset and the carrying value of the asset.
A
Which of the following costs should be capitalized in the year incurred? A) costs to successfully defend a patent B) research and development costs for a new product to be introduced later this year C) cost to internally generate goodwill D) organizational costs
A
Yeager Inc. and Tibbits Co. have an exchange with no commercial substance. The asset given up by Yeager Inc. has a book value of $31,000 and a fair value of $40,000. The asset given up by Tibbits Co. has a book value of $46,000 and a fair value of $54,000. Yeager also pays Tibbits $14,000 cash. (Round any computations to three decimals). 44) What is Yeager's recognized gain or loss on the exchange? A) $0 B) $9,000 gain C) $9,000 loss D) $2,034 gain
A
10) Caramel Company has the following transactions in the current year. Assuming that all of the transactions are material, which of them will most likely will effect on current year net income? A. The payment for the settlement of a lawsuit that had been accrued in the previous year. B. The determination that intangibles acquired through the purchases of a small start-up company were worthless. C. Receiving a building contributed by a shareholder. The write-off of an account receivable.
B
Devo Co. has an indefinite-life intangible asset with a carrying value of $782,000. The undiscounted cash flows expected to be realized from that asset total $827,000; the discounted cash flows are $574,000; and the fair value of the asset has been determined to be $646,000. What is the amount of the impairment loss to be recorded, if any? A) $208,000 B) $136,000 C) $35,000 D) -0-
B
Eurobake Inc. made a $10,000 sale on account with terms: of 1/15, n/30. If the company uses the net method, which of the following will be included in the journal entry to record the sale on account? A) debit Accounts Receivable $10,000 B) debit Accounts Receivable $9,900 C) debit Sales Discount Forfeited $100 D) credit Sales Discount Forfeited $100
B
Hendrickson Corporation's trial balance for July 31, the end of its fiscal year, included the following accounts: Accounts Receivable $25,000 Inventories 60,000 Copyright 20,000 Investments 45,000 Prepaid Insurance 9,000 Note receivable, due in two years 75,000 Cash in Bank 5,500 Investments are treasury bills that were purchased in May and mature on August 15. Prepaid insurance is a three-year policy that was purchased on July 31. The amount that should be classified as current assets in the July 31 balance sheet is ________. A) $144,500 B) $138,500 C) $93,500 D) $213,500
B
Kaven Corporation purchased a truck at the beginning of 2016 for $75,000 which will be depreciated using the units-of-output method. The truck is estimated to have a residual value of $3,000 and a useful life of 4 years and 120,000 miles. It was driven 18,000 miles in 2016 and 32,000 miles in 2017. What is the depreciation expense for 2017? A) $18,750 B) $19,200 C) $20,000 D) $32,000
B
On May 1, Jonson Industries decided to discontinue its prepackaged business segment. At the end of the year, the company is still holding the business segment for disposal, which is expected early in the following year. On its year-end income statement, Jonson Industries will report as income from discontinued operations the profits generated by the prepackaged business segment ________. A) for the entire year, before taxes B) for the entire year, net of taxes C) since May 1, before taxes D) since May 1, net of taxes
B
Poseidon Corp is aware that a large portion of receivables may become uncollectible because the customer is in talks for bankruptcy. By choosing not to disclose this information, the information provided in the statements ________. A) is not verifiable B) does not faithfully represent the firm's financial position C) both A & B D) neither A nor B
B
Regular Corp. has four divisions. One of them, Weeble Products, was acquired on January 1, 2016, for $60,000,000, and recorded goodwill of $6,000,000 as a result of that purchase. At December 31, 2017, Weeble Products had a fair value (including goodwill) of $37,000,000. and the book value of the company's net assets (without goodwill) was $44,000,000. The fair value of Weeble's net assets (without goodwill) at December 31, 2017 was $33,000,000. What amount of loss on impairment of goodwill should Regular record in 2017? A) -0- B) $2,000,000 C) $4,000,000 D) $11,000,000
B
Rommer Company purchases Daley Inc. for $960,000 cash on January 1, 2017. The book value of Daley Company's net assets, as reflected on its December 31, 2016 statement of financial position is $740,000. An analysis by Rommer on December 31, 2016 indicates that the fair value of Daley's tangible assets exceeded the book value by $70,000, and the fair value of identifiable intangible assets exceeded book value by $35,000. How much goodwill should be recognized by Rommer Company when recording the purchase of Daley Inc.? A) $70,000 B) $115,000 C) $150,000 D) $220,000
B
Seeder Inc. made a lump-sum purchase of three pieces of machinery for $135,000 from an unaffiliated company. The appraised value of the machines are: Machine A $70,000 Machine B $42,000 Machine C $28,000 What cost should be assigned to Machines A, B, and C, respectively? A) A: $70,000; B: $42,000; C: $28,000 B) A: $67,500; B: $40,500; C: $27,000 C) A: $65,000; B: $39,000; C: $26,000 D) A: $45,000; B: $45,000; C: $45,000
