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1. Securities which could be classified as held-to...

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1. Securities which could be classified as held-to-maturity are a. redeemable preferred stock. b. warrants. c. municipal bonds. d. treasury stock. 2. Unrealized holding gains or losses which are recognized in income are from securities classified as a. held-to-maturity. b. available-for-sale. c. trading. d. none of these. 3. Solo Co. purchased $300,000 of bonds for $315,000. If Solo intends to hold the securities to maturity, the entry to record the investment includes a. a debit to Held-to-Maturity Securities at $300,000. b. a credit to Premium on Investments of $15,000. c. a debit to Held-to-Maturity Securities at $315,000. d. none of these. 4. An unrealized holding loss on a company's available-for-sale securities should be reflected in the current financial statements as a. an extraordinary item shown as a direct reduction from retained earnings. b. a current loss resulting from holding securities. c. a note or parenthetical disclosure only. d. other comprehensive income and deducted in the equity section of the balance sheet. Use the following information for questions 5 and 6: Oliver Company purchased $400,000 of 10% bonds of McGee Co. on January 1, 2008, paying $376,100. The bonds mature January 1, 2018; interest is payable each July 1 and January 1. The discount of $23,900 provides an effective yield of 11%. Oliver Company uses the effective-interest method and plans to hold these bonds to maturity. 5. On July 1, 2008, Oliver Company should increase its Held-to-Maturity Debt Securities account for the McGee Co. bonds by a. $2,392. b. $1,371. c. $1,196. d. $686. 6. For the year ended December 31, 2008, Oliver Company should report interest revenue from the McGee Co. bonds of: a. $42,392. b. $41,409. c. $41,368. d. $40,000. 7. On August 1, 2007, Bettis Company acquired $200,000 face value 10% bonds of Hanson Corporation at 104 plus accrued interest. The bonds were dated May 1, 2007, and mature on April 30, 2012, with interest payable each October 31 and April 30. The bonds will be held to maturity. What entry should Bettis make to record the purchase of the bonds on August 1, 2007? a. Held-to-Maturity Securities 208,000 Interest Revenue 5,000 Cash 213,000 b. Held-to-Maturity Securities 213,000 Cash 213,000 c. Held-to-Maturity Securities 213,000 Interest Revenue 5,000 Cash 208,000 d. Held-to-Maturity Securities 200,000 Premium on Bonds 13,000 Cash 213,000 8. On its December 31, 2009, balance sheet, Quinn Co. reported its investment in available-for-sale securities, which had cost $600,000, at fair value of $550,000. At December 31, 2010, the fair value of the securities was $585,000. What should Quinn report on its 2010 income statement as a result of the increase in fair value of the investments in 2010? a. $0. b. Unrealized loss of $15,000. c. Realized gain of $35,000. d. Unrealized gain of $35,000. Use the following information for questions 9 and 10: On its December 31, 2007 balance sheet, Klugman Company appropriately reported a $10,000 debit balance in its Securities Fair Value Adjustment (Available-for-Sale) account. There was no change during 2008 in the composition of Klugman?s portfolio of marketable equity securities held as available-for-sale securities. The following information pertains to that portfolio: Security Cost Fair value at 12/31/08 X $125,000 $160,000 Y 100,000 95,000 Z 175,000 125,000 $400,000 $380,000 9. What amount of unrealized loss on these securities should be included in Klugman's stockholders' equity section of the balance sheet at December 31, 2008? a. $30,000. b. $20,000. c. $10,000. d. $0. 10. The amount of unrealized loss to appear as a component of comprehensive income for the year ending December 31, 2008 is a. $30,000. b. $20,000. c. $10,000. d. $0. 11. During 2007, Ellis Company purchased 20,000 shares of Hiller Corp. common stock for $315,000 as an available-for-sale investment. The fair value of these shares was $300,000 at December 31, 2007. Ellis sold all of the Hiller stock for $17 per share on December 3, 2008, incurring $14,000 in brokerage commissions. Ellis Company should report a realized gain on the sale of stock in 2008 of a. $11,000. b. $25,000. c. $26,000. d. $40,000. 