ACCT 557 Midterm Plus Final Exam
ACCT 557 Week 4 Midterm
- Page 1 – Multiple Choice
- Question(TCO A) In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year to the
- Question (TCO A) Tim Construction Co. began operations in 2014. Construction activity for 2014 is shown below. Tim uses the percentage of completion method. Contract Contract Price Billings
- Question (TCO B) K Corporation’s partial income statement after its first year of operations is as follows:
- Question (TCO B) Deferred tax amounts that are related to specific assets or liabilities should be classified as current or noncurrent based on
- Question (TCO C) On January 1, 2008, Nen Co. has the following balances: Projected benefit obligation $4,200,000…..Fair value of plan assets 3,750,000….The settlement rate is 10%. Other data related to the pension plan for 2014 are:…..Service cost $240,000…..Amortization of unrecognized prior service costs 54,000……. Contributions 270,000….Benefits paid 225,000…Actual return on plan assets 264,000 Amortization of unrecognized net gain 18,000…..The balance of the projected benefit obligation at December 31, 2014 is
- Question (TCO C) Presented below is pension information related to Woods, Inc. for the year 2013.
Service cost $84,000……Interest on projected benefit obligation $46,000 ……..Interest on vested benefits $30,000
Expected return on plan assets $21,000 ……The amount of pension expense to be reported for 2013 is.
- Question (TCO D) Capitalization of lease requires which of the following?
- Question (TCO D) Advantage(s) of leasing versus buying equipment is (are)
- Question (TCO D) Pirate, Inc. leased equipment from Shoreline Enterprises under a four-year lease requiring equal annual payments of $320,000, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pirate, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by ,Pirate Inc.) is 8%. Assuming that this lease is properly classified as a capital lease, what is the amount of interest expense recorded by Pirate, Inc. in the first year of the asset’s life?…..PV Annuity Due PV Ordinary Annuity……..8%, 4 periods 3.5771 3.31213……10%, 4 periods 3.48685 3.16986
- Question (TCO D) On January 2, 2013, Bentley Co. leases equipment from Harry’s Leasing Company with five equal annual payments of $30,000 each, payable beginning December 31, 2013. Bentley Co. agrees to guarantee the $60,000 residual value of the asset at the end of the lease term. Bentley’s incremental borrowing rate is 10%; however, it knows that Harry’s implicit interest rate is 8%. What journal entry would Harry’s Leasing Company make at January 2, 2013 assuming this is a direct–financing lease?….PV Annuity Due PV Ordinary Annuity PV Single Sum
8%, 5 periods 4.31213 3.99271 0.68058……10%, 5 periods 4.16986 3.79079 0.62092
- Question (TCO D) Lease A does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75% of the estimated economic life of the leased property. Lease B does not contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased property. How should the lessee classify these leases?
- Page 2 – Short/Essay
- Question (TCO B) There are four types of temporary differences. Indicate a minimum of two types and for each:(1) indicate the cause of the difference, (2) give an example, and (3) indicate whether it will create a taxable or deductible amount in the future.
- Question (TCO C) Measuring, recording, and reporting pension expense and liability. Feeble Co. on January 1, 2011 initiated a noncontributory, defined-benefit pension plan that grants benefits to its 100 employees for services rendered in years prior to the adoption of the pension plan. The total expected service-years of the 100 employees who are expected to receive benefits under the plan is 1,200. An actuarial consulting firm has indicated that the present value of the projected benefit obligation on January 1, 2011 was $5,040,000. On December 31, 2011 the following information was provided concerning the pension plan’s operations for its first year.
- Question (TCO A) Chicago contractors got $5,400,000 contract to construct a school building for the City of Chicago. Work on this contract began in 2013 and the financial data pertaining to this contract is available here…..Cost incurred till Dec.31, 2013 $1,080,000…..Billings made to City $1,000,000…..Amount collected from City $ 750,000…..The estimated future cost to complete this contract is $3,240,000. …..(a) Prepare Chicago contractors 2013 journal entries using completed contract method……(b) Show how the contract accounts will appear in the Balance Sheet of Chicago Contractors on 12/31/2013.
