3. ACC 422 Final Exam Guide 1
ACC 422 Final Exam Guide 2
ACC 422 Final Exam Guide 3
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ACC 422 Final Exam Guide (New 2019, With
EXCEL FILE, Score 29/30)
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This Tutorial contains excel File which can be used to solve for any
change in values
Brief Exercise 7-1
Brief Exercise 7-7
Brief Exercise 7-14
8. Postdated checks
770
Cash refund due from IRS
35,600
Certificates of deposit (180-day)
94,570
What amount should be reported as cash?
Brief Exercise 7-7
Larkspur Family Importers sold goods to Tung Decorators for
$40,800 on November 1, 2017, accepting Tung’s $40,800, 6-month,
6% note.
Prepare Larkspur’s November 1 entry, December 31 annual adjusting
entry, and May 1 entry for the collection of the note and interest.
Brief Exercise 7-14
9. Recent financial statements of General Mills, Inc. report net sales of
$12,442,000,000.Accounts receivable are $912,000,000 at the
beginning of the year and $953,000,000 at the end of the year.
Brief Exercise 7-15
Indigo Company designated Jill Holland as petty cash custodian and
established a petty cash fund of $290. The fund is reimbursed when
the cash in the fund is at $26, which it is. Petty cash receipts indicate
funds were disbursed for office supplies $92 and miscellaneous
expense $169.
Prepare journal entries for the establishment of the fund and the
reimbursement.
Brief Exercise 8-4 (Part Level Submission)
Pharoah Company uses a periodic inventory system. For April, when
the company sold 500 units, the following information is available.
Units
Unit Cost
Total Cost
April 1 inventory
290
10. $32
$ 9,280
April 15 purchase
430
38
16,340
April 23 purchase
280
42
11,760
1,000
$37,380
13. 39
11,310
1,000
$35,250
Compute the April 30 inventory and the April cost of goods sold
using the LIFO method.
Multiple Choice Question 21
Which of the following inventories carried by a manufacturer is
similar to the merchandise inventory of a retailer?
Question 14
A fire destroys all of the merchandise of Shamrock Company on
February 10, 2017. Presented below is information compiled up to the
date of the fire.
Inventory, January 1, 2017
14. $432,200
Sales revenue to February 10, 2017
1,935,200
Purchases to February 10, 2017
1,104,580
Freight-in to February 10, 2017
59,180
Rate of gross profit on selling price
35%
What is the approximate inventory on February 10, 2017?
Exercise 9-4
15. Martinez Company began operations in 2017 and determined its
ending inventory at cost and at LCNRV at December 31, 2017, and
December 31, 2018. This information is presented below.
Cost
Net Realizable Value
12/31/17
$322,170
$299,520
12/31/18
409,250
390,440
(a) Prepare the journal entries required at December 31, 2017, and
December 31, 2018, assuming inventory is recorded at LCNRV and a
perpetual inventory system using the cost-of-goods-sold method.
Brief Exercise 10-6
16. Waterway Inc. purchased land, building, and equipment from Laguna
Corporation for a cash payment of $327,600.The estimated fair
values of the assets are land $62,400, building $228,800,and
equipment $83,200. At what amounts should each of the three assets
be recorded?
Brief Exercise 10-8
Pearl Corporation traded a used truck (cost $29,600, accumulated
depreciation $26,640) for a small computer with a fair value of
$4,884. Pearl also paid $740 in the transaction.
Prepare the journal entry to record the exchange. (The exchange has
commercial substance.)
Exercise 10-1
The expenditures and receipts below are related to land, land
improvements, and buildings acquired for use in a business enterprise.
The receipts are enclosed in parentheses.
(a)
Money borrowed to pay building contractor (signed a note)
$(285,400
)
(b)
17. Payment for construction from note proceeds
285,400
(c)
Cost of land fill and clearing
11,790
(d)
Delinquent real estate taxes on property assumed by purchaser
7,300
(e)
Premium on 6-month insurance policy during construction
8,580
(f)
18. Refund of 1-month insurance premium because construction
completed early
(1,430
)
(g)
Architect’s fee on building
26,200
(h)
Cost of real estate purchased as a plant site (land $209,100 and
building $52,900)
262,000
(i)
Commission fee paid to real estate agency
8,970
19. (j)
Installation of fences around property
3,770
(k)
Cost of razing and removing building
11,710
(l)
Proceeds from salvage of demolished building
(4,550
)
(m)
Interest paid during construction on money borrowed for construction
13,150
20. (n)
Cost of parking lots and driveways
20,050
(o)
Cost of trees and shrubbery planted (permanent in nature)
14,440
(p)
Excavation costs for new building
2,700
Identify each item by letter and list the items in columnar form, using
the headings shown below. All receipt amounts should be reported in
parentheses. For any amounts entered in the Other Accounts column,
also indicate the account title.
Question 9
21. Sage Company purchased machinery for $174,300 on January 1,
2017. It is estimated that the machinery will have a useful life of 20
years, salvage value of $14,700, production of 81,900 units, and
working hours of 44,000. During 2017, the company uses the
machinery for 11,440 hours, and the machinery produces 9,009 units.
Compute depreciation under the straight-line, units-of-output,
working hours, sum-of-the-years’-digits, and double-declining-
balance methods.
Brief Exercise 11-8
Carla Company owns equipment that cost $1,008,000 and has
accumulated depreciation of $425,600. The expected future net cash
flows from the use of the asset are expected to be $560,000. The fair
value of the equipment is $448,000.
Prepare the journal entry, if any, to record the impairment loss.
Brief Exercise 12-8
Concord Corporation purchased Johnson Company 3 years ago and at
that time recorded goodwill of $330,000. The Johnson Division’s net
assets, including the goodwill, have a carrying amount of $700,000.
The fair value of the division is estimated to be $668,000 and the
implied goodwill is $298,000.
Prepare Concord journal entry to record impairment of the goodwill.
Exercise 12-3
22. Joni Marin Inc. has the following amounts reported in its general
ledger at the end of the current year.
Organization costs
$24,400
Trademarks
16,900
Discount on bonds payable
37,400
Deposits with advertising agency for ads to promote goodwill of
company
12,400
Excess of cost over fair value of net identifiable assets of acquired
subsidiary
77,400
Cost of equipment acquired for research and development projects;
the
equipment has an alternative future use
23. 87,400
Costs of developing a secret formula for a product that is expected to
be marketed for at least 20 years
83,800
(a)
On the basis of this information, compute the total amount to be
reported by Marin for intangible assets on its balance sheet at year-
end.
Brief Exercise 13-2
Ivanhoe Company borrowed $30,000 on November 1, 2017, by
signing a $30,000, 8%, 3-month note. Prepare Ivanhoe’s November 1,
2017, entry; the December 31, 2017, annual adjusting entry; and the
February 1, 2018, entry.
Brief Exercise 13-5
Riverbed Corporation made credit sales of $19,800 which are subject
to 7% sales tax. The corporation also made cash sales which totaled
$28,462 including the 7% sales tax.
Prepare the entry to record Riverbed’s credit sales.
Brief Exercise 13-10
24. Windsor Inc. is involved in a lawsuit at December 31, 2017.
Prepare the December 31 entry assuming it is probable that Windsor
will be liable for $862,200 as a result of this suit.
Brief Exercise 13-13
Martinez Factory provides a 2-year warranty with one of its products
which was first sold in 2017. Martinez sold $930,400 of products
subject to the warranty. Martinez expects $124,050 of warranty costs
over the next 2 years. In that year, Martinez spent $70,460 servicing
warranty claims. Prepare Martinez’s journal entry to record the sales
(ignore cost of goods sold) and the December 31 adjusting entry,
assuming the expenditures are inventory costs.
Brief Exercise 14-3
The Skysong Company issued $260,000 of 10% bonds on January 1,
2017. The bonds are due January 1, 2022, with interest payable each
July 1 and January 1. The bonds were issued at 98.
Prepare the journal entries for (a) January 1, (b) July 1, and (c)
December 31. Assume The Skysong Company records straight-line
amortization semiannually.
Brief Exercise 14-12
25. Vaughn Corporation issued a 4-year, $55,000, 5% note to Greenbush
Company on January 1, 2017, and received a computer that normally
sells for $44,762. The note requires annual interest payments each
December 31. The market rate of interest for a note of similar risk is
11%.
Prepare Vaughn’s journal entries for (a) the January 1 issuance and
(b) the December 31 interest.
Multiple Choice Question 99
On June 30, 2018, Sheridan Co. sold equipment to an unaffiliated
company for $2250000.The equipment had a book value of
$1205000 and a remaining useful life of 10 years. That same day,
Sheridan leased back the equipment at $12500 per month for 5 years
with no option to renew the lease or repurchase the equipment.
Sheridan’s rent expense for this equipment for the year ended
December 31, 2018, should bet round Cost per equivalent unit)
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ACC 422 Final Exam Guide 1
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1. Kraft Enterprises owns the following assets at December 31, 2012.
Cash in bank–savings account
26. 67,516
Checking account balance
26,445
Cash on hand
9,478
Postdated checks
753
Cash refund due from IRS
40,324
Certificates of deposit (180-day)
94,754
What amount should be reported as cash?
Question 2
Presented below is information related to Rembrandt Inc.’s inventory.
(per unit) Skis Boots
Parkas
Historical Cost 273.79 152.75
76.37
Selling Price 312.70 208.95
106.27
Cost to distribute 27.38 11.53
3.60
Current replacement cost 292.52 151.31
73.49
Normal profit margin 46.11 41.79
30.62
Determine the following:
Question 3
Matlock Company uses a perpetual inventory system. Its beginning
inventory consists of 67 units that cost $40 each. During June, the
27. company purchased 202 units at $40 each, returned 8 units for credit,
and sold 168 units at $67 each. Journalize the June transactions.
Question 4
Amsterdam Company uses a periodic inventory system. For April,
when the company sold 700 units, the following information is
available.
Compute the April 30 inventory and the April cost of goods sold
using the average cost method.
Question 5
Amsterdam Company uses a periodic inventory system. For April,
when the company sold 600 units, the following information is
available.
