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Question 1 Marks: 2 Fences and parking lots ar...

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Question 1 Marks: 2 Fences and parking lots are reported on the balance sheet as Choose one answer. a. current assets. b. land improvements. c. land. d. property and equipment. Question 2 Marks: 2 An improvement made to a machine increased its fair market value and its production capacity by 25% without extending the machine's useful life. The cost of the improvement should be Choose one answer. a. expensed. b. debited to accumulated depreciation. c. capitalized in the machine account. d. allocated between accumulated depreciation and the machine account. Question 3 Marks: 2 A change in estimate should Choose one answer. a. result in restatement of prior period statements. b. be handled in current and future periods. c. be handled in future periods only. d. be handled retroactively. Question 4 Marks: 2 Which of the following disclosures is not required in the financial statements regarding depreciation? Choose one answer. a. Accumulated depreciation, either by major classes of depreciable assets or in total. b. Details demonstrating how depreciation was calculated. c. Depreciation expense for the period. d. Balances of major classes of depreciable assets, by nature and function. Question 5 Marks: 2 Tyson Chandler Company purchased equipment for $10,000. Sales tax on the purchase was $500. Other costs incurred were freight charges of $200, repairs of $350 for damage during installation, and installation costs of $225. What is the cost of the equipment? Choose one answer. a. $10,000 b. $10,500 c. $10,925 d. $11,275 Question 6 Marks: 2 When a company develops a trademark or trade name, the costs directly related to securing it should generally be capitalized. Which of the following costs associated with a trademark or trade name would not be allowed to be capitalized? Choose one answer. a. Attorney Fees b. Consulting Fees c. Research and Development Fees d. Design Costs Question 7 Marks: 2 Which of the following is not an intangible asset? Choose one answer. a. Trade Name b. Research and Development Costs c. Franchise d. Copyright Question 8 Marks: 2 The intangible asset goodwill may be Choose one answer. a. capitalized only when purchased. b. capitalized either when purchased or created internally. c. capitalized only when created internally. d. written off directly to retained earnings. Question 9 Marks: 2 When the fair market value of the assets acquired in a business purchase exceed the purchase price, negative goodwill (also called badwill) arises. When negative goodwill arises, GAAP requires that it be allocated to Choose one answer. a. an extraordinary gain. b. all periods benefited on an equitable basis. c. reduce proportionately the values assigned to noncurrent assets. d. reduce proportionately the values assigned to both current and noncurrent assets. Question 10 Marks: 2 A loss on impairment of an intangible asset is the difference between the asset's Choose one answer. a. carrying amount and the expected future net cash flows. b. carrying amount and its fair value. c. fair value and the expected future net cash flows. d. book value and its fair value. Question 11 Marks: 2 Blue Sky Company's 12/31/08 balance sheet reports assets of $5,000,000 and liabilities of $2,000,000. All of Blue Sky's assets' book values approximate their fair value, except for land, which has a fair value that is $300,000 greater than its book value. On 12/31/08, Horace Wimp Corporation paid $5,100,000 to acquire Blue Sky. What amount of goodwill should Horace Wimp record as a result of this purchase? Choose one answer. a. $0 b. $100,000 c. $1,800,000 d. $2,100,000 Question 12 Marks: 2 A liability has three essential characteristics. Which of the following is not one of them? Choose one answer. a. It is a present obligation that entails settlement by probable future transfer or use of cash, goods, or services. b. The obligation must be liquidated using cash, goods, or services that were earned by the entity in the performance of its normal business operation. c. The liability must be an unavoidable obligation. d. The transaction or other event creating the obligation must have already occurred. Question 13 Marks: 2 Which of the following must be disclosed relative to long-term debt maturities and sinking fund requirements? Choose one answer. a. The present value of future payments for sinking fund requirements and long-term debt maturities during each of the next five years. b. The present value of scheduled interest payments on long-term debt during each of the next five years. c. The amount of scheduled interest payments on long-term debt during each of the next five years. d. The amount of future payments for sinking fund requirements and long-term debt maturities during each of the next five years. Question 14 Marks: 2 Lopez Corporation, a manufacturer of household paints, is preparing annual financial statements at December 31, 2008. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Lopez recall all cans of this paint sold in the last six months. The management of Lopez estimates that this recall would cost $800,000. What accounting recognition, if any, should be accorded this situation? Choose one answer. a. No recognition b. Note disclosure only c. Operating expense of $800,000 and liability of $800,000 d. Appropriation of retained earnings of $800,000 Question 15 Marks: 2 Wilson Company is involved in a litigation suit concerning the clean-up of old underground oil storage tanks on property it sold to a housing development company five years ago. The attorneys for Wilson Company cannot give a best estimate for the probable liability; however, the attorneys state that the liability to Wilson Company will probably fall within a range of $2 million to $10 million. According to the SEC, what should Wilson Company record with regards to this environmental liability? Choose one answer. a. No entry is required. b. A loss and liability of $10 million. c. A loss and