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MOdule_11_Final_Exam-1.-Holiday Laboratories purchased a high speed industrial centrifuge...




Question;Final Exam;Instructions;Solve the following 25 problems. Write all your;solutions on this sheet. In addition, write your calculations or rationale for;your answer on this sheet. In other words, it's not enough to give the correct;answer. You must also show why your answer is correct through your calculations;or rationale. The spaces expand as you write. Each problem is worth 4 points.;Problems;1. Holiday;Laboratories purchased a high speed industrial centrifuge at a cost of;$420,000. Shipping costs totaled $15,000. Foundation work to house the;centrifuge cost $8,000. An additional water line had to be run to the equipment;at a cost of $3,000. Labor and testing costs totaled $6,000. Materials used up;in testing cost $3,000.;The capitalized cost is;A. $455,000.;B. $446,000.;C. $437,000.;D. $435,000.;Calculations;Correct Answer;2. Vijay;Inc. purchased a 3-acre tract of land for a building site for $320,000. On the;land was a building with an appraised value of $120,000. The company demolished;the old building at a cost of $12,000, but was able to sell scrap from the;building for $1,500. The cost of title insurance was $900 and attorney fees for;reviewing the contract was $500. Property taxes paid were $3,000, of which $250;covered the period subsequent to the purchase date.;The;capitalized cost of the land is;A. $336,400.;B. $336,150.;C. $334,650.;D. $201,150.;Calculations;Correct Answer;3. Simpson;and Homer Corporation acquired an office building on three acres of land for a;lump-sum price of $2,400,000. The building was completely furnished. According;to independent appraisals, the fair values were $1,300,000, $780,000, and;$520,000 for the building, land, and furniture and fixtures, respectively.;The initial values of the building, land, and;furniture and fixtures would be;A. $1,300,000, $780,000, $520,000.;B. $1,200,000, $720,000, $480,000.;C. $720,000, $1,200,000, $480,000.;D. These figures are not accurate - see my calculations for details.;Calculations;Correct Answer;4. When;bonds are sold at a discount, if the annual straight-line amortization amount;is compared to the annual effective interest amortization amount over the life;of the bond issue, the annual amount of the straight-line amortization of;discount is;A.;Higher than the effective interest amount;every year.;B.;Higher than the effective interest amount in;the early years and less than the effective interest amount in the later years.;C.;Less than the effective interest amount in;the early years and more than the effective interest amount in the later years.;D.;Less than the effective interest amount every;year.;Correct Answer;Rationale for Your Answer;5. On;January 1, 2009, Zebra Corporation issued 1,000 of its 8%, $1,000 bonds at 98.;Interest is payable semiannually on January 1 and July 1. The bonds mature on;January 1, 2019. Zebra paid $50,000 in bond issue costs. Zebra uses the;straight-line amortization method. What is the bond carrying value reported in;the December 31, 2009, balance sheet?;A. $1,045,000.;B. $1,040,000.;C. $987,000.;D. $982,000.;Calculations;Correct Answer;6. When;bonds include detachable warrants, what is the appropriate accounting for the;cash proceeds from the bond issue?;A. The;proceeds from the bond issue are allocated between the bonds and the warrants;on the basis of their relative market values.;B. The;proceeds from the bond issue are allocated between the bonds and the warrants;on the basis of their relative face values.;C. A;nominal amount is allocated to the warrants.;D. All;of the proceeds are allocated to the bonds.;Correct Answer;Rationale for Your Answer;7. On;January 2, 2009, Tobias Company began using straight-line depreciation for a;certain class of assets. In the past, the company had used;double-declining-balance depreciation for these assets. As of January 2, 2009;the amount of the change in accumulated depreciation is $40,000. The;appropriate tax rate is 40%. The separately reported change in 2009 earnings;is;A. An increase of $40,000.;B. A decrease of $40,000.;C. An increase of $24,000.;D. None of these are correct. See calculations and correct answer below.;Calculations;Correct Answer;8. B;Company switched from the sum-of-the-years-digits depreciation method to;straight-line depreciation in 2009. The change affects machinery purchased at;the beginning of 2007 at a cost of $72,000. The machinery has an estimated life;of five years and an estimated residual value of $3,600. What is B's 2009;depreciation expense?;A. $ 8,400;B. $13,680;C. $15,840;D. $ 9,120;Calculations and Rationale;Correct Answer;9. Retrospective;restatement usually is appropriate for a change in which one of the following? Choose;A, B, C, or D.;A.;B.;C.;D.;Correct Answer;Rationale for Your Answer;10.In;2009, internal auditors discovered that Fay, Inc. had debited an expense;account for the $700,000 cost of a machine purchased on January 1, 2006. The machine's;useful life was expected to be 5 years with no residual value. Straight-line;depreciation is used by Fay. The journal entry to correct the error will;include a credit to accumulated depreciation of;A. $140,000.;B. $280,000.;C. $420,000.;D. $700,000.;Calculations;Correct