Compute the April 30 inventory and the April cost of goods sold
using the FIFO method.
Question 6
(FIFO, LIFO, Average Cost Inventory)
Esplanade Company was formed on December 1, 2011. The
following information is available from Esplanade’s inventory records
for Product BAP.
Purchases Units Unit Cost
January 1, 2012(beginning inventory) 762 8.00
January 5, 2012 1,524 9.00
January 25, 2012 1,651 10.00
February 16, 2012 1,061 11.00
March 26, 2012 762 12.00
A physical inventory on March 31, 2012, shows 2,032 units on hand.
Prepare schedules to compute the ending inventory at March 31,
2012, under each of the following inventory methods. Assume
Esplanade Company uses the periodic inventory method.
Question 7
Floyd Corporation has the following four items in its ending
inventory. Determine the final lower of cost or market inventory value
for each item.
28. Question 8
Kumar Inc. uses a perpetual inventory system. At January 1, 2013,
inventory was $320,786 at both cost and market value. At December
31, 2013, the inventory was $428,714 at cost and $403,231 at market
value. Prepare the necessary December 31 entry under:
Question 9
Boyne Inc. had beginning inventory of $15,000 at cost and $25,000 at
retail. Net purchases were $150,000 at cost and $212,500 at retail. Net
markups were $12,500;net markdowns were $8,750; and sales were
$196,250. Compute ending inventory at cost using the conventional
retail method.
Question 10
(Gross Profit Method)
Astaire Company uses the gross profit method to estimate inventory
for monthly reporting purposes. Presented below is information for
the month of May.
Question 11
Previn Brothers Inc. purchased land at a price of $30,400. Closing
costs were $1,820. An old building was removed at a cost of $14,850.
What amount should be recorded as the cost of the land?
Question 12
Garcia Corporation purchased a truck by issuing an $108,000,4-year,
zero-interest-bearing note to Equinox Inc. The market rate of interest
for obligations of this nature is 10%. Prepare the journal entry to
record the purchase of this truck.
Question 13
Mohave Inc. purchased land, building, and equipment from Laguna
Corporation for a cash payment of $352,800.The estimated fair
values of the assets are land $67,200, building $246,400,and
equipment $89,600. At what amounts should each of the three assets
be recorded?
29. Question 14
Fielder Company obtained land by issuing 2,000 shares of its $12 par
value common stock. The land was recently appraised at $103,700.
The common stock is actively traded at $50 per share. Prepare the
journal entry to record the acquisition of the land.
Question 15
Navajo Corporation traded a used truck (cost $23,600, accumulated
depreciation $21,240) for a small computer worth $4,366. Navajo also
paid $1,180 in the transaction. Prepare the journal entry to record the
exchange.
Question 16
Mehta Company traded a used welding machine (cost $10,080,
accumulated depreciation $3,360) for office equipment with an
estimated fair value of $5,600. Mehta also paid $3,360 cash in the
transaction. Prepare the journal entry to record the exchange.
Question 17
Depreciation is normally computed on the basis of the nearest
A). full month and to the nearest dollar.
B). day and to the nearest cent.
C). day and to the nearest dollar.
D). full month and to the nearest cent.
Question 18
Fernandez Corporation purchased a truck at the beginning of 2012 for
$54,180. The truck is estimated to have a salvage value of $2,580 and
a useful life of 206,400 miles. It was driven 29,670 miles in 2012 and
39,990 miles in 2013. Compute depreciation expense for 2012 and
2013.
Question 19
Lockhard Company purchased machinery on January 1, 2012, for
$79,200. The machinery is estimated to have a salvage value of
$7,920 after a useful life of 8 years.
30. (a) Compute 2012 depreciation expense using the double-declining
balance method.
(b) Compute 2012 depreciation expense using the double-declining
balance method assuming the machinery was purchased on October 1,
2012.
Question 20
Jurassic Company owns machinery that cost $1,145,700 and has
accumulated depreciation of $458,280. The expected future net cash
flows from the use of the asset are expected to be $636,500. The fair
value of the equipment is $509,200. Prepare the journal entry, if any,
to record the impairment loss.
Question 21
Everly Corporation acquires a coal mine at a cost of $501,600.
Intangible development costs total $125,400.After extraction has
occurred, Everly must restore the property (estimated fair value of the
obligation is $100,320), after which it can be sold for $200,640.
Everly estimates that 5,016 tons of coal can be extracted. If 878 tons
are extracted the first year, prepare the journal entry to record
depletion.
Question 22
Francis Corporation purchased an asset at a cost of $58,200 on March
1, 2012. The asset has a useful life of 8 years and a salvage value of
$5,820. For tax purposes, the MACRS class life is 5 years. Compute
tax depreciation for each year 2012–2017.
Question 23
Celine Dion Corporation purchases a patent from Salmon Company
on January 1, 2012, for $50,820. The patent has a remaining legal life
of 16 years. Celine Dion feels the patent will be useful for 10 years.
Prepare Celine Dion’s journal entries to record the purchase of the
patent and 2012 amortization.
Question 24
31. Karen Austin Corporation has capitalized software costs of $768,500,
and sales of this product the first year totaled $390,630. Karen Austin
anticipates earning $911,470 in additional future revenues from this
product, which is estimated to have an economic life of 4 years.
Compute the amount of software cost amortization for the first year.
(a) Compute the amount of software cost amortization for the first
year using the percent of revenue approach.
(b) Compute the amount of software cost amortization for the first
year using the straight-line approach.
Question 25
Jeff Beck is a farmer who owns land which borders on the right-of-
way of the Northern Railroad. On August 10, 2012, due to the
admitted negligence of the Railroad, hay on the farm was set on fire
and burned. Beck had had a dispute with the Railroad for several
years concerning the ownership of a small parcel of land. The
representative of the Railroad has offered to assign any rights which
the Railroad may have in the land to Beck in exchange for a release of
his right to reimbursement for the loss he has sustained from the fire.
Beck appears inclined to accept the Railroad’s offer. The Railroad’s
2012 financial statements should include the following related to the
incident:
A). recognition of a loss only.
B). creation of a liability only.
C). disclosure in note form only.
D). recognition of a loss and creation of a liability for the value of the
land.
Question 26
Roley Corporation uses a periodic inventory system and the gross
method of accounting for purchase discounts. On July 1, Roley
purchased $66,000 of inventory, terms 2/10, n/30, FOB shipping
point. Roley paid freight costs of $1,210. On July 3, Roley returned
damaged goods and received credit of $6,600. On July 10, Roley paid
for the goods. Prepare all necessary journal entries for Roley.
Question 27
32. Takemoto Corporation borrowed $93,000 on November 1, 2012, by
signing a $95,093, 3-month, zero-interest-bearing note. Prepare
Takemoto’s November 1, 2012, entry; the December 31, 2012, annual
adjusting entry; and the February 1, 2013, entry. (For multiple
debit/credit en tries, list amounts from largest to smallest, e.g. 10, 8, 6.
Round all answers to 0 decimal places, e.g. 11,150.)
Question 28
Whiteside Corporation issues $629,000 of 9% bonds, due in 14 years,
with interest payable semiannually. At the time of issue, the annual
market rate for such bonds is 10%. Compute the issue price of the
bonds.(Use the present value tables in the text.
Question 29
Indiana Jones Company enters into a 6-year lease of equipment on
January 1, 2012, which requires 6 annual payments of $37,560 each,
beginning January 1, 2012. In addition, the lessee guarantees a
residual value of $20,870 at lease-end. The equipment has a useful
life of 6 years. Assume that for Lost Ark Company, the lessor,
collectibility is reasonably predictable, there are no important
uncertainties concerning costs, and the carrying amount of the
machinery is $191,722. Prepare Lost Ark’s January 1, 2012, journal
entries.
Question 30
On January 1, 2012, Irwin Animation sold a truck to Peete Finance
for $26,050 and immediately leased it back. The truck was carried on
Irwin’s books at $20,800. The term of the lease is 5 years, and title
transfers to Irwin at lease-end. The lease requires five equal rental
payments of $7,048 at the end of each year. The appropriate rate of
interest is 11%, and the truck has a useful life of 5 years with no
salvage value. Prepare Irwin’s 2012 journal entries.
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ACC 422 Final Exam Guide 2
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SET 2
1) Which of the following is considered cash?
2) Bank overdrafts, if material, should be
3) Which of the following is NOT considered cash for financial
reporting purposes?
4) If a company employs the gross method of recording accounts
receivable from customers, then sales discounts taken should be
reported as
5) Which of the following methods of determining annual bad debt
expense best achieves the matching concept?
6) The advantage of relating a company's bad debt expense to its
outstanding accounts receivable is that this approach
7) The failure to record a purchase of mer¬chandise on account even
though the goods are properly included in the physical inven¬tory
results in
8) Belle Co. received merchandise on consignment. As of March 31,
Belle had recorded the transaction as a purchase and included the
goods in inventory. The effect of this on its financial statements for
March 31
9) Eller Co. received merchandise on consignment. As of January 31,
Eller included the goods in inventory, but did NOT record the
transaction. The effect of this on its financial statements for January
31
10) The use of a Purchase Discounts account implies that the recorded
cost of a purchased inventory item is its
11) Which method of inventory pricing best approximates specific
identification of the actual flow of costs and units in most
manufacturing situations?
34. 12) When using the periodic inventory system, which of the following
generally would NOT be separately accounted for in the computation
of cost of goods sold?
13) An item of inventory purchased this period for $15.00 has been
incorrectly written down to its current replacement cost of $10.00. It
sells during the following period for $30.00, its normal selling price,
with disposal costs of $3.00 and normal profit of $12.00. Which of the
following statements is NOT true?
14) Designated market value
15) In no case can "market" in the lower-of-cost-or-market rule be
more than
16) A major advantage of the retail inventory method is that it
17) The gross profit method of inventory valuation is invalid when
18) The retail inventory method is based on the assumption that the
19) Which of the following is NOT a major characteristic of a plant
asset?