- Question (TCO B) Hertz Co. prepared the following reconciliation of its pretax financial statement income to taxable income for the year ended December 31, 2013, its first year of operations:…..Pretax financial income $300,000…..Nontaxable interest received on municipal securities (15,000)…….Estimated warranties not deductible for tax purpose in 2013 30,000……Depreciation in excess of financial statement amount (50 ,000)……Taxable income $265,000….……(a) In its Year 1 income statement, what amount should Hertz report as income tax expense-current portion?……(b) In its December 31, 2013 balance sheet, what amount should Hertz report as deferred income tax liability/asset? (Summer 2016)
- Choice: 10
- Question (TCO A) Amazon Building, Inc. won a bid for a new warehouse building contract. Below is information from the project accountant…..Total Construction Fixed Price $10,000,000….Construction Start Date June 13, 2012……Construction Complete Date December 16, 2013…..As of Dec. 31… 2012 2013…..Actual cost incurred $4,500,000 $2,360,000……Estimated remaining costs $2,250,000 $-…….Billed to customer $6,000,000 $4,000,000…..Received from customer $5,000,000 $3,500,000……Assuming Amazon Building, Inc. uses the completed contract……method, what amount of gross profit would be recognized in 2013?
- Question (TCO B) At the beginning of 2012, Annie, Inc. has a deferred tax asset of $7,500 and deferred tax liability of $10,500. In 2012, pretax financial income was $826,000 and the tax rate was 35%. Pretax income included:…..Interest income from municipal-bonds $15,000…..Accrued warranty costs, estimated to be used in-2013 $74,000……Prepaid rent expense, will be used in-2013 $31,000…..Installment sales revenue, to be collected in-2013 $56,000…..Operating loss carryforward – $71,000…..What is taxable income for 2012?
- Question (TCO C) Presented below is pension information related to…..Amazing Goods, Inc. for the year 2013……Service…..cost $105,000…..Interest on projected benefit…..obligation $65,000……Interest on vested benefits $14,000…..Amortization of prior service cost due to increase in…..benefits $17,000…..Expected return on plan……assets $23,000…..The amount of pension expense to be reported for 2013 is
- Question (TCO C) Apple Dumpling Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2013……Service cost $320,000……Contributions to the plan $285,000……Actual return on plan assets $215,000…..Projected benefit obligation (beginning of year) $3,100,000…….Fair value of plan assets (beginning of year) $3,600,000……The expected return on plan assets and the settlement rate were……both 9%. The amount of pension expense reported for 2013 is
- Question (TCO D) Animal, Inc. leased equipment from Zoo Enterprises under a 5-year lease requiring equal annual payments of $63,000, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 5-year useful life and no salvage value. Animal, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Assuming that this lease is properly classified as a capital lease, what is the amount of
interest expense recorded by Animal, Inc. in the first year of the asset’s life? PV Annuity Due PV Ordinary
Annuity 8%, 5 periods 4.31213 3.99271 10%, 5 periods 4.16986 3.79079
- Question (TCO E) On December 31, 2013, Bob’s Trucking, Inc. appropriately changed its inventory valuation method from weighted-average cost to FIFO method for financial statement and income tax purposes. The change will result in an $800,000 increase in the beginning inventory at January 1, 2013. Assume a 40% income tax rate. The cumulative effect of this accounting change on beginning retained earnings
- Question (TCO E) Which of the following is not a change in accounting estimate?
- Question (TCO F) Amazing Glory, Inc. recognized a net income of $55,000 including $8,000 in depreciation expense. Additional changes from the balance sheet are as follows…..Accounts Receivable $1,200 decrease Prepaid Expenses $600 decrease…..Inventory $14,600 increase Accrued Liabilities $1,000 decrease
Accounts Payable $2,100 increase Compute net cash from operating activities based on the above information.
- Question (TCO G) Which of the following events that occurred after the balance sheet date but before issuance of the financial statements would require adjustment of the accounts before issuance of the financial statements?