B
What is the balance sheet classification of a bank account whose fund balance is restricted for retirement of bonds that mature in six years? A) current asset B) non-current asset C) current liability D) non-current liability
B
Which financial is the first to be prepared? A) balance sheet B) statement of income C) statement of shareholders' equity D) statement of comprehensive income
B
Yeager Inc. and Tibbits Co. have an exchange with no commercial substance. The asset given up by Yeager Inc. has a book value of $31,000 and a fair value of $40,000. The asset given up by Tibbits Co. has a book value of $46,000 and a fair value of $54,000. Yeager also pays Tibbits $14,000 cash. (Round any computations to three decimals). 44) What is Tibbits recognized gain or loss on the exchange? A) $0 B) $8,000 gain C) $2,000 gain D) $1,808 gain
B
10) You have discovered an investment opportunity that earns a 8% rate of interest compounded annually. If you invest $3,429 today, how much will you have at the end of two years? A. $4,666 B. $8,986 C. $4,000 D. $7,704
C
Administrative Expense $ 160 Cost of Goods Sold 340 Gain on Sale of Securities 45 Income Tax Expense 57 Loss on Discontinued Operations after Tax 38 Loss on Disposal of Equipment 86 Revenue 1,000 Selling Expense 210 10) What is the amount of income from continuing operations for Ash Millinery? A. $147 B. $154 C. $192 D. $278
C
An improvement made to a machine increased its fair value and its production capacity. The cost of the improvement should be debited to ________. A) expense B) accumulated depreciation C) equipment D) intangible assets
C
At December 31, the Selig Company has ending inventory with a historical cost of $630,000. Assume the company uses the LIFO perpetual inventory system. The current replacement cost of the inventory is $608,000. The net realizable value is $650,000. The normal profit on this inventory is $50,000. Following U.S. GAAP, which journal entry is required on December 31 to adjust the ending balance of inventory if the direct method is used? A) Debit Cost of Goods Sold for $20,000 and credit Inventory for $20,000. B) Debit Inventory for $20,000 and credit Cost of Goods Sold for $20,000. C) Debit Cost of Goods Sold for $22,000 and credit Inventory for $22,000. D) Debit Inventory for $22,000 and credit Cost of Goods Sold for $22,000.
C
Auditors should exercise ________ to minimize management bias. A) common sense B) ratio analysis C) professional skepticism D) interrogation techniques
C
Ballyhigh Company purchased equipment for $20,000. Sales tax on the purchase was $1,500. Other costs incurred were freight charges of $400, and installation costs of $450. What is the capitalizable cost of the equipment? A) $21,500 B) $21,850 C) $22,350 D) $22,700
C
Basking Company adopted the dollar-value LIFO method in 2014. At December 31, 2014, ending inventory was $100,000, with a price index of 1.00, using dollar-value LIFO. At December 31, 2015, the ending inventory using FIFO is $120,000 and the price index is 1.15. Round all dollar amounts to the nearest dollar. Basking Company's ending inventory at December 31, 2015 on a dollar-value LIFO basis is ________. A) $100,000 B) $104,348 C) $105,000 D) $120,000
C
Bay City Corporation received $21,000 for 12 months' rent in advance. What entry is used to record this transaction? A) Cash 21,000 Prepaid Rent 21,000 B) Rent Expense 21,000 Cash 21,000 C) Cash 21,000 Unearned Revenue 21,000 D) Unearned Revenue 21,000 Rent Revenue 21,000
C
During the year, Liptom Company made an entry to write off a $4,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $60,000 and the balance in the allowance account was $4,500. What is the net realizable value of accounts receivable after the write-off entry? A) $60,000 B) $59,500 C) $55,500 D) $51,500
C
Edmond Office Equipment borrowed $10,000 at 10% interest on September 1. Principal and interest are due on February 28. The company's fiscal year ends on December 31. What adjusting entry should be made on that date? A) No entry B) Interest Expense 500 Interest Payable 500 C) Interest Expense 333 Interest Payable 333 D) Prepaid Interest 333 Interest Payable 333
C
In 2010, Mennora Corporation acquired production machinery at a cost of $410,000, which now has a book value of $190,000. The undiscounted cash flows from use of the machinery is $175,000. and it's fair value is $135,000. What amount should Menorrah recognize as a loss on impairment? A) $15,000 B) $40,000 C) $55,000 D) -0-
C
Jones Corporation enters into a contract with Warner Video to add their programs to Jones' network. Warner will pay Jones an upfront fixed fee of $250,000 for 12 months of access, and will also pay a $100,000 bonus if Jones' users access Warner Video for at least 10,000 hours during the 12-month period. Jones estimates that it has a 80% chance of earning the $100,000 bonus. Refer to Jones Corporation. Using the expected-value approach the transaction price would be ________. A) $200,000 B) $250,000 C) $330,000 D) $350,000
C