20) Cotton Hotel Corporation recently purchased Holiday Hotel and
the land on which it is located with the plan to tear down the Holiday
Hotel and build a new luxury hotel on the site. The cost of the
Holiday Hotel should be
21) If a corporation purchases a lot and building and subsequently
tears down the building and uses the property as a parking lot, the
proper accounting treatment of the cost of the building would depend
on
22) The period of time during which interest must be capitalized ends
when
23) To be consistent with the historical cost principle, overhead costs
incurred by an enterprise constructing its own building should be
24) When computing the amount of interest cost to be capitalized, the
concept of "avoidable interest" refers to
25) The King-Kong Corporation exchanges one plant asset for a
similar plant asset and gives cash in the exchange. The exchange is
NOT expected to cause a material change in the future cash flows for
either entity. If a gain on the disposal of the old asset is indicated, the
gain will
26) When funds are borrowed to pay for construction of assets that
qualify for capitalization of interest, the excess funds NOT needed to
35. pay for construction may be temporarily invested in interest-bearing
securities. Interest earned on these temporary investments should be
27) Which of the following is NOT a condition that must be satisfied
before interest capitalization can begin on a qualifying asset?
28) Which of the following most accurately reflects the concept of
depreciation as used in accounting?
29) Which of the following principles best describes the conceptual
rationale for the methods of matching depreciation expense with
revenues?
30) The major difference between the service life of an asset and its
physical life is that
31) Starr Company purchased a depreciable asset for $150,000. The
estimated salvage value is $10,000, and the estimated useful life is 8
years. The double-declining balance method will be used for
depreciation. What is the depreciation expense for the second year on
this asset?
32) Bigbie Company purchased a depreciable asset for $600,000.The
estimated salvage value is $30,000, and the estimated useful life is
10,000 hours. Bigbie used the asset for 1,100 hours in the current
year. The activity method will be used for depreciation. What is the
depreciation expense on this asset?
33) Harrison Company purchased a depreciable asset for $100,000.
The estimated salvage value is $10,000, and the estimated useful life
is 10 years. The straight-line method will be used for depreciation.
What is the depreciation base of this asset?
34) Costs incurred internally to create intangibles are
35) The cost of purchasing patent rights for a product that might
otherwise have seriously competed with one of the purchaser's
patented products should be
36) Riser Corporation was granted a patent on a product on January 1,
1998. To protect its patent, the corporation purchased on January 1,
2007 a patent on a competing product which was originally issued on
January 10, 2003. Because of its unique plant, Riser Corporation does
NOT feel the competing patent can be used in producing a product.
The cost of the competing patent should be
37) Twilight Corporation acquired End-of-the-World Products on
January 1, 2008 for $2,000,000, and recorded goodwill of $375,000 as
36. a result of that purchase. At December 31, 2008, the End-of-the-
World Products Division had a fair value of $1,700,000. The net
identifiable assets of the Division (excluding goodwill) had a fair
value of $1,450,000 at that time. What amount of loss on impairment
of goodwill should Twilight record in 2008?
38) Fleming Corporation acquired Out-of-Sight Products on January
1, 2008 for $4,000,000,and recorded goodwill of $750,000 as a result
of that purchase. At December 31, 2008, the Out-of-Sight Products
Division had a fair value of $3,400,000. The net identifiable assets of
the Division (excluding goodwill) had a fair value of $2,900,000 at
that time. What amount of loss on impairment of goodwill should
Fleming record in 2008?
39) Malrom Manufacturing Company acquired a patent on a
manufacturing process on January 1, 2006 for $10,000,000. It was
expected to have a 10 year life and no residual value. Malrom uses
straight-line amortization for patents. On December 31, 2007, the
expected future cash flows expected from the patent were expected to
be $800,000 per year for the next eight years. The present value of
these cash flows, discounted at Malrom’s market interest rate, is
$4,800,000. At what amount should the patent be carried on the
December 31, 2007 balance sheet?
40) Goodwill
41) Easton Company and Lofton Company were combined in a
purchase transaction. Easton was able to acquire Lofton at a bargain
price. The sum of the market or appraised values of identifiable assets
acquired less the fair value of liabilities assumed exceeded the cost to
Easton. After revaluing noncurrent assets to zero, there was still some
"negative goodwill." Proper accounting treatment by Easton is to
report the amount as
42) The reason goodwill is sometimes referred to as a master
valuation account is because
43) Which of the following items is a current liability?
44) Which of the following statements is false?
45) Stock dividends distributable should be classified on the
46) Simson Company has 35 employees who work 8-hour days and
are paid hourly. On January 1, 2006 the company began a program of
granting its employees 10 days of paid vacation each year. Vacation
37. days earned in 2006 may first be taken on January 1, 2007.
Information relative to these employees is as follows:
Year Hourly Wages Vacation Days Earned by Each Employee
Vacation Dayse Used by Each Employee
2006 $28.50 10 0
2007 $27.00 10 8
2008 $28.50 10 10
What is the amount of expense relative to compensated absences that
should be reported on Simson’s income statement for 2006?
47) A company buys an oil rig for $1,000,000 on January 1, 2007.
The life of the rig is 10 years and the expected cost to dismantle the
rig at the end of 10 years is $200,000 (present value at 10% is
$77,110). 10% is an appropriate interest rate for this company. What
expense should be recorded for 2007 as a result of these events?
48) A company offers a cash rebate of $1 on each $4 package of
batteries sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 6,000,000 packages of batteries are sold,
and 210,000 $1 rebates are mailed to customers. What is the rebate
expense and liability, respectively, shown on the 2007 financial
statements dated December 31?
49) A contingency can be accrued when
50) Which of the following sets of conditions would give rise to the
accrual of a contingency under current generally accepted accounting
principles?
51) Mark Ward is a farmer who owns land which borders on the right-
of-way of the Northern Railroad. On August 10, 2007, due to the
admitted negligence of the Railroad, hay on the farm was set on fire
and burned. Ward had had a dispute with the Railroad for several
years concerning the ownership of a small parcel of land. The
representative of the Railroad has offered to assign any rights which
the Railroad may have in the land to Ward in exchange for a release
of his right to reimbursement for the loss he has sustained from the
fire. Ward appears inclined to accept the Railroad's offer. The
Railroad's 2007 financial statements should include the following
related to the incident:
52) An example of an item which is NOT a liability is
38. 53) The covenants and other terms of the agreement between the
issuer of bonds and the lender are set forth in the
54) Bonds for which the owners' names are NOT registered with the
issuing corporation are called
55) Minimum lease payments may include a
56) What impact does a bargain purchase option have on the present
value of the minimum lease payments computed by the lessee?
57) Which of the following is a correct statement of one of the
capitalization criteria?
58) In order to properly record a direct-financing lease, the lessor
needs to know how to calculate the lease receivable. The lease
receivable in a direct-financing lease is best defined as
59) In the earlier years of a lease, from the lessee's perspective, the
use of the
60) In a lease that is appropriately recorded as a direct-financing lease
by the lessor, unearned income
********************************************************
ACC 422 Final Exam Guide 3
For more classes visit
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SET 3
1) Which of the following is NOT considered cash for financial
reporting purposes?
2) What is the preferable presentation of accounts receivable from
officers, employees, or affiliated companies on a balance sheet?
3) Which of the following items should NOT be included in the Cash
caption on the balance sheet?
39. 4) The advantage of relating a company's bad debt expense to its
outstanding accounts receivable is that this approach
5) Which of the following is a generally accepted method of
determining the amount of the adjustment to bad debt expense?
6) Assuming that the ideal measure of short-term receivables in the
balance sheet is the discounted value of the cash to be received in the
future, failure to follow this practice usually does NOT make the
balance sheet misleading because
7) Eller Co. received merchandise on consignment. As of January 31,
Eller included the goods in inventory, but did NOT record the
transaction. The effect of this on its financial statements for January
31 would be
8) If the beginning inventory for 2006 is overstated, the effects of this
error on cost of goods sold for 2006, net income for 2006, and assets
at December 31, 2007, respectively, are
9) The accountant for the Orion Sales Company is preparing the
income statement for 2007 and the balance sheet at December 31,
2007. Orion uses the periodic inventory system. The January 1, 2007
merchandise inventory balance will appear
10) The use of a Discounts Lost account implies that the recorded cost
of a purchased inventory item is its
11) When using the periodic inventory system, which of the following
generally would NOT be separately accounted for in the computation
of cost of goods sold?
12) The use of a Purchase Discounts account implies that the recorded
cost of a purchased inventory item is its
13) In no case can "market" in the lower-of-cost-or-market rule be
more than
14) When the direct method is used to record inventory at market
15) Designated market value
16) The retail inventory method is based on the assumption that the
17) In 2006, Lucas Manufacturing signed a contract with a supplier to
purchase raw materials in 2007 for $700,000. Before the December
31, 2006 balance sheet date, the market price for these materials
dropped to $510,000. The journal entry to record this situation at
December 31, 2006 will result in a credit that should be reported
18) The gross profit method of inventory valuation is invalid when
40. 19) Which of the following is NOT a major characteristic of a plant
asset?
20) The cost of land does NOT include
21) If a corporation purchases a lot and building and subsequently
tears down the building and uses the property as a parking lot, the
proper accounting treatment of the cost of the building would depend
on
22) To be consistent with the historical cost principle, overhead costs
incurred by an enterprise constructing its own building should be
23) When computing the amount of interest cost to be capitalized, the
concept of "avoidable interest" refers to
24) The period of time during which interest must be capitalized ends
when
25) Construction of a qualifying asset is started on April 1 and
finished on December 1. The fraction used to multiply an expenditure
made on April 1 to find weighted-average accumulated expenditures
is
26) When funds are borrowed to pay for construction of assets that
qualify for capitalization of interest, the excess funds NOT needed to
pay for construction may be temporarily invested in interest-bearing
securities. Interest earned on these temporary investments should be
27) When a plant asset is acquired by issuance of common stock, the
cost of the plant asset is properly measured by the
28) If an industrial firm uses the units-of-production method for
computing depreciation on its only plant asset, factory machinery, the
credit to accumulated depreciation from period to period during the
life of the firm will
29) The term "depreciable cost," or "depreciable base," as it is used in
accounting, refers to
30) Which of the following most accurately reflects the concept of
depreciation as used in accounting?