12. Under the completed-contract method a. revenue, cost, and gross profit are recognized during the production cycle. b. revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed. c. revenue, cost, and gross profit are recognized at the time the contract is completed. d. none of these. 13. Under the installment-sales method, a. revenue, costs, and gross profit are recognized proportionate to the cash that is received from the sale of the product. b. gross profit is deferred proportionate to cash uncollected from sale of the product, but total revenues and costs are recognized at the point of sale. c. gross profit is not recognized until the amount of cash received exceeds the cost of the item sold. d. revenues and costs are recognized proportionate to the cash received from the sale of the product, but gross profit is deferred until all cash is received. 14. Reese Construction Corporation contracted to construct a building for $1,500,000. Construction began in 2009 and was completed in 2010. Data relating to the contract are summarized below: Year ended December 31, 2009 2010 Costs incurred $600,000 $450,000 Estimated costs to complete 400,000 ? Reese uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2009, and 2010, respectively, Reese should report gross profit of a. $270,000 and $180,000. b. $900,000 and $600,000. c. $300,000 and $150,000. d. $0 and $450,000. 15. Winsor Construction Company uses the percentage-of-completion method of accounting. In 2010, Winsor began work on a contract it had received which provided for a contract price of $15,000,000. Other details follow: 2010 Costs incurred during the year $7,200,000 Estimated costs to complete as of December 31 4,800,000 Billings during the year 6,600,000 Collections during the year 3,900,000 What should be the gross profit recognized in 2010? a. $600,000 b. $7,800,000 c. $1,800,000 d. $3,000,000 Use the following information for questions 16 and 17: Ramos, Inc. began work in 2009 on contract #3814, which provided for a contract price of $7,200,000. Other details follow: 2009 2010 Costs incurred during the year $1,200,000 $3,675,000 Estimated costs to complete, as of December 31 3,600,000 0 Billings during the year 1,350,000 5,400,000 Collections during the year 900,000 5,850,000 16. Assume that Ramos uses the percentage-of-completion method of accounting. The portion of the total gross profit to be recognized as income in 2009 is a. $450,000. b. $600,000. c. $1,800,000. d. $2,400,000. 17. Assume that Ramos uses the completed-contract method of accounting. The portion of the total gross profit to be recognized as income in 2010 is a. $900,000. b. $1,350,000. c. $2,325,000. d. $7,200,000. Use the following information for questions 18 and 19: Carter Construction Company had a contract starting April 2008, to construct a $15,000,000 building that is expected to be completed in September 2009, at an estimated cost of $13,750,000. At the end of 2008, the costs to date were $6,325,000 and the estimated total costs to complete had not changed. The progress billings during 2008 were $3,000,000 and the cash collected during 2008 was $2,000,000. Carter uses the percentage-of-completion method. 18. For the year ended December 31, 2008, Carter would recognize gross profit on the building of a. $0. b. $527,083. c. $575,000. d. $675,000. 19. At December 31, 2008, Carter would report Construction in Process in the amount of a. $6,900,000. b. $6,325,000. c. $5,900,000. d. $575,000. 20. Lamberson Company has used the installment method of accounting since it began operations at the beginning of 2008. The following information pertains to its operations for 2008: Installment sales $ 1,400,000 Cost of installment sales 980,000 Collections of installment sales 560,000 General and administrative expenses 140,000 The amount to be reported on the December 31, 2008 balance sheet as Deferred Gross Profit should be a. $168,000. b. $252,000. c. $336,000. d. $840,000. 21. Neber Co., which began operations on January 1, 2007, appropriately uses the installment-sales method of accounting. The following information pertains to Neber's operations for the year 2007: Installment sales $1,200,000 Regular sales 480,000 Cost of installment sales 720,000 Cost of regular sales 288,000 General and administrative expenses 96,000 Collections on installment sales 288,000 The deferred gross profit account in Neber's December 31, 2007 balance sheet should be a. $115,200. b. $192,000. c. $364,800. d. $480,000. 