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BUA 201 Exam 2 Chapters 4, 5, and 6




Question;BUA 201 Exam 2 Chapters 4, 5, and 6;1. An annuity is a series of equal periodic payments.;2. Slick's Used Cars sells pre-owned cars on the installment;basis and carries its own notes because its customers typically cannot qualify;for a bank loan. Default rates tend to be high or unpredictable. However, in;the event of nonpayment, Slick's can usually repossess the cars without loss.;The revenue method Slick would use is the;A. Installment;sales method.;B. Point of;sales method.;C. Cost;recovery method.;D. Installment sales method or cost recovery method.;3. Each of the following would be reported as items of other;comprehensive income except;A. Foreign;currency translation gains.;B. Unrealized;gains on investments accounted for as securities available for sale.;C. Deferred;gains from derivatives.;D. Gains from the sale of equipment;4. Freda's Florist reported the following before-tax income;statement items for the year ended December 31, 2013;All income statement items are subject to a 40% income tax;rate. In its 2013 income statement, Freda's separately stated income tax expense;and total income tax expense would be;A. $128,000 and $128,000, respectively.;1;B. $128,000 and $100,000, respectively.;C. $100,000 and $128,000, respectively.;D. $100,000 and $100,000, respectively.;5. With an ordinary annuity, a payment is made or received;on the date the agreement begins.;6. Merchandise sold FOB shipping point indicates that: A.;The seller pays the freight.;B. The buyer holds title after the merchandise leaves the;seller's location.;C. The;common carrier holds the title until the merchandise is delivered.;D. The sale;is not consummated until the merchandise reaches the point to which it is being;shipped.;7. Popson Inc. incurred a material loss that was not unusual;in character but was clearly an infrequent occurrence. This loss should be;reported as;A. An;extraordinary loss.;B. A;separate line item between income from continuing operations and income from;discontinued operations.;C. A;separate line item within income from continuing operations.;D. A;separate line item in the retained earnings statement.;8. The principal benefit of separately reporting;discontinued operations and extraordinary items is to enhance;A. Predictive ability.;B. Consistency;in reporting.;C. Intraperiod;continuity.;D. Comprehensive;reporting.;9. On August 1, 2013, Rocket Retailers adopted a plan to;discontinue its catalog sales division, which qualifies as a separate component;of the business according to GAAP regarding discontinued operations. The;disposal of the division was expected to be concluded by June 30, 2014. On;January 31, 2014, Rocket's fiscal year-end, the following information relative;to the discontinued division was accumulated;2;In its income statement for the year ended January 31, 2014;Rocket would report a before-tax loss on discontinued operations of;A. $115,000.;B. $195,000.;C. $65,000.;D. $125,000.;10. Comprehensive income is the change in equity from: A.;Owner transactions.;B. Nonowner transactions.;C. Owner or;nonowner transactions.;D. Capital;transactions.;Required: 3 points each;Consider independently the appropriate accounting by Jacob;under the scenario below;3;11. Scenario 1: Assume that Jacob sold the division's assets;on December 31, 2013, for $24 million. The book value of the division's assets;was $19 million at that date. Under these assumptions, what would Jacob report;in its 2013 income statement regarding the office equipment division? Explain;where this information would be presented.;12. Scenario 2: Assume that Jacob had not yet sold the;division's assets by the end of 2013. Further, assume that the fair value less;costs to sell of the division's assets at December 31, 2013, was $24 million;and was expected to remain the same when the assets are sold in 2014. The book;value of the division's assets was $19 million at the end of the year. Under;these assumptions, what would Jacob report in its 2013 income statement;regarding the office equipment division? Explain where this information would;be presented.;4;13. Scenario 3: Assume that Jacob had not yet sold the;office furniture division by the end of 2013. Further, assume that the fair;value less costs to sell of the division's assets at December 31, 2013, was $12;million and was expected to remain the same when the assets are sold in 2014.;The book value of the division's assets was $19 million at the end of the year.;Under these assumptions, what would Jacob report in its 2013 income statement;regarding the office equipment division? Explain where this information would;be presented.;14.(7points) Paris Company reported the following items in;its December 31, 2013, year-end adjusted trial balance;Paris is subject to a 40% income tax rate.;Required;Prepare the December 31, 2013, income statement for Paris;Company starting with income from continuing operations before income taxes.;15. Required: 15 points Prepare a single-step income;statement with basic earnings per share disclosure.;Planto;Co.;Income;Statement;For Period ending Dec. 31, 2013;Revenues and Gains;Sales $700,000;Interest Revenues 60,000;Gains on sale of investments 110,000;Total Revenues and Gains: $870,000;Expenses and Losses;Cost of goods sold $500,000;Selling expenses 150,000;G&A expenses 60,000;Restructuring costs 40,000;Interest expense 30,000;Total Expenses and Losses: $780,00;Income Before income taxes $90,000;Income tax expense $27,000;Net income $63,000;Earnings Per Share;Basic $1.26.;16. (1point) Merchandise sold FOB destination indicates;that;A. The seller holds the title until the merchandise is;received at the buyer's location.;B. The buyer;is responsible for delivery of the merchandise to the destination.;C. The full;order is back-ordered to its destination.;D. The buyer;pays the freight to the destination.;\;On December 15, 2013, Rigsby Sales Co. sold a tract of land;that cost $3,600,000 for $4,500,000. Rigsby appropriately uses the installment;sale method of accounting for this transaction. Terms called for a down payment;of $500,000 with the balance in two equal annual installments payable on;December 15, 2014, and December 15, 2015. Ignore interest charges. Rigsby has a;December 31 year-end.;17.