Answer;11.During;2009, P Company discovered that the ending inventories reported on its;financial statements were incorrect by the following amounts;P Company uses the periodic inventory system to ascertain year-end quantities;that are converted to dollar amounts using the FIFO cost method. Prior to any;adjustments for these errors and ignoring income taxes, P's retained earnings;at January 1, 2009 would be;A. Correct as stated.;B. $ 30,000 overstated.;C. $150,000 overstated.;D. $270,000 overstated.;Calculations;Correct Answer;12.A;change that uses the prospective approach is accounted for by;A. Implementing it in the current year.;B. Reporting pro forma data.;C. Retrospective restatement of all prior financial statements in a;comparative annual report.;D. Giving current recognition of the past effect of the change.;Correct Answer;Rationale for Your Answer;13.Which;of the following accounting changes should not be accounted for;prospectively?;A. The correction of an error.;B. A change from declining balance to straight-line depreciation.;C. A change from straight-line to declining balance depreciation.;D. A change in the expected salvage value of a depreciable asset.;Correct Answer;Rationale for Your Answer;14.Issued;stock refers to the number of shares;A. Outstanding plus treasury shares.;B. Shares issued for cash.;C. In the hand of shareholders.;D. That may be issued under state law.;Correct Answer;Rationale for Your Answer;15.The;common stock account on a company's balance sheet is measured as;A. The;number of common shares outstanding multiplied by the stock's par value per;share.;B. The;number of common shares outstanding multiplied by the stock's current market;value per share.;C. The;number of common shares issued multiplied by the stock's par value per share.;D. None;of these is correct. The correct answer and rationale for your answer are shown;below;Correct Answer;Rationale for Your Answer;16.Roberto;Corporation was organized on January 1, 2009. The firm was authorized to issue;100,000 shares of $5 par common stock. During 2009, Roberto had the following;transactions relating to shareholders' equity;?;Issued 10,000 shares of;common stock at $7 per share.;?;Issued 20,000 shares of;common stock at $8 per share.;?;Reported a net income of;$100,000.;?;Paid dividends of $50,000.Purchased;3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8).;What is total;shareholders' equity at the end of 2009?;A. $270,000.;B. $300,000.;C. $250,000.;D. $200,000.;Calculations;Correct Answer;17.The;par value of shares issued is normally recorded in the;A. Paid-in capital in excess of par account.;B. Common stock account.;C. Retained earnings account.;D. Appropriated retained earnings account.;Correct Answer;Rationale for Your Answer;18.The;owners of a corporation are its shareholders. If a corporation has only one;class of shares, they typically are labeled common shares. Each of the;following are ownership rights held by common shareholders, unless specifically;withheld by agreement except;A.;The right to vote on policy issues.;B.;The right to share in profits when dividends;are declared (in proportion to the percentage of shares owned by the;shareholder).;C.;The right to dividends equal to a stated rate;time par value (if dividends are paid).;D.;The right to share in the distribution of any;assets remaining at liquidation after other claims are satisfied.;Correct Answer;Rationale for Your Answer;19.If;a futures contract is used to hedge a debt sale, and interest rates go down;causing debt security prices to rise, the potential benefit of being able to;issue debt at that lower interest rate (higher price) will be offset by a loss;on the futures position.;This;statement is: True False;Correct Answer;Rationale for Your Answer;20.Hedging;is used to deal with exposure to;A. Fair value risk.;B. Cash flow risk.;C. Foreign exchange risk.;D. All of these are correct.;Correct Answer;Rationale for Your Answer;21.Disclosure;notes would not include;A. Depreciation methods used and estimated useful life.;B. Definition of cash equivalents.;C. Details of pension plans.;D. Data to adjust the financial statements so that they are not;misleading.;Correct Answer;Rationale for Your Answer;22.The;Management Discussion and Analysis section of the annual report can best be;described as;A. Frank but objective.;B. Independent but precise.;C. Legalistic and lengthy.;D. Biased but informative.;Correct Answer;Rationale for Your Answer;23.The;quick ratio is;A. The liquidity ratio divided by the equity ratio.;B. Current assets minus inventory divided by current liabilities minus;accounts payable.;C. Current assets minus inventory and prepaid items divided by current;liabilities.;D. Cash divided by accounts payable.;Correct Answer;Rationale for Your Answer;24.Recent;financial statement data for Harmony Health Foods (HHF) Inc. is shown below.;HHF's;debt-to-equity ratio is;A. 0.75.;B. 1.13.;C. 0.53.;D. 1.80.;Calculations;Correct Answer;25.Which;of the following is not a required segment reporting disclosure according to;International Accounting Standards?;A. Segment profit or loss.;B. Segment assets.;C. Segment liabilities.;D. All are required disclosures.;Calculations;Correct Answer


Paper#37695 | Written in 18-Jul-2015

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