31) Prentice Company purchased a depreciable asset for $200,000.
The estimated salvage value is $20,000, and the estimated useful life
is 10 years. The straight-line method will be used for depreciation.
What is the depreciation base of this asset?
32) Pine Company purchased a depreciable asset for $360,000. The
estimated salvage value is $24,000, and the estimated useful life is 8
41. years. The double-declining balance method will be used for
depreciation. What is the depreciation expense for the second year on
this asset?
33) Bigbie Company purchased a depreciable asset for $600,000.The
estimated salvage value is $30,000, and the estimated useful life is
10,000 hours. Bigbie used the asset for 1,100 hours in the current
year. The activity method will be used for depreciation. What is the
depreciation expense on this asset?
34) The cost of purchasing patent rights for a product that might
otherwise have seriously competed with one of the purchaser's
patented products should be
35) Riser Corporation was granted a patent on a product on January 1,
1998. To protect its patent, the corporation purchased on January 1,
2007 a patent on a competing product which was originally issued on
January 10, 2003. Because of its unique plant, Riser Corporation does
NOT feel the competing patent can be used in producing a product.
The cost of the competing patent should be
36) Which of the following methods of amortization is normally used
for intangible assets?
37) General Products Company bought Special Products Division in
2006 and appropriately booked $250,000 of goodwill related to the
purchase. On December 31, 2007, the fair value of Special Products
Division is $2,000,000 and it is carried on General Product’s books
for a total of $1,700,000, including the goodwill. An analysis of
Special Products Division’s assets indicates that goodwill of $200,000
exists on December 31, 2007. What goodwill impairment should be
recognized by General Products in 2007?
38) Twilight Corporation acquired End-of-the-World Products on
January 1, 2008 for $2,000,000, and recorded goodwill of $375,000 as
a result of that purchase. At December 31, 2008, the End-of-the-
World Products Division had a fair value of $1,700,000. The net
identifiable assets of the Division (excluding goodwill) had a fair
value of $1,450,000 at that time. What amount of loss on impairment
of goodwill should Twilight record in 2008?
39) Fleming Corporation acquired Out-of-Sight Products on January
1, 2008 for $4,000,000,and recorded goodwill of $750,000 as a result
of that purchase. At December 31, 2008, the Out-of-Sight Products
42. Division had a fair value of $3,400,000. The net identifiable assets of
the Division (excluding goodwill) had a fair value of $2,900,000 at
that time. What amount of loss on impairment of goodwill should
Fleming record in 2008?
40) When a patent is amortized, the credit is usually made to
41) The reason goodwill is sometimes referred to as a master
valuation account is because
42) Easton Company and Lofton Company were combined in a
purchase transaction. Easton was able to acquire Lofton at a bargain
price. The sum of the market or appraised values of identifiable assets
acquired less the fair value of liabilities assumed exceeded the cost to
Easton. After revaluing noncurrent assets to zero, there was still some
"negative goodwill." Proper accounting treatment by Easton is to
report the amount as
43) Stock dividends distributable should be classified on the
44) Which of the following statements is false?
45) Which of the following items is a current liability?
46) Simson Company has 35 employees who work 8-hour days and
are paid hourly. On January 1, 2006 the company began a program of
granting its employees 10 days of paid vacation each year. Vacation
days earned in 2006 may first be taken on January 1, 2007.
Information relative to these employees is as follows:
What is the amount of expense relative to compensated absences that
should be reported on Simson’s income statement for 2006?
47) A company offers a cash rebate of $1 on each $4 package of
batteries sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 6,000,000 packages of batteries are sold,
and 210,000 $1 rebates are mailed to customers. What is the rebate
expense and liability, respectively, shown on the 2007 financial
statements dated December 31?
48) A company offers a cash rebate of $1 on each $4 package of light
bulbs sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 4,000,000 packages of light bulbs are sold,
and 140,000 $1 rebates are mailed to customers. What is the rebate
expense and liability, respectively, shown on the 2007 financial
statements dated December 31?
49) A contingency can be accrued when
43. 50) Mark Ward is a farmer who owns land which borders on the right-
of-way of the Northern Railroad. On August 10, 2007, due to the
admitted negligence of the Railroad, hay on the farm was set on fire
and burned. Ward had had a dispute with the Railroad for several
years concerning the ownership of a small parcel of land. The
representative of the Railroad has offered to assign any rights which
the Railroad may have in the land to Ward in exchange for a release
of his right to reimbursement for the loss he has sustained from the
fire. Ward appears inclined to accept the Railroad's offer. The
Railroad's 2007 financial statements should include the following
related to the incident:
51) Which of the following sets of conditions would give rise to the
accrual of a contingency under current generally accepted accounting
principles?
52) If bonds are issued initially at a premium and the effective-interest
method of amortization is used, interest expense in the earlier years
will be
53) An example of an item which is NOT a liability is
54) The covenants and other terms of the agreement between the
issuer of bonds and the lender are set forth in the
55) Which of the following is a correct statement of one of the
capitalization criteria?
56) Which of the following best describes current practice in
accounting for leases?
57) While only certain leases are currently accounted for as a sale or
purchase, there is theoretic justification for considering all leases to be
sales or purchases. The principal reason that supports this idea is that
58) The amount to be recorded as the cost of an asset under capital
lease is equal to the
59) In the earlier years of a lease, from the lessee's perspective, the
use of the
60) If the residual value of a leased asset is guaranteed by a third
party
********************************************************
ACC 422 Final Exam Guide All 3 Sets
44. For more classes visit
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Details of All 180 Questions Given Below
SET 1
1. Kraft Enterprises owns the following assets at December 31, 2012.
Cash in bank–savings account 67,516 Checking
account balance 26,445
Cash on hand 9,478 Postdated checks 753
Cash refund due from IRS 40,324 Certificates of
deposit (180-day) 94,754
What amount should be reported as cash?
Question 2
Presented below is information related to Rembrandt Inc.’s inventory.
(per unit) Skis Boots
Parkas
Historical Cost 273.79 152.75
76.37
Selling Price 312.70 208.95
106.27
Cost to distribute 27.38 11.53
3.60
Current replacement cost 292.52 151.31
73.49
Normal profit margin 46.11 41.79
30.62
Determine the following:
Question 3
45. Matlock Company uses a perpetual inventory system. Its beginning
inventory consists of 67 units that cost $40 each. During June, the
company purchased 202 units at $40 each, returned 8 units for credit,
and sold 168 units at $67 each. Journalize the June transactions.
Question 4
Amsterdam Company uses a periodic inventory system. For April,
when the company sold 700 units, the following information is
available.
Compute the April 30 inventory and the April cost of goods sold
using the average cost method.
Question 5
Amsterdam Company uses a periodic inventory system. For April,
when the company sold 600 units, the following information is
available.
Compute the April 30 inventory and the April cost of goods sold
using the FIFO method.
Question 6
(FIFO, LIFO, Average Cost Inventory)
Esplanade Company was formed on December 1, 2011. The
following information is available from Esplanade’s inventory records
for Product BAP.
Purchases Units Unit Cost
January 1, 2012(beginning inventory) 762 8.00
January 5, 2012 1,524 9.00
January 25, 2012 1,651 10.00
February 16, 2012 1,061 11.00
March 26, 2012 762 12.00
A physical inventory on March 31, 2012, shows 2,032 units on hand.
Prepare schedules to compute the ending inventory at March 31,
2012, under each of the following inventory methods. Assume
Esplanade Company uses the periodic inventory method.
Question 7
46. Floyd Corporation has the following four items in its ending
inventory. Determine the final lower of cost or market inventory value
for each item.
Question 8
Kumar Inc. uses a perpetual inventory system. At January 1, 2013,
inventory was $320,786 at both cost and market value. At December
31, 2013, the inventory was $428,714 at cost and $403,231 at market
value. Prepare the necessary December 31 entry under:
Question 9
Boyne Inc. had beginning inventory of $15,000 at cost and $25,000 at
retail. Net purchases were $150,000 at cost and $212,500 at retail. Net
markups were $12,500;net markdowns were $8,750; and sales were
$196,250. Compute ending inventory at cost using the conventional
retail method.
Question 10
(Gross Profit Method)
Astaire Company uses the gross profit method to estimate inventory
for monthly reporting purposes. Presented below is information for
the month of May.
Question 11
Previn Brothers Inc. purchased land at a price of $30,400. Closing
costs were $1,820. An old building was removed at a cost of $14,850.
What amount should be recorded as the cost of the land?
Question 12
Garcia Corporation purchased a truck by issuing an $108,000,4-year,
zero-interest-bearing note to Equinox Inc. The market rate of interest
for obligations of this nature is 10%. Prepare the journal entry to
record the purchase of this truck.
Question 13
Mohave Inc. purchased land, building, and equipment from Laguna
Corporation for a cash payment of $352,800.The estimated fair
47. values of the assets are land $67,200, building $246,400,and
equipment $89,600. At what amounts should each of the three assets
be recorded?
Question 14
Fielder Company obtained land by issuing 2,000 shares of its $12 par
value common stock. The land was recently appraised at $103,700.
The common stock is actively traded at $50 per share. Prepare the
journal entry to record the acquisition of the land.
Question 15
Navajo Corporation traded a used truck (cost $23,600, accumulated
depreciation $21,240) for a small computer worth $4,366. Navajo also
paid $1,180 in the transaction. Prepare the journal entry to record the
exchange.
Question 16
Mehta Company traded a used welding machine (cost $10,080,
accumulated depreciation $3,360) for office equipment with an
estimated fair value of $5,600. Mehta also paid $3,360 cash in the
transaction. Prepare the journal entry to record the exchange.
Question 17
Depreciation is normally computed on the basis of the nearest
A). full month and to the nearest dollar.
B). day and to the nearest cent.
C). day and to the nearest dollar.
D). full month and to the nearest cent.