Sampe Company has the following data available: Transaction Units Purchased Unit Cost Units Sold Beginning Inventory 400 $10 March 1 Purchase 200 $12 April 25 Sale 350 June 10 Purchase 300 $14 July 20 Sale 250 October 30 Purchase 350 $15 December 15 Sale 400 If Sampe Company uses a perpetual FIFO inventory system, the cost of goods sold for the year is ________. A) $5,400 B) $16,850 C) $12,100 D) $4,200
C
What is a cash equivalent? A) reclassification of a cash amount that is restricted from use in the current operating cycle B) negative cash balance that occurs when a company writes a check in an amount that exceeds the account balance C) short-term liquid investment with original maturity of three months or less D) minimum cash balance required to be maintained by a credit agreement
C
10) Fir Corp. sells Coconut Company software to be used in conjunction with the Palm's production system. Fir also installs the software. The software is usable without Fir installing the product. The software and the installation are an example of ________. A. a single performance obligation B. three performance obligations C. no performance obligations D. two performance obligations
D
10) JCR. Co. sells a truck for $45,000. The truck had an acquisition cost of $140,000 and accumulated depreciation at the time of the sale of $85,000. Which of the following statements are true? A. JCR will report a $10,000 gain as a result of this sale. B. JCR's loss on this sale is $45,000. C. Total assets increased by $10,000 as a result of this transaction. D. Equity decreased by $10,000 as a result of this transaction.
D
Bombard Company has the following data available: Transaction Units Purchased Unit Cost Units Sold Beginning Inventory 500 $10 March 1 Purchase 200 $12 April 25 Sale 350 June 10 Purchase 300 $14 July 20 Sale 250 October 30 Purchase 350 $15 December 15 Sale 400 If Bombard Company uses a perpetual LIFO inventory system, the cost of goods sold for the year is ________. A) $3,500 B) $5,520 C) $16,850 D) $13,350
D
In 2017, Yumster Company determined that a production machine used in its operations was impaired and an impairment loss of $110,000 was recognized. In 2017, the fair value of the asset increased by $170,000 due to an unexpected resurgence in demand for the products the machine was designed to produce. How would the gain due to increase in fair value be recognized in 2017? A) U.S. GAAP permits the recognition of this impairment reversal as income from continuing operations. B) U.S. GAAP permits the recognition of this impairment reversal as other comprehensive income. C) U.S. GAAP allows the recognition of this impairment reversal as either income from continuing operations or as other comprehensive income, depending upon management's intent. D) U.S. GAAP does not permit recognition of gains or reversal of previous impairment loss write-downs.
D
Jesse Company has the following data for January: Beginning inventory $215,000 Net purchases $605,000 Net sales $440,000 Gross profit percentage 40% What is the company's estimated cost of goods sold for January using the gross profit method? A) $165,000 B) $176,000 C) $225,000 D) $264,000
D
Jones Corporation enters into a contract with Warner Video to add their programs to Jones' network. Warner will pay Jones an upfront fixed fee of $250,000 for 12 months of access, and will also pay a $100,000 bonus if Jones' users access Warner Video for at least 10,000 hours during the 12-month period. Jones estimates that it has a 80% chance of earning the $100,000 bonus. Refer to Jones Corporation. Using the most-likely-amount approach, the transaction price would be ________. A) $200,000 B) $250,000 C) $330,000 D) $350,000
D
Lunar Products purchased a computer for $13,000 on July 1, 2016. The company intends to depreciate it over 4 years using the double-declining balance method. Residual value is $1,000. What is depreciation for 2017? A) $3,000 B) $3,250 C) $4,500 D) $4,875
D
Marston Company has outstanding accounts receivable totaling €6.5 million as of December 31 and sales on credit during the year of €24 million. There is also a credit balance of €12,000 in the allowance for doubtful accounts. After aging its receivables, the company estimates that 8% of its total outstanding receivables will be uncollectible. What will be the amount of bad debt expense recognized for the year? A) €532,000 B) €520,000 C) €512,000 D) €508,000
D
Net realizable value of trade accounts receivable is calculated as ________. A) net receivables plus sales discounts forfeited B) gross receivables minus sales discounts taken C) gross receivables minus sales discounts forfeited D) gross receivables minus allowance for uncollectible accounts
D
Smith-Miller Enterprises has inventory of $657,000 in its stores as of December 31. It also has two shipments in-transit that left the suppliers' warehouses by December 28. Both shipments are expected to arrive on January 5. The first shipment of $128,000 was sold f.o.b. destination and the second shipment of $76,000 was sold f.o.b. shipping point. What amount of inventory should Smith-Miller report on its balance sheet as of December 31? A) $657,000 B) $861,000 C) $785,000 D) $733,000
D
Which of the following terms describe probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events? A) performance B) income C) equity D) asset
D
