ACCT 551 Week 4 Midterm (Version 4)

Multiple Choice

1. Question: (TCO C) The cost of an intangible asset includes all of the following except
2. Question: (TCO C) Which of the following is not an intangible asset?
3. Question: (TCO C) The intangible asset goodwill may be
4. Question: (TCO C) ELO Corporation purchased a patent for $90,000 on September 1, 2008. It had a useful life of ten years. On March 1, 2010, ELO spent $17,500 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is five years………. expense for 2010?
5. Question: (TCO C) Floyd Company purchases Haeger Company for $800,000 cash on January 1, 2011. The book value of Haeger Company’s net assets, as reflected on its December 31, 2010 balance sheet, is $620,000. An analysis by Floyd on December 31, 2010 indicates that the fair value of Haeger’s tangible assets exceeded the book value by $60,000, and the fair value of identifiable intangible assets was equal to book value………. Floyd Company when recording the purchase of Haeger Company?
6. Question: (TCO D) An employee’s net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee’s
7. Question: (TCO D) Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing new products against defects for one year that has resulted in material but rather stable warranty repair and replacement costs. Any liability for the warranty
8. Question: (TCO D) On December 31, 2010, Irey Co. has $2,000,000 of short-term notes payable due on February 14, 2011………… on March 5, 2011 is
9. Question: (TCO D) Tender Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing………… What is the required journal entry as a result of this litigation?
10. Question: (TCO D) Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue………
11. Question: (TCO D) If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will
12. Question: (TCO D)When the interest payment dates of a bond are June 1 and December 1, and a bond issue is sold on November 1, the amount of cash received by the issuer will be
13. Question: (TCO D) Feller Company issues $20,000,000 of ten-year, 9% bonds on August 1, 2010 at 97 plus accrued interest………. What is the total cash received on the issue date?
14. Question: (TCO D) A company issues $5,000,000, 7.8/%, 20-year bonds to yield 8% on January 1, 2010……. The proceeds from the bonds are $4,901,036. Using effective-interest amortization, how much interest expense will be recognized in 2010?
15. Question: (TCO D) On January 1, Martinez Inc. issued $3,000,000, 11% bonds for $3,195,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report unamortized bond premium of:
    

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Explanatory

1. Question: (TCO C) Sisco Co. purchased a patent from Thornton Co. for $180,000 on July 1, 2007. Sisco amortizes the patent over a period of 10 years. Expenditures ……….. July 1, 2011. Sisco estimates that the useful life of the patent will be increase by 10 years from the date of litigation because of successfully defending it
2. Question: (TCO C) Fred’s Company is considering the write-off of a limited life intangible asset because of its lack of profitability……… permitted.
3. Question: (TCO D) Edwards Co. includes one coupon in each bag of dog food it sells. In return for four coupons, customers receive a dog toy that the company purchases for $1.20 each. Edwards’s experience ……… redeemed.
4. Question: (TCO D) Prepare journal entries to record the following transactions related to long-term bonds of Quirk Co. (a) On April 1, 2009, Quirk issued $500,000, 9% bonds for $537,868 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2019. (b) On July 1, 2011 Quirk retired $150,000 of the bonds at 102 plus accrued interest. Quirk uses straight-line amortization.
5. Question: (TCO D) Mann, Inc., which owes Doran Co. $600,000 in notes payable with accrued interest of $54,000, is in financial difficulty. To settle the debt, Doran agrees to accept from Mann equipment with a fair value of $570,000, an original cost of $840,000, and accumulated depreciation of $195,000.
   Instructions: (a) Compute the gain or loss to Mann on the settlement of the debt. (b) Compute the gain or loss to Mann on the transfer of the equipment.