Question 18
Fernandez Corporation purchased a truck at the beginning of 2012 for
$54,180. The truck is estimated to have a salvage value of $2,580 and
a useful life of 206,400 miles. It was driven 29,670 miles in 2012 and
39,990 miles in 2013. Compute depreciation expense for 2012 and
2013.
Question 19
48. Lockhard Company purchased machinery on January 1, 2012, for
$79,200. The machinery is estimated to have a salvage value of
$7,920 after a useful life of 8 years.
(a) Compute 2012 depreciation expense using the double-declining
balance method.
(b) Compute 2012 depreciation expense using the double-declining
balance method assuming the machinery was purchased on October 1,
2012.
Question 20
Jurassic Company owns machinery that cost $1,145,700 and has
accumulated depreciation of $458,280. The expected future net cash
flows from the use of the asset are expected to be $636,500. The fair
value of the equipment is $509,200. Prepare the journal entry, if any,
to record the impairment loss.
Question 21
Everly Corporation acquires a coal mine at a cost of $501,600.
Intangible development costs total $125,400.After extraction has
occurred, Everly must restore the property (estimated fair value of the
obligation is $100,320), after which it can be sold for $200,640.
Everly estimates that 5,016 tons of coal can be extracted. If 878 tons
are extracted the first year, prepare the journal entry to record
depletion.
Question 22
Francis Corporation purchased an asset at a cost of $58,200 on March
1, 2012. The asset has a useful life of 8 years and a salvage value of
$5,820. For tax purposes, the MACRS class life is 5 years. Compute
tax depreciation for each year 2012–2017.
Question 23
Celine Dion Corporation purchases a patent from Salmon Company
on January 1, 2012, for $50,820. The patent has a remaining legal life
of 16 years. Celine Dion feels the patent will be useful for 10 years.
Prepare Celine Dion’s journal entries to record the purchase of the
patent and 2012 amortization.
49. Question 24
Karen Austin Corporation has capitalized software costs of $768,500,
and sales of this product the first year totaled $390,630. Karen Austin
anticipates earning $911,470 in additional future revenues from this
product, which is estimated to have an economic life of 4 years.
Compute the amount of software cost amortization for the first year.
(a) Compute the amount of software cost amortization for the first
year using the percent of revenue approach.
(b) Compute the amount of software cost amortization for the first
year using the straight-line approach.
Question 25
Jeff Beck is a farmer who owns land which borders on the right-of-
way of the Northern Railroad. On August 10, 2012, due to the
admitted negligence of the Railroad, hay on the farm was set on fire
and burned. Beck had had a dispute with the Railroad for several
years concerning the ownership of a small parcel of land. The
representative of the Railroad has offered to assign any rights which
the Railroad may have in the land to Beck in exchange for a release of
his right to reimbursement for the loss he has sustained from the fire.
Beck appears inclined to accept the Railroad’s offer. The Railroad’s
2012 financial statements should include the following related to the
incident:
A). recognition of a loss only.
B). creation of a liability only.
C). disclosure in note form only.
D). recognition of a loss and creation of a liability for the value of the
land.
Question 26
Roley Corporation uses a periodic inventory system and the gross
method of accounting for purchase discounts. On July 1, Roley
purchased $66,000 of inventory, terms 2/10, n/30, FOB shipping
point. Roley paid freight costs of $1,210. On July 3, Roley returned
damaged goods and received credit of $6,600. On July 10, Roley paid
for the goods. Prepare all necessary journal entries for Roley.
50. Question 27
Takemoto Corporation borrowed $93,000 on November 1, 2012, by
signing a $95,093, 3-month, zero-interest-bearing note. Prepare
Takemoto’s November 1, 2012, entry; the December 31, 2012, annual
adjusting entry; and the February 1, 2013, entry. (For multiple
debit/credit en tries, list amounts from largest to smallest, e.g. 10, 8, 6.
Round all answers to 0 decimal places, e.g. 11,150.)
Question 28
Whiteside Corporation issues $629,000 of 9% bonds, due in 14 years,
with interest payable semiannually. At the time of issue, the annual
market rate for such bonds is 10%. Compute the issue price of the
bonds.(Use the present value tables in the text.
Question 29
Indiana Jones Company enters into a 6-year lease of equipment on
January 1, 2012, which requires 6 annual payments of $37,560 each,
beginning January 1, 2012. In addition, the lessee guarantees a
residual value of $20,870 at lease-end. The equipment has a useful
life of 6 years. Assume that for Lost Ark Company, the lessor,
collectibility is reasonably predictable, there are no important
uncertainties concerning costs, and the carrying amount of the
machinery is $191,722. Prepare Lost Ark’s January 1, 2012, journal
entries.
Question 30
On January 1, 2012, Irwin Animation sold a truck to Peete Finance
for $26,050 and immediately leased it back. The truck was carried on
Irwin’s books at $20,800. The term of the lease is 5 years, and title
transfers to Irwin at lease-end. The lease requires five equal rental
payments of $7,048 at the end of each year. The appropriate rate of
interest is 11%, and the truck has a useful life of 5 years with no
salvage value. Prepare Irwin’s 2012 journal entries.
SET 2
51. 1) Which of the following is considered cash?
2) Bank overdrafts, if material, should be
3) Which of the following is NOT considered cash for financial
reporting purposes?
4) If a company employs the gross method of recording accounts
receivable from customers, then sales discounts taken should be
reported as
5) Which of the following methods of determining annual bad debt
expense best achieves the matching concept?
6) The advantage of relating a company's bad debt expense to its
outstanding accounts receivable is that this approach
7) The failure to record a purchase of mer¬chandise on account even
though the goods are properly included in the physical inven¬tory
results in
8) Belle Co. received merchandise on consignment. As of March 31,
Belle had recorded the transaction as a purchase and included the
goods in inventory. The effect of this on its financial statements for
March 31
9) Eller Co. received merchandise on consignment. As of January 31,
Eller included the goods in inventory, but did NOT record the
transaction. The effect of this on its financial statements for January
31
10) The use of a Purchase Discounts account implies that the recorded
cost of a purchased inventory item is its
11) Which method of inventory pricing best approximates specific
identification of the actual flow of costs and units in most
manufacturing situations?
12) When using the periodic inventory system, which of the following
generally would NOT be separately accounted for in the computation
of cost of goods sold?
13) An item of inventory purchased this period for $15.00 has been
incorrectly written down to its current replacement cost of $10.00. It
sells during the following period for $30.00, its normal selling price,
with disposal costs of $3.00 and normal profit of $12.00. Which of the
following statements is NOT true?
14) Designated market value
52. 15) In no case can "market" in the lower-of-cost-or-market rule be
more than
16) A major advantage of the retail inventory method is that it
17) The gross profit method of inventory valuation is invalid when
18) The retail inventory method is based on the assumption that the
19) Which of the following is NOT a major characteristic of a plant
asset?
20) Cotton Hotel Corporation recently purchased Holiday Hotel and
the land on which it is located with the plan to tear down the Holiday
Hotel and build a new luxury hotel on the site. The cost of the
Holiday Hotel should be
21) If a corporation purchases a lot and building and subsequently
tears down the building and uses the property as a parking lot, the
proper accounting treatment of the cost of the building would depend
on
22) The period of time during which interest must be capitalized ends
when
23) To be consistent with the historical cost principle, overhead costs
incurred by an enterprise constructing its own building should be
24) When computing the amount of interest cost to be capitalized, the
concept of "avoidable interest" refers to
25) The King-Kong Corporation exchanges one plant asset for a
similar plant asset and gives cash in the exchange. The exchange is
NOT expected to cause a material change in the future cash flows for
either entity. If a gain on the disposal of the old asset is indicated, the
gain will
26) When funds are borrowed to pay for construction of assets that
qualify for capitalization of interest, the excess funds NOT needed to
pay for construction may be temporarily invested in interest-bearing
securities. Interest earned on these temporary investments should be
27) Which of the following is NOT a condition that must be satisfied
before interest capitalization can begin on a qualifying asset?
28) Which of the following most accurately reflects the concept of
depreciation as used in accounting?
29) Which of the following principles best describes the conceptual
rationale for the methods of matching depreciation expense with
revenues?
53. 30) The major difference between the service life of an asset and its
physical life is that
31) Starr Company purchased a depreciable asset for $150,000. The
estimated salvage value is $10,000, and the estimated useful life is 8
years. The double-declining balance method will be used for
depreciation. What is the depreciation expense for the second year on
this asset?
32) Bigbie Company purchased a depreciable asset for $600,000.The
estimated salvage value is $30,000, and the estimated useful life is
10,000 hours. Bigbie used the asset for 1,100 hours in the current
year. The activity method will be used for depreciation. What is the
depreciation expense on this asset?
33) Harrison Company purchased a depreciable asset for $100,000.
The estimated salvage value is $10,000, and the estimated useful life
is 10 years. The straight-line method will be used for depreciation.
What is the depreciation base of this asset?
34) Costs incurred internally to create intangibles are
35) The cost of purchasing patent rights for a product that might
otherwise have seriously competed with one of the purchaser's
patented products should be
36) Riser Corporation was granted a patent on a product on January 1,
1998. To protect its patent, the corporation purchased on January 1,
2007 a patent on a competing product which was originally issued on
January 10, 2003. Because of its unique plant, Riser Corporation does
NOT feel the competing patent can be used in producing a product.
The cost of the competing patent should be
37) Twilight Corporation acquired End-of-the-World Products on
January 1, 2008 for $2,000,000, and recorded goodwill of $375,000 as
a result of that purchase. At December 31, 2008, the End-of-the-
World Products Division had a fair value of $1,700,000. The net
identifiable assets of the Division (excluding goodwill) had a fair
value of $1,450,000 at that time. What amount of loss on impairment
of goodwill should Twilight record in 2008?
38) Fleming Corporation acquired Out-of-Sight Products on January
1, 2008 for $4,000,000,and recorded goodwill of $750,000 as a result
of that purchase. At December 31, 2008, the Out-of-Sight Products
Division had a fair value of $3,400,000. The net identifiable assets of
54. the Division (excluding goodwill) had a fair value of $2,900,000 at
that time. What amount of loss on impairment of goodwill should
Fleming record in 2008?