liability of $6 million. d. A loss and liability of $2 million. Question 16 Marks: 2 When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the Choose one answer. a. market value of the services received. b. par value of the shares issued. c. market value of the shares issued. d. Any of these provides an appropriate basis for recording the transaction. Question 17 Marks: 2 Presented below is information related to Edis Corporation: Common Stock, $1 par $4,300,000 Paid-in Capital in Excess of Par - Common Stock $550,000 Preferred 8 1/2% Stock, $50 par $2,000,000 Paid-in Capital in Excess of Par - Preferred Stock $400,000 Retained Earnings $1,500,000 Treasury Common Stock (at cost) $150,000 The total stockholders' equity of Edis Corporation is Choose one answer. a. $8,600,000 b. $8,750,000 c. $7,100,000 d. $7,250,000 Question 18 Marks: 2 Presented below is information related to Edis Corporation: Common Stock, $1 par $4,300,000 Paid -in Capital in Excess of Par - Common Stock $550,000 Preferred 8 1/2% Stock, $50 par $2,000,000 Paid-in Capital in Excess of Par - Preferred Stock $400,000 Retained Earnings $1,500,000 Treasury Common Stock (at cost) $150,000 The total paid-in-capital (cash collected) related to the common stock is Choose one answer. a. $4,300,000 b. $4,850,000 c. $5,250,000 d. $4,700,000 Question 19 Marks: 2 Presented below is information related to Edis Corporation: Common Stock, $1 par $4,300,000 Paid-in Capital in Excess of Par - Common Stock $550,000 Preferred 8 1/2% Stock, $50 par $2,000,000 Paid-in Capital in Excess of Par - Preferred Stock $400,000 Retained Earnings $1,500,000 Treasury Common Stock (at cost) $150,000 Cash dividends are paid on the basis of the number of shares Choose one answer. a. authorized. b. issued. c. outstanding. d. outstanding less the number of treasury shares. Question 20 Marks: 2 When common stock is sold by a corporation, a journal entry is prepared which includes a debit to cash and a credit to the common stock account. If the debit to cash is greater than the credit to the common stock account, then it can be assumed that Choose one answer. a. the common stock is worth more than its current market value. b. a gain on the sale of stock is a part of the transaction. c. the common stock was sold at a discount. d. the stated value of the common stock is less than the per share price investors were willing to pay. Question 21 A machine cost $500,000 on April 1, 2008. Its estimated salvage value is $50,000 and its expected life is eight years. Directions (10 Points): Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used on a separate Excel spreadsheet as directed on the Problem Set 3 directions. a) Straight-line for 2008 b) Double-declining balance for 2009 c) Sum-of-the-years'-digits for 2009 Answer: @import url(http://nec.embanet.com/lib/editor/htmlarea/htmlarea.css); Path: http://nec.embanet.com/help.php?module=moodle&file=editorshortcuts.html&forcelang=http://nec.embanet.com/help.php?module=moodle&file=editorshortcuts.html&forcelang= Question 22 Equipment that cost $80,000 and has accumulated depreciation of $63,000 is exchanged for similar equipment with a fair value of $35,000 and $15,000 cash is received. The exchange lacked commercial substance. Directions (10 Points): Respond to these questions on a separate Excel spreadsheet as directed on the Problem Set 3 directions. a) Show the calculation of the gain to be recognized from the exchange. b) Prepare the entry for the exchange. Answer: Question 23 Presented below is information related to copyrights owned by Wamser Corporation at December 31, 2008. Cost $2,700,000 Carrying Amount $2,400,000 Expected Future Net Cash Flows $2,100,000 Fair Value $1,400,000 Assume Wamser will continue to use this asset in the future. As of December 31, 2008, the copyrights have a remaining useful life of 5 years. Directions (15 points): Respond to these questions on a separate Excel spreadsheet as directed on the Problem Set 3 directions. a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2008. b) Prepare the journal entry to record amortization expense for 2009. c) The fair value of the copyright at December 31, 2009 is $1,500,000. Prepare the journal entry (if any) necessary to record this increase in fair value. Answer: Question 24 Fehr Co. purchased a patent from Wells Co. for $180,000 on July 1, 2005. Expenditures of $51,000 for successful litigation in defense of the patent were paid on July 1, 2008. Fehr estimates that the useful life of the patent will be 20 years from the date of acquisition. Directions (5 points): Prepare a computation of the carrying value of the patent as of December 31, 2008 on a separate Excel spreadsheet as directed on the Problem Set 3 directions. Answer: Question 25 On January 1, 2008, Lowry Co. issued ten-year bonds with a face value of $1,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Directions (10 points): Prepare your responses on a separate Excel spreadsheet as directed on the Problem Set 3 directions. a. Calculate the issue price of the bonds. b. Without prejudice to your solution in part a, assume that the issue price was $884,000. Prepare the amortization table for 2008, assuming that amortization is recorded on interest payment dates. Answer: Question 26 James Equipment Company sells computers for $1,500 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2008, the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $30 for parts and $60 for labor. (Assume sales all occur at December 31, 2008.) In 2009, James incurred actual warranty costs relative to 2008 computer sales of $10,000 for parts and $18,000 for labor. Directions (10 points): Prepare your responses to these problems on a separate Excel spreadsheet as directed on the Problem Set 3 directions. a) Under the expense warranty treatment, give the entries to reflect the above transactions (accrual method) for 2008 and 2009. b) Under the cash basis method, what are the Warranty Expense balances for 2008 and 2009? Answer:

 

Paper#12890 | Written in 18-Jul-2015

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