- Question (TCO G) Adventure, Inc. is a company that operates in four different divisions. The following information relating to each segment is available for 2013……Sales revenue Operating profit (loss) Identifiable assets….A $85,000 $31,000 $56,000 B $105,000 $(16,000) $82,000…..C $250,000 $112,000 $640,000 D $20,000 $4,000 $35,000……Required: For which of the segments would information have to be disclosed in accordance with professional pronouncements?
Name: Jennifer Lucas
Status: Online ⬤
Classes Taken: 3878
- Essay Questions: 6
- Question (TCO A) Adam’s Adorable Creations Company provided the following financial information for its installment sales for the current year……Financial Data:……Installment sales for current year $2,400,000
Cost of goods sold on installment basis $1,800,000…..Repossessed merchandise: Estimated value $56,000
Repossessed merchandise: Unpaid balances $90,000…..Payments by customers $1,750,000……Required: (a) Prepare journal entries for the end of the year based on the information above……(b) Prepare the entry to record the gross profit realized in the current year.
- Question (TCO B) The Accent Corporation shows the following information. On January 1, 2012, Accent purchased a donut machine for $700,000. (a) Pretax financial income is $2,300,000 in 2012 and $2,400,000 in 2013. (b) Taxable income is expected in future years with an expected tax rate of 35%. (c) The company recognized an extraordinary gain of $150,000 in 2013 (which is fully taxable). (d) Tax-exempt municipal bonds yielded interest of $150,000 in 2013. (e) Straight-line basis for 7 years for financial reporting (See Appendix 11A.) (f) Half-year convention basis depreciation for 4 years for tax purposes. Required: (a) Compute taxable income and income taxes payable for 2013. (b) Prepare the journal entries for income tax expense, income taxes payable, and deferred taxes for 2013. (c) Prepare the deferred income taxes presentation for December 31, 2013 balance sheet.
- Question (TCO D) Absolute Leasing, Inc. agrees to lease equipment to Allen, Inc. on January 1, 2012. They agree on the following terms: (a) The normal selling price of the equipment is $600,000 and the cost of the asset to Absolute Leasing, Inc. was $475,000. (b) At the end of the lease, the equipment will revert to Absolute Leasing, Inc. and have an unguaranteed residual value of $60,000. Their implicit interest rate is 10%.
(c) The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life). (d) Absolute Leasing, Inc. incurred costs of $10,000 in negotiating and closing the lease. There are no uncertainties regarding additional costs yet to be incurred and the collectability of the lease payments is reasonably predictable. (e) The lease begins on January 1, 2012 and payments will be in equal annual installments. (f) Allen will pay all maintenance, insurance, and tax costs directly and annual payments of $65,000 on January 1 of each year. Required: (a) Determine what type of lease this would be for the lessee and calculate the initial obligation. (b) Prepare Allen, Inc.’s amortization schedule for the lease terms. (c) Prepare all the journal entries for Allen, Inc. for 2012. Assume a calendar year fiscal year.
- Question (TCO F) Drexon Corp., which follows U.S. GAAP, uses the direct method to report its cash flows. The CFO is assessing the impact on cash flows of 12 events during the fiscal year. Specify which category each event falls under (under the direct method) and note whether it increases cash, decreases cash, or has no impact on cash: # Event…………
- Question (TCO G) Selected financial ratios. The following information pertains to Allbright, Inc.
– Cash $53,000 Accounts receivable $186,000
– Inventory $82,000 Plant assets (net) $320,000
– Total assets $641,000 Accounts payable $85,000
– Accrued taxes and expenses payable $12,000 Long-term debt $268,000
– Common stock ($10 par) $120,000 Paid-in capital in excess of par $6,000
– Retained earnings $150,000 Total equities $641,000
– Net sales (all on credit) $980,000 Cost of goods sold $760,000
– General & Admin Expenses $160,000 Net income $60,000
- Question (TCO E) Please describe the requirements for a change in accounting principle and at least four reasons why companies might implement a change in accounting principle. (Summer 2016)