39) Malrom Manufacturing Company acquired a patent on a
manufacturing process on January 1, 2006 for $10,000,000. It was
expected to have a 10 year life and no residual value. Malrom uses
straight-line amortization for patents. On December 31, 2007, the
expected future cash flows expected from the patent were expected to
be $800,000 per year for the next eight years. The present value of
these cash flows, discounted at Malrom’s market interest rate, is
$4,800,000. At what amount should the patent be carried on the
December 31, 2007 balance sheet?
40) Goodwill
41) Easton Company and Lofton Company were combined in a
purchase transaction. Easton was able to acquire Lofton at a bargain
price. The sum of the market or appraised values of identifiable assets
acquired less the fair value of liabilities assumed exceeded the cost to
Easton. After revaluing noncurrent assets to zero, there was still some
"negative goodwill." Proper accounting treatment by Easton is to
report the amount as
42) The reason goodwill is sometimes referred to as a master
valuation account is because
43) Which of the following items is a current liability?
44) Which of the following statements is false?
45) Stock dividends distributable should be classified on the
46) Simson Company has 35 employees who work 8-hour days and
are paid hourly. On January 1, 2006 the company began a program of
granting its employees 10 days of paid vacation each year. Vacation
days earned in 2006 may first be taken on January 1, 2007.
Information relative to these employees is as follows:
Year Hourly Wages Vacation Days Earned by Each Employee
Vacation Dayse Used by Each Employee
2006 $28.50 10 0
2007 $27.00 10 8
2008 $28.50 10 10
What is the amount of expense relative to compensated absences that
should be reported on Simson’s income statement for 2006?
55. 47) A company buys an oil rig for $1,000,000 on January 1, 2007.
The life of the rig is 10 years and the expected cost to dismantle the
rig at the end of 10 years is $200,000 (present value at 10% is
$77,110). 10% is an appropriate interest rate for this company. What
expense should be recorded for 2007 as a result of these events?
48) A company offers a cash rebate of $1 on each $4 package of
batteries sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 6,000,000 packages of batteries are sold,
and 210,000 $1 rebates are mailed to customers. What is the rebate
expense and liability, respectively, shown on the 2007 financial
statements dated December 31?
49) A contingency can be accrued when
50) Which of the following sets of conditions would give rise to the
accrual of a contingency under current generally accepted accounting
principles?
51) Mark Ward is a farmer who owns land which borders on the right-
of-way of the Northern Railroad. On August 10, 2007, due to the
admitted negligence of the Railroad, hay on the farm was set on fire
and burned. Ward had had a dispute with the Railroad for several
years concerning the ownership of a small parcel of land. The
representative of the Railroad has offered to assign any rights which
the Railroad may have in the land to Ward in exchange for a release
of his right to reimbursement for the loss he has sustained from the
fire. Ward appears inclined to accept the Railroad's offer. The
Railroad's 2007 financial statements should include the following
related to the incident:
52) An example of an item which is NOT a liability is
53) The covenants and other terms of the agreement between the
issuer of bonds and the lender are set forth in the
54) Bonds for which the owners' names are NOT registered with the
issuing corporation are called
55) Minimum lease payments may include a
56) What impact does a bargain purchase option have on the present
value of the minimum lease payments computed by the lessee?
57) Which of the following is a correct statement of one of the
capitalization criteria?
56. 58) In order to properly record a direct-financing lease, the lessor
needs to know how to calculate the lease receivable. The lease
receivable in a direct-financing lease is best defined as
59) In the earlier years of a lease, from the lessee's perspective, the
use of the
60) In a lease that is appropriately recorded as a direct-financing lease
by the lessor, unearned income
SET 3
1) Which of the following is NOT considered cash for financial
reporting purposes?
2) What is the preferable presentation of accounts receivable from
officers, employees, or affiliated companies on a balance sheet?
3) Which of the following items should NOT be included in the Cash
caption on the balance sheet?
4) The advantage of relating a company's bad debt expense to its
outstanding accounts receivable is that this approach
5) Which of the following is a generally accepted method of
determining the amount of the adjustment to bad debt expense?
6) Assuming that the ideal measure of short-term receivables in the
balance sheet is the discounted value of the cash to be received in the
future, failure to follow this practice usually does NOT make the
balance sheet misleading because
7) Eller Co. received merchandise on consignment. As of January 31,
Eller included the goods in inventory, but did NOT record the
transaction. The effect of this on its financial statements for January
31 would be
8) If the beginning inventory for 2006 is overstated, the effects of this
error on cost of goods sold for 2006, net income for 2006, and assets
at December 31, 2007, respectively, are
9) The accountant for the Orion Sales Company is preparing the
income statement for 2007 and the balance sheet at December 31,
2007. Orion uses the periodic inventory system. The January 1, 2007
merchandise inventory balance will appear
57. 10) The use of a Discounts Lost account implies that the recorded cost
of a purchased inventory item is its
11) When using the periodic inventory system, which of the following
generally would NOT be separately accounted for in the computation
of cost of goods sold?
12) The use of a Purchase Discounts account implies that the recorded
cost of a purchased inventory item is its
13) In no case can "market" in the lower-of-cost-or-market rule be
more than
14) When the direct method is used to record inventory at market
15) Designated market value
16) The retail inventory method is based on the assumption that the
17) In 2006, Lucas Manufacturing signed a contract with a supplier to
purchase raw materials in 2007 for $700,000. Before the December
31, 2006 balance sheet date, the market price for these materials
dropped to $510,000. The journal entry to record this situation at
December 31, 2006 will result in a credit that should be reported
18) The gross profit method of inventory valuation is invalid when
19) Which of the following is NOT a major characteristic of a plant
asset?
20) The cost of land does NOT include
21) If a corporation purchases a lot and building and subsequently
tears down the building and uses the property as a parking lot, the
proper accounting treatment of the cost of the building would depend
on
22) To be consistent with the historical cost principle, overhead costs
incurred by an enterprise constructing its own building should be
23) When computing the amount of interest cost to be capitalized, the
concept of "avoidable interest" refers to
24) The period of time during which interest must be capitalized ends
when
25) Construction of a qualifying asset is started on April 1 and
finished on December 1. The fraction used to multiply an expenditure
made on April 1 to find weighted-average accumulated expenditures
is
26) When funds are borrowed to pay for construction of assets that
qualify for capitalization of interest, the excess funds NOT needed to
58. pay for construction may be temporarily invested in interest-bearing
securities. Interest earned on these temporary investments should be
27) When a plant asset is acquired by issuance of common stock, the
cost of the plant asset is properly measured by the
28) If an industrial firm uses the units-of-production method for
computing depreciation on its only plant asset, factory machinery, the
credit to accumulated depreciation from period to period during the
life of the firm will
29) The term "depreciable cost," or "depreciable base," as it is used in
accounting, refers to
30) Which of the following most accurately reflects the concept of
depreciation as used in accounting?
31) Prentice Company purchased a depreciable asset for $200,000.
The estimated salvage value is $20,000, and the estimated useful life
is 10 years. The straight-line method will be used for depreciation.
What is the depreciation base of this asset?
32) Pine Company purchased a depreciable asset for $360,000. The
estimated salvage value is $24,000, and the estimated useful life is 8
years. The double-declining balance method will be used for
depreciation. What is the depreciation expense for the second year on
this asset?
33) Bigbie Company purchased a depreciable asset for $600,000.The
estimated salvage value is $30,000, and the estimated useful life is
10,000 hours. Bigbie used the asset for 1,100 hours in the current
year. The activity method will be used for depreciation. What is the
depreciation expense on this asset?
34) The cost of purchasing patent rights for a product that might
otherwise have seriously competed with one of the purchaser's
patented products should be
35) Riser Corporation was granted a patent on a product on January 1,
1998. To protect its patent, the corporation purchased on January 1,
2007 a patent on a competing product which was originally issued on
January 10, 2003. Because of its unique plant, Riser Corporation does
NOT feel the competing patent can be used in producing a product.
The cost of the competing patent should be
36) Which of the following methods of amortization is normally used
for intangible assets?
59. 37) General Products Company bought Special Products Division in
2006 and appropriately booked $250,000 of goodwill related to the
purchase. On December 31, 2007, the fair value of Special Products
Division is $2,000,000 and it is carried on General Product’s books
for a total of $1,700,000, including the goodwill. An analysis of
Special Products Division’s assets indicates that goodwill of $200,000
exists on December 31, 2007. What goodwill impairment should be
recognized by General Products in 2007?
38) Twilight Corporation acquired End-of-the-World Products on
January 1, 2008 for $2,000,000, and recorded goodwill of $375,000 as
a result of that purchase. At December 31, 2008, the End-of-the-
World Products Division had a fair value of $1,700,000. The net
identifiable assets of the Division (excluding goodwill) had a fair
value of $1,450,000 at that time. What amount of loss on impairment
of goodwill should Twilight record in 2008?
39) Fleming Corporation acquired Out-of-Sight Products on January
1, 2008 for $4,000,000,and recorded goodwill of $750,000 as a result
of that purchase. At December 31, 2008, the Out-of-Sight Products
Division had a fair value of $3,400,000. The net identifiable assets of
the Division (excluding goodwill) had a fair value of $2,900,000 at
that time. What amount of loss on impairment of goodwill should
Fleming record in 2008?
40) When a patent is amortized, the credit is usually made to
41) The reason goodwill is sometimes referred to as a master
valuation account is because
42) Easton Company and Lofton Company were combined in a
purchase transaction. Easton was able to acquire Lofton at a bargain
price. The sum of the market or appraised values of identifiable assets
acquired less the fair value of liabilities assumed exceeded the cost to
Easton. After revaluing noncurrent assets to zero, there was still some
"negative goodwill." Proper accounting treatment by Easton is to
report the amount as
43) Stock dividends distributable should be classified on the
44) Which of the following statements is false?
45) Which of the following items is a current liability?
46) Simson Company has 35 employees who work 8-hour days and
are paid hourly. On January 1, 2006 the company began a program of
60. granting its employees 10 days of paid vacation each year. Vacation
days earned in 2006 may first be taken on January 1, 2007.