22. Taxable income of a corporation differs from pretax financial income because of Permanent Temporary Differences Differences a. No No b. No Yes c. Yes Yes d. Yes No 23. Machinery was acquired at the beginning of the year. Depreciation recorded during the life of the machinery could result in Future Future Taxable Amounts Deductible Amounts a. Yes Yes b. Yes No c. No Yes d. No No Use the following fact pattern to answer Questions 24 and 25: Frizell Co., at the end of 2007, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $ 750,000 Estimated litigation expense 1,000,000 Extra depreciation for taxes (1,500,000) Taxable income $ 250,000 The estimated litigation expense of $1,000,000 will be deductible in 2008 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years. The income tax rate is 30% for all years. 24. The deferred tax asset to be recognized is a. $75,000 current. b. $150,000 current. c. $225,000 current. d. $300,000 current. 25. The deferred tax liability to be recognized is Current Noncurrent a. $150,000 $300,000 b. $150,000 $225,000 c. $0 $450,000 d. $0 $375,000 ). Gordon Company has the following securities in its portfolio of trading equity securities on December 31, 2009: Cost FairValue 5,000 shares of Milner Corp., Common $155,000 $139,000 10,000 shares of Eddy, Common 182,000 190,000 $337,000 $329,000 All of the securities had been purchased in 2009. In 2010, Gordon completed the following securities transactions: March 1 Sold 5,000 shares of Milner Corp., Common @ $31 less fees of $1,500. April 1 Bought 600 shares of Yount Stores, Common @ $45 plus fees of $550. The Gordon Company portfolio of trading equity securities appeared as follows on December 31, 2010: Cost FairValue 10,000 shares of Eddy, Common $182,000 $195,500 600 shares of Yount Stores, Common 27,550 25,500 $209,550 $221,000 Instructions Prepare the general journal entries for Gordon Company for: (a) the 2009 adjusting entry. (b) the March 1, 2010 sale of the Milner Corp. stock. (c) the April 1, 2010 purchase of the Yount Stores' stock. (d) the 2010 adjusting entry. . Nott Co. at the end of 2007, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $ 420,000 Extra depreciation taken for tax purposes (1,050,000) Estimated expenses deductible for taxes when paid 840,000 Taxable income $ 210,000 Use of the depreciable assets will result in taxable amounts of $350,000 in each of the next three years. The estimated litigation expenses of $840,000 will be deductible in 2010 when settlement is expected. Instructions (a) Prepare a schedule of future taxable and deductible amounts. (b) Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2007, assuming a tax rate of 40% for all years. Stiner Builders contracted to build a high-rise for $14,000,000. Construction began in 2009 and is expected to be completed in 2011. Data for 2009 and 2010 are: 2009 2010 Costs incurred to date $1,800,000 $5,200,000 Estimated costs to complete 7,200,000 4,800,000 Stiner uses the percentage-of-completion method. Instructions (a) How much gross profit should be reported for 2009? Show your computation. (b) How much gross profit should be reported for 2010? (c) Make the journal entry to record the revenue and gross profit for 2010.,I completed the multiple choice already, not sure if all is accurate, but really need help with longer problems....,Thank you for your reply, but I think there are some issues with your/my solution 8. On its December 31, 2009, balance sheet, Quinn Co. reported its investment in available-for-sale securities, which had cost $600,000, at fair value of $550,000. At December 31, 2010, the fair value of the securities was $585,000. What should Quinn report on its 2010 income statement as a result of the increase in fair value of the investments in 2010? a. $0. b. Unrealized loss of $15,000. c. Realized gain of $35,000. Your answer d. Unrealized gain of $35,000. I can see where you got the difference of $35,000, but isn't the Cost price($600,000) still greater than the FMV of the securities($585,000) so there will be an Unrealized loss of $15,0000? Also, since the securities was not sold, the gain(your answer) cannot be realized? Can you explain 9,10,24,25...not sure how to come up with answers, (show working.

 

Paper#12825 | Written in 18-Jul-2015

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