(2pts) In 2013, Rigsby would recognize realized gross;profit of;A. $500,000.;B. $0.;C. $900,000.;D. $100,000.;18.(2pts) In 2014, Rigsby would recognize realized gross;profit of;A. $0.;B. $450,000.;C. $300,000.;D. $400,000.;19.(2pts) In its December 31, 2013, balance sheet, Rigsby;would report: A. Realized gross profit of $100,000.;B. Deferred gross profit of $100,000.;C. Installment receivables (net) of $3,200,000.;D. Installment receivables (net) of $4,000,000.;20.(2pts) At December 31, 2014, Rigsby would report in its;balance sheet: A. Realized gross profit of $500,000.;B. Deferred gross profit of $400,000.;C. Realized;gross profit of $400,000.;D. Cost of;installment sales $1,600,000.;21. 1pt. When using the completed contract method of;accounting for long-term contracts;A. Estimated;losses on the overall contract are recognized before the contract is completed.;B. Expenses;are recorded each period, but revenue is only recognized when the contract is;completed.;C. Use of;this method is not permitted under generally accepted accounting principles.;D. Neither gains nor losses are recognized until the;contract is completed.;22. 1pt. The;percentage-of-completion method violates the general rule for revenue;recognition that;A. Collection;is reasonably assured.;B. Costs are;known or reasonably estimated.;C. The;earnings process is complete.;D. Collections;have been received.;23. 2pt. Dowling's 2013 profit margin is (rounded);A. 17.4%.;B. 18.5%.;C. 18.0%.;D. 16.5%.;24. 2pt.Dowling's 2013 average collection period is;(rounded);A. 50 days.;B. 63 days.;C. 57 days.;D. 51 days.;25. 2pt Dowling's average total assets for 2013 is;(rounded);A. 32.;B. 210.;C. 115.;D. 194.;10;26. 2pts. Dowling's average inventory balance for 2013 is;(rounded);A. 11.;B. 12;C. 11.5.;D. 12.5.;McCombs Contractors received a contract to construct a;mental health facility for $2,500,000. Construction was begun in 2012 and;completed in 2013. Cost and other data are presented below;27. Assume that McCombs uses the percentage-of-completion;method for revenue recognition.;Required: 20 points: Prepare all journal entries to record;costs, billings, collections, and profit recognition. Round your answers to the;nearest whole dollar.;28. (6 points) Assume that McCombs uses the completed;contract method for revenue recognition. Required: Compute the amount of gross;profit recognized by McCombs during 2012 and 2013.;Present and future value tables of $1 at 3% are presented;below;12;29. 2pts. Today, Thomas deposited $100,000 in a three-year;12% CD that compounds quarterly. What is the maturity value of the CD?;A. $109,270.;B. $119,410.;C. $142,576.;D. $309,090.;30. 2pts. Carol wants to invest money in a 6% CD account;that compounds semiannually. Carol would like the account to have a balance of;$50,000 five years from now. How much must Carol deposit to accomplish her;goal?;A. $35,069.;B. $43,131.;C. $37,205.;D. $35,000.;31. 3pts. At the end of the next four years, a new machine;is expected to generate net cash flows of $8,000, $12,000, $10,000, and;$15,000, respectively. What are the (rounded) cash flows worth today if a 3%;interest rate properly reflects the time value of money in this situation?;A. $41,556.;B. $39,982.;C. $32,400.;D. $38,100.;32. 2pts. At the end of each quarter, Patti deposits $500;into an account that pays 12% interest compounded quarterly. How much will;Patti have in the account in three years?;A. $7,096.;B. $7,213.;C. $7,129.;D. $8,880.;33. 2pts. Sondra deposits $2,000 in an IRA account on April;15, 2013. Assume the account will earn 3% annually. If she repeats this for the;next nine years, how much will she have on deposit on April 14, 2023?;A. $20,600.;B. $20,928.;C. $23,616.;D. $24,715.;34. 2pts. Shelley wants to cash in her winning lottery;ticket. She can either receive ten $100,000 semiannual;14;payments starting today, or she can receive a lump-sum;payment now based on a 6% annual interest rate. What is the equivalent lump-sum;payment?;A. $853,020.;B. $801,969.;C. $744,090.;D. $878,611.;35. 2pts. On January 1, 2013, you are considering making an;investment that will pay three annual payments of $10,000. The first payment is;not expected until December 31, 2016. You are eager to earn 3%. What is the;present value of the investment on January 1, 2013?;A. $28,286.;B. $25,886.;C. $26,662.;D. $27,300.;36. 2pts. Rosie's Florist borrows $300,000 to be paid off in;six years. The loan payments are semiannual with the first payment due in six;months, and interest is at 6%. What is the amount of each payment?;A. $25,750.;B. $29,761.;C. $30,139.;D. $25,500.;37. 2pts. Jimmy has $255,906 accumulated in a 401K plan. The;fund is earning a low, but safe, 3% per year. The withdrawals will take place;at the end of each year starting a year from now. How soon will the fund be;exhausted if Jimmy withdraws $30,000 each year?;A. 11 years.;B. 10 years.;15;C. 8.5;years.;D. 8.8;years.;38. 2pts. A firm leases equipment under a capital lease;(analogous to an installment purchase) that calls for 12 semiannual payments of;$39,014.40. The first payment is due at the inception of the lease. The annual;rate on the lease is 6%. What is the value of the leased asset at inception of;the lease?;A. $388,349.;B. $400,000.;C. $454,128.;D. $440,082.;16;="msonormal">="msonormal">="msonormal">="msonormal">


Paper#54371 | Written in 18-Jul-2015

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