Information relative to these employees is as follows:
What is the amount of expense relative to compensated absences that
should be reported on Simson’s income statement for 2006?
47) A company offers a cash rebate of $1 on each $4 package of
batteries sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 6,000,000 packages of batteries are sold,
and 210,000 $1 rebates are mailed to customers. What is the rebate
expense and liability, respectively, shown on the 2007 financial
statements dated December 31?
48) A company offers a cash rebate of $1 on each $4 package of light
bulbs sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 4,000,000 packages of light bulbs are sold,
and 140,000 $1 rebates are mailed to customers. What is the rebate
expense and liability, respectively, shown on the 2007 financial
statements dated December 31?
49) A contingency can be accrued when
50) Mark Ward is a farmer who owns land which borders on the right-
of-way of the Northern Railroad. On August 10, 2007, due to the
admitted negligence of the Railroad, hay on the farm was set on fire
and burned. Ward had had a dispute with the Railroad for several
years concerning the ownership of a small parcel of land. The
representative of the Railroad has offered to assign any rights which
the Railroad may have in the land to Ward in exchange for a release
of his right to reimbursement for the loss he has sustained from the
fire. Ward appears inclined to accept the Railroad's offer. The
Railroad's 2007 financial statements should include the following
related to the incident:
51) Which of the following sets of conditions would give rise to the
accrual of a contingency under current generally accepted accounting
principles?
52) If bonds are issued initially at a premium and the effective-interest
method of amortization is used, interest expense in the earlier years
will be
53) An example of an item which is NOT a liability is
61. 54) The covenants and other terms of the agreement between the
issuer of bonds and the lender are set forth in the
55) Which of the following is a correct statement of one of the
capitalization criteria?
56) Which of the following best describes current practice in
accounting for leases?
57) While only certain leases are currently accounted for as a sale or
purchase, there is theoretic justification for considering all leases to be
sales or purchases. The principal reason that supports this idea is that
58) The amount to be recorded as the cost of an asset under capital
lease is equal to the
59) In the earlier years of a lease, from the lessee's perspective, the
use of the
60) If the residual value of a leased asset is guaranteed by a third
party
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ACC 422 Week 1 CPA Practice Exam
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1. What amount should Herc report as inventory in its December 31,
2005, balance sheet?
2. What dollar-value LIFO inventory cost would be reported in Cobb's
December 31, 2006, balance sheet?
3. Garson Co. recorded goods in transit purchased FOB shipping
point at year-end as purchases. The goods were excluded from the
ending inventory. What effect does the omission have on Garson's
assets and retained earnings at year end?
62. 4. In accordance with ASC Topic 255, the Consumer Price Index for
All Urban Consumers is used to compute information on a
5. If current assets exceed current liabilities, payments to creditors
made on the last day of the month will
6. At the end of its first year of operations, December 31, year 1,
Wonder Company had a net realizable value of accounts receivable of
$500,000. During year 1 Wonder recorded charges to bad debt
expense of $80,000 and wrote off as uncollectible accounts receivable
of $20,000. What should Wonder report on its balance sheet at
December 31, year 1, as accounts receivable before the allowance for
doubtful accounts?
7. A company is in its first year of operations and has never written
off any accounts receivable as uncollectible. When the allowance
method of recognizing bad debt expense is used, the entry to
recognize that expense
8. When the allowance method of recognizing bad debt expense is
used, the allowance for doubtful accounts would decrease when a(n)
9. In accordance with ASC Topic 860, Transfers and Servicing, all of
the following would be disclosed except for
10. The premium on a 3-year insurance policy expiring on December
31, year 3, was paid in total on January 2, year 1. If the company has
a 6-month operating cycle, then on December 31, year 1, the prepaid
insurance reported as a current asset would be for
11. Foster Co. adjusted its allowance for uncollectible accounts at
year-end. The general ledger balances for the accounts receivable and
the related allowance account were $1,000,000 and $40,000,
respectively. Foster uses the percentage-of-receivables method to
estimate its allowance for uncollectible accounts. Accounts receivable
63. were estimated to be 5% uncollectible. What amount should Foster
record as an adjustment to its allowance for uncollectible accounts at
year-end?
12. A retailer failed to record a purchase of inventory on credit near
the end of the current year. The goods did arrive and were included in
the inventory count. The purchase will be recorded next year, when
the goods are paid for. As a result,
13. What is the current ratio as of December 31?
14. What was Brock's dollar-value LIFO inventory on December 31,
2004?
15. In its 2005 income statement, what amount should Kam report as
the cost of goods sold?
16. When the accounts receivable of a company are sold outright to a
company which normally buys accounts receivable of other
companies without recourse, the accounts receivable have been
Pledged.
17. What was the price index used to compute Bach's 2007 dollar-
value LIFO inventory layer?
18. Drew Co. uses the average cost inventory method for internal
reporting purposes and LIFO for financial statement and income tax
reporting.
19. What adjusting entry should Drew record to adjust from average
cost to LIFO on December 31, 2005?
20. When the FIFO inventory method is used during periods of rising
prices, a perpetual inventory system results in an ending inventory
cost that is
64. 21. Nomar Co. shipped inventory on consignment to Seabright Co.
that cost $20,000. Seabright paid $500 for advertising that was
reimbursable from Nomar. At the end of the year, 70% of the
inventory was sold for $30,000. The agreement states that a
commission of 20% will be provided to Seabright for all sales. What
amount of net inventory on consignment remains on the balance sheet
for the first year for Nomar?
22. When an inventory overstatement in year one counterbalances in
year two, this means:
23. If ending inventory for 20x5 is understated because certain items
were missed in the count, then:
24. The following bank reconciliation is presented for the Kingston
Company for the month of November year 1:
25. Data for the month of December year 1 per bank follows:
26. All items that were outstanding as of November 30, cleared
through the bank in December, including the bank credit. In addition,
$2,500 in checks were outstanding as of December 31, year 1. What is
the balance of cash per books at December 31, year 1?
65. 27. Lind Corp. declared a cash dividend of $50,000 on March 10, year
2, to stockholders of record March 25, year 2, payable on April 5,
year 2. As a result of this cash dividend, working capital
28. The controller of Peabody, Inc. has been asked to present an
analysis of accounts receivable collections at the upcoming staff
meeting. The following information is used:
29. What is the receivables turnover ratio as of December 31, year 2?
30. All but one of the following are required before a transfer of
receivables can be recorded as a sale.
31.Alfisol, Inc. offers sales discounts of 2% on all credit sales paid
within 15 days. For year 1, gross credit sales totaled $150,000 and
75% of Alfisol’s customers took advantage of the discount. Under the
net method
32. The following information is available from Timber Corp’s
financial records for year 1:
33. How many times did Timber’s accounts receivable turn over in
year 1?
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ACC 422 Week 1 DQ 1
66. For more classes visit
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Week 1 – DQ 1
Consider how an organization must manage cash, receivables, and
inventory. Which of the three variables is the most important to
manage? Is one more susceptible to fraud and errors than the others?
Explain your answer.
How would a misstatement in each affect the organization?
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ACC 422 Week 1 DQ 2
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Week 1 – DQ 2
What is the perpetual method of tracking inventory?
How does it differ from the periodic method of tracking inventory?
Why would a company choose one method over the other method?
Which is the best method? Why?
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ACC 422 Week 1 DQ 3
67. For more classes visit
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Week 1 – DQ 3
What are the different ways to estimate bad debt?
How does this affect net income?
What does Generally Accepted Accounting Principles (GAAP)
require? Why?
Should all companies have bad debt? Explain your answer.
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ACC 422 Week 1 Individual Assignment
Disclosure Analysis Paper (2 Papers)
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This Tutorial contains 2 Papers
Resource: Internet
Select a publicly held company to use as the basis for this assignment.
Research your selected company and acquire the company’s most
recent financial statements using the Internet.
68. Prepare a 700- to 1,050-word paper analyzing the disclosures
contained within the notes to the financial statements related to cash
and cash equivalents, receivables, and inventories. Include a list
identifying the components of the organization’s cash and cash
equivalents.
Format your paper consistent with APA guidelines..
********************************************************
ACC 422 Week 1 Individual Assignment
Disclosure Analysis Paper
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Resource: Internet
Select a publicly held company to use as the basis for this assignment.
Research your selected company and acquire the company’s most
recent financial statements using the Internet.
69. Prepare a 700- to 1,050-word paper analyzing the disclosures
contained within the notes to the financial statements related to cash
and cash equivalents, receivables, and inventories. Include a list
identifying the components of the organization’s cash and cash
equivalents.
Format your paper consistent with APA guidelines.
********************************************************
ACC 422 Week 1 Individual WileyPlus
Assignment(Exercise 7-2, 7-4, 7-8, 7-9, 7-13, 7-
16, 8-3, 8-13) 100% Score
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Complete the following Week 1 Assignment in WileyPLUS:
Exercise 7-2
Exercise 7-4
Exercise 7-8
Exercise 7-9
Exercise 7-13
Exercise 7-16
Exercise 8-3
Exercise 8-13
Take a screenshot of your completed work, and Click the Assignment
Files tab to submit your screenshot.
70. ********************************************************
ACC 422 Week 1 Summary
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Post a 150 words summary what you have learned this week
********************************************************
ACC 422 Week 1 Team Assignment Audited
Financial Statements (Nordstrom Inc.)
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Each team is assigned a publically traded company that they will use
to answer the questions in the Financial Scavenger Hunt assigned
each week.
Team A: Nordstrom Inc.
Team B: Macy's Inc.
Locate your assigned company's latest audited financial statements
and post them on the assignment tab.
Review the financial statements, including any notes and
supplemental information, and answer the following questions.
71. Indicate where you found the answer to the questions. If calculations
are required, show your work. Post your answers to the assignment
tab.
Who are the auditors and have the auditors changed in the past 2
years? If yes, who were the previous auditors and why was there a
change?
What kind of opinion did the auditors issue on
The company as a whole
The internal control system
What is the date of the audit opinion? This is the date that fixes the
auditor's liability.
Have the financials been restated in the past 2 years?
