1. Which one of the following revenue recognition methods is not acceptable by GAAP? Explain why. (4 points) A. Sale with buyback B. Completed contract C. Completion of production D. Installment sale 2. Which of the following are dilutive securities? There can be more than one answer. (4 points) A. Municipal Bonds B. Common Stock C. Stock Warrants D. Convertible Bonds E. Treasury Stock 3. The new bookkeeper for Bingo Co. recorded depreciation on a straight line basis because he failed to follow the established accounting methods for the company. His manager discovers this in the subsequent year and reissues financial statements for the previous year. This would be an example of: (4 points) A. Change in Accounting Principle B. Change in Accounting Estimate C. Change in Reporting Entity D. Correction of Error 4. Which of the following revenue recognition methods results in the greatest amount of deferred revenue? (5 points) A. Percentage of Completion B. Completed Contract C. Installment Sale D. Point of Sale E. Cost Recovery 5. Provide an example of 5 note disclosures commonly found in the financial statements and explain the purpose of each. Why is each disclosure important for users of the financial statements? (5 points) 6. Determine whether each of the following would be an addition to net income (A), a subtraction from net income (S), or neither (N) assuming a Statement of Cash Flows Operating Activities section prepared using the indirect method: (8 points) A. Increase in Inventory B. Decrease in Receivables C. Gain on Sale of Equipment D. Bond Discount Amortization E. Dividend Payments F. Equipment Purchases G. Equipment Depreciation H. Proceeds from Sale of Equipment 7. On December 31, 2010, the stockholders? equity section of the balance sheet for Garnett & Pierce Co. was as follows (10 points): Common stock, par value $20, authorized 75,000 shares; issued and outstanding 45,000 shares $900,000 Additional paid in capital 250,000 Retained earnings 500,000 Total Stockholders? Equity $1,650,000 During 2011, the following transactions occurred: 3,000 shares were reacquired at $28 per share 3,000 shares were reacquired at $35 per share 1,800 shares of treasury stock were sold at $30 per share For the year ended December 31, 2011, Garnett & Pierce Co. reported net income of $450,000. Assuming Garnett & Pierce Company accounts for treasury stock under the cost method, what should it report as total stockholders? equity on December 31, 2011? 8. Lisa?s Trucking Co. has a net loss on its books of $15,750 in 2009. Included in that total is straight line depreciation of $10,250. Tax depreciation using MACRS is determined to be $18,400. In addition, Lisa?s Trucking Co. has included a federal tax provision of $40,000 and a state tax provision of $20,000 in its book income. What is Lisa?s Trucking Co.?s taxable income for 2009? (10 points) 9. Determine the earnings per share for Davidson Company for 2009 given the following data (10 points): ? Taxable Income $165,000 ? Net Income $275,000 ? Common Stock Dividends $27,000 ? Outstanding Shares 346,750 ? Preferred Dividends $75,000 ? Treasury Stock $300,000 10. Dudley Dental is looking to establish a retirement plan for its employees. Which of the following is the best choice given the preferences of the managing partners (10 points)? ? Would like to match employee contributions ? Does not want to be forced to make mandatory contributions ? Would like the largest contribution amount possible and the largest match possible A. Pension Plan B. Roth IRA C. Profit Sharing Plan D. 401K E. SIMPLE IRA 11. Marble Company owns 4,000 of the 10,000 outstanding shares of Hopscotch Corp. common stock. During 2010 Hopscotch earns $120,000 and pays cash dividends of $40,000. If the beginning balance in the investment account was $240,000, what is the balance at December 31, 2010? (10 points) 12. Bob?s Building Co. and Acme Roofing Co. both use the completed contract method for their accounting. On December 21, 2009, Acme Roofing Co. sends Bob?s Building Co. a progress billing for $25,000 when the job is halfway complete. What journal entry, if any, does each company make to account for the billing (10 points)? 13. Smith Consulting is evaluating two lease alternatives for its office space. Each lease is for a 1 year period. Alternative A ? $2,500 mo. base amount for rent + additional 1% gross revenue payable to landlord ? $6,000 security deposit ? $375 per mo. utilities fee paid to landlord ? Property taxes of $7,000 per year tenant?s responsibility ? Estimated revenues in this location are $780,000 ? Repairs responsibility of tenant Alternative B ? $4,500 mo. rent ? $8,000 security deposit ? Utilities included in rent amount ? Repairs responsibility of landlord ? Property taxes $8,500 per year tenant?s responsibility ? Estimated revenues in this location are $675,000 Smith Consulting estimates repairs of $600 per year, utilities of $2,000 per year, and that 97% of sales will be realized in cash by year end. Which of these alternatives should Smith Consulting select based on net income? Which alternative should Smith Consulting select based on cash flows? Show your work. (15 points) 14. On January 1, 2009, Sarah?s Boutique secures a line of credit to obtain necessary funding for its spring collection. The line of credit is subject to the following terms: ? 4% APR based upon the balance at month end ? Interest increases balance of line of credit ? Principal payments of 5% of the outstanding balance due on the first of the following month Sarah?s Boutique makes the following draws on its line of credit: Date Purpose Amount 1/4/09 Apparel from supplier $74,826 2/2/09 Jewelry for collection $7,345 2/25/09 Spring accessories $2,846 3/3/09 Signage for collection $536 4/2/09 Commercial for boutique $3,470 Assume all required payments are made as agreed. What is the balance of Sarah?s Boutique?s line of credit as of 4/30/09? How should the line of credit balance be reported on the financial statements of Sarah?s Boutique? (15 points) 15. Tiny Toy Company has 5 employees on its payroll. All employees are paid biweekly. The following are the salary/hourly rates for Tiny Toy Company?s employees: Employee Position Pay Rate Sam Smith Owner/CEO $120,000/year salary Tracy Thompson Administrative Assistant $30,000/year salary Andy Anderson Assembly Worker $8.50/hour- 20 hours/week Brian Benson Assembly Supervisor $12.50/hour- 40 hours/week Candy Cook Assembly Lead $10.00/hour- 40 hours/week Each full time employee is eligible for Tiny Toy Company?s health insurance plan and 401K program. The health insurance plan dictates that both the employee and employer are responsible for half of the insurance cost. Also, the company matches each employee?s contributions to the 401K plan biweekly as employee deferrals are made. For the pay period 1/14/10 calculate the paycheck for each employee, compute the payroll journal entry, and compute the company?s payroll tax journal entry given the following information (15 points): ? FICA Rate: 6.2% ? Medicare Rate : 1.45% ? Federal Unemployment Tax Rate: 0.8% ? State Unemployment Tax Rate: 3% Employee Deferrals (Biweekly) Employee Health Insurance 401k Contributions Sam Smith $250 3% of gross salary Tracy Thompson $175 $50 biweekly Brian Benson $75 None Candy Cook $75 $50 biweekly 16. The balance sheets for Celtics Company for 2010 and 2009 showed the following information. Additional information concerning transactions and events during 2010 are presented below. Celtics Company Balance Sheets 12/31/10 12/31/09 Cash $30,900 $10,200 Accounts Receivable (net) 43,300 20,300 Inventory 35,000 42,000 Long-term Investments 0 15,000 Property, Plant, & Equipment 236,500 150,000 Accumulated Depreciation -37,700 -25,000 Total Assets $308,000 $212,500 Accounts Payable $17,000 $26,500 Accrued Liabilities 21,000 17,000 Long-term Notes Payable 70,000 50,000 Common Stock 130,000 90,000 Retained Earnings 70,000 29,000 Total Liabilities & Equity $308,000 $212,500 1. Net income for the year 2010 is $76,000 2. Depreciation on plant assets for the year $12,700 3. Sold the long term investments for $28,000 4. Paid dividends of $35,000 5. Purchased machinery costing $26,500 and paid cash. 6. Purchased machinery and gave a $60,000 long term note payable. 7. Paid a $40,000 long term note payable by issuing common stock. Prepare a Statement of Cash Flows for 2010 using the indirect method. (15 points) Who Am I? Bonus Questions (Optional- one point ea.) 1. I occur when tax deductible expenses exceed taxable revenues. 2. I am the estimated fair value of a leased asset at the end of the lease term. 3. I am a financial report which covers a period of less than one year. 4. I am a loss of value which is other than temporary. 5. I am the process of interest rate approximation.,Thanks I have another one if you are interested which needs to be done by Saturday the 18th at 6 pm as well? Please let me know,Are you sure you are an expert I just received a 90.5/150 on this assignment. I have spent a total of $100 dollars on two failing grades. I would like my money back.
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