ACCT 557 Week 8