Have there been any changes in the following positions in the past 2
years?
Chief Executive Officer
Chief Financial Officer
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ACC 422 Week 2 CPA Practice Exam
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1. On June 18, 2005, Dell Printing Co. incurred the following costs
for one of its printing presses:
72. 2. The overhaul resulted in a significant increase in production.
Neither the attachment nor the overhaul increased the estimated useful
life of the press. What amount of the above costs should be
capitalized?
3. The following two inventory items were purchased as a group in a
liquidation sale for $1,000.
4. The firm purchasing the inventory records item A at what amount?
5. Which of the following statements are correct when a company
applying the lower of cost or market method reports its inventory at
replacement cost?
6. Immediately after a note payable was signed, its present value was
$30,000. This note and $20,000 cash were used to acquire a used
plant asset at the beginning of the current year. The interest rate
implied in the note is 6%. Total interest payments due on the note
over its term amount to $4,000. The term exceeds one year. No
payments on the note are due during the current year. What amount of
interest expense is recognized for the first year (current year) on this
note, and what amount is capitalized to the plant asset account?
7. Cole Co. began constructing a building for its own use in January
2004. During 2004, Cole incurred interest of $50,000 on specific
construction debt and $20,000 on other borrowings. Interest computed
on the weighted-average amount of accumulated expenditures for the
building during 2004 was $40,000. What amount of interest cost
should Cole capitalize?
8. Many years after constructing a plant asset, management spent a
significant sum on the asset. Which of the following types of
expenditures should be capitalized in this instance:
9. Which of the following is a not requirement for an asset to be
categorized as a plant asset.
73. 10. Zahn Corp.'s comprehensive Balance Sheet at December 31, 2005
and 2004 reported accumulated depreciation balances of $800,000
and $600,000, respectively. Property with a cost of $50,000 and a
carrying amount of $40,000 was the only property sold in 2005.
Depreciation charged to operations in 2005 was:
11. Talton Co. installed new assembly line production equipment at a
cost of $185,000. Talton had to rearrange the assembly line and
remove a wall to install the equipment. The rearrangement cost was
$12,000 and the wall removal cost was $3,000. The rearrangement did
not increase the life of the assembly line but it did make it more
efficient. What amount of these costs should be capitalized by Talton?
12. The original cost of an inventory item is above the replacement
cost. The inventory item's replacement cost is above the net realizable
value. Under the lower of cost or market method, the inventory item
should be valued at
13. When marking up a specific line of household items for resale, a
retailer computes its markup as 40% of cost. For purposes of
estimating ending inventory using the gross margin method, what
percentage is applied to sales when estimating cost of goods sold?
14. A flash flood swept through Hat, Inc.'s warehouse on May 1.
After the flood, Hat's accounting records showed the following:
15. What amount of inventory was lost in the flood?
16. Information for a firm using the dollar value (DV) LIFO retail
method follows. The cost to retail (C/R) is provided along with price
74. level indices. The data reflects the use of the method through year
one.
17. For year two, ending inventory at retail (by count) totaled $310.
The ending price-level index for the year was 1.15. The cost-to-retail
ratio was .42. What is the ending inventory for financial reporting
purposes for this firm?
18. A firm began the construction of its new manufacturing facility in
January of 20x2. The following expenditures were made on
construction in that year:
19. Debt outstanding the entire year:
20. At the beginning of the year, Cann Co. started construction on a
new $2 million addition to its plant. Total construction expenditures
made during the year were $200,000 on January 2, $600,000 on May
1, and $300,000 on December 1. On January 2, the company
borrowed $500,000 for the construction at 12%. The only other
outstanding debt the company had was a 10% interest rate, long-term
mortgage of $800,000, which had been outstanding the entire year.
What amount of interest should Cann capitalize as part of the cost of
the plant addition?
21. A corporation entered into a purchase commitment to buy
inventory. At the end of the accounting period, the current market
value of the inventory was less than the fixed purchase price, by a
material amount. Which of the following accounting treatments is
most appropriate?
22. Merry Co. purchased a machine costing $125,000 for its
manufacturing operations and paid shipping costs of $20,000. Merry
spent an additional $10,000 testing and preparing the machine for use.
What amount should Merry record as the cost of the machine?
23. How does the retail inventory method establish the lower-of-cost-
or-market valuation for ending inventory?
24. A firm uses the dollar value LIFO retail method and has $2,000 in
beginning inventory at retail at the beginning of the current year. The
base year equivalent of this amount is $1,600. The base year index is
75. 1.00. The beginning inventory reported in the Balance Sheet is $800.
During the current year, the firm purchased $12,000 of inventory at
cost and marked that up to $40,000. Sales for the year were $28,000.
The relevant ending price index is 1.60. What amount does this firm
report as inventory in its Balance Sheet at the end of the current year?
********************************************************
ACC 422 Week 2 DQ 1
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Week 2 – DQ 1
Under what circumstances would a company need to estimate its
inventory?
What are the differences between using the gross profit method and
retail inventory method for estimating inventory?
Which method of estimation, gross profit or retail inventory, is best?
Explain your answer.
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ACC 422 Week 2 DQ 2
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76. Week 2 – DQ 2
What are the criteria for capitalization of fixed assets?
What items are included in the cost of a fixed asset?
Should interest be included in the cost of a fixed asset? Explain why
or why not.
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ACC 422 Week 2 DQ 3
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Week 2 – DQ 3
How do we account for the disposition of fixed assets?
What are the differences in how the exchanges of assets are handled,
pending on whether they are similar or dissimilar?
What is the rationale for these differences?
What is the impact to the companies’ financial statements?
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ACC 422 Week 2 Individual Assignment E7-2,
E7-8,Q13,E8-5 And E8-14
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77. Resource: Intermediate Accounting
Prepare written responses to the following assignments from the text:
· Ch. 7: Exercises E7-2 & E7-8
Ch. 8: Question 13 and Exercises E8-5 & E8-14
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ACC 422 Week 2 Individual WileyPlus
Assignment (Exercise 9-3, 9-12, 9-19, 10-2, 10-
23, 10-24)
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Complete the following Week Two Assignment in WileyPLUS:
Exercise 9-3
Exercise 9-12
Exercise 9-19
Exercise 10-2
Exercise 10-23
Exercise 10-24
Take a screenshot of your completed work, and Click the Assignment
Files tab to submit your screenshot.
78. ********************************************************
ACC 422 Week 2 Learning Team Assignment
From The Text P7-10 And E8-25
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Resource: Intermediate Accounting
Prepare written responses to the following assignments from the text:
· Ch. 7: Problem P7-10
Ch. 8: Exercise E8-25
********************************************************
ACC 422 Week 2 Summary
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79. Post a 150 words summary what you have learned this week
********************************************************
ACC 422 Week 2 Team Assignment Textbook
Problems (P7-1, P7-2, P8-4) 100% Score
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Prepare written responses to the following assignments from Ch. 7 &
8 of Intermediate Accounting:
Problem 7-1
Problem 7-2
Problem 8-4
Click the Assignment Files tab to submit your assignment.
********************************************************
ACC 422 Week 3 CPA Practice Exam
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1. Alta Co. spent $400,000 during the current year developing a new
idea for a product that was patented during the year. The legal cost of
80. applying for a patent license was $40,000. Also, $50,000 was spent to
successfully defend the rights of the patent against a competitor. The
patent has a life of 20 years. Under U.S. GAAP, what amount should
Alta capitalize related to the patent?
2. In 2005, Ball Labs incurred the following costs:
3. What was Ball's total research and development expense in 2005?
4. South Co. purchased a machine that was installed and placed in
service on January 1, 2004 at a cost of $240,000. Salvage value was
estimated at $40,000. The machine is being depreciated over 10 years
by the double declining balance method. For the year ended
December 31, 2005, what amount should South report as depreciation
expense?
5. A manufacturing firm purchased used equipment for $135,000. The
original owners estimated that the residual value of the equipment
was $10,000. The carrying amount of the equipment was $120,000
when ownership transferred. The new owners estimate that the
expected remaining useful life of the equipment was 10 years, with a
salvage value of $15,000. What amount represents the depreciable
base used by the new owners?
6. After an impairment loss is recognized, the adjusted carrying
amount of the intangible asset shall be its new accounting basis.
Which of the following statements about subsequent reversal of a
previously recognized impairment loss is correct?
7. Northstar Co. acquired a registered trademark for $600,000. The
trademark has a remaining legal life of five years, but can be renewed
every 10 years for a nominal fee. Northstar expects to renew the
trademark indefinitely. What amount of amortization expense should
Northstar record for the trademark in the current year?
81. 8. Hull Co. bought a trademark from Roe Corp. on January 1, 2005,
for $224,000.
9. A firm began a mineral exploitation venture during the current year
by spending (1) $40 million for the mineral rights; (2) $100 million
exploring for the minerals, one-fourth of which were successful; and
(3) $60 million to develop the site. Management estimated that 20
million tons of ore would ultimately be removed from the property.
Wages and other extraction costs for the current year amounted to $10
million. In total, 2 million tons of ore were removed from the deposit
in the current year. The entire production for the period was sold.
Compute cost of goods sold under the successful efforts method.
10. Spiro Corp. uses the sum-of-the-years' digits method to depreciate
equipment purchased in January 2003 for $20,000. The estimated
salvage value of the equipment is $2,000, and the estimated useful life
is four years. What should Spiro report as the asset's carrying amount
as of December 31, 2005?
11. A depreciable asset has an estimated 15% salvage value. Under
which of the following methods, properly applied, would the
accumulated depreciation equal the original cost at the end of the
asset’s estimated useful life?
12. What amount should Ichor report as depreciation expense for
2005?
13. Grayson Co. incurred significant costs in defending its patent
rights. Which of the following is the appropriate treatment of the
related litigation costs?
14. On April 1, 2004, Kew Co. purchased new machinery for
$300,000. The machinery has an estimated useful life of five years,
and depreciation is computed by the sum-of-the-years'-digits method.
The accumulated depreciation on this machinery at March 31, 2006
should be:
15. Stam Co. incurred the following research and development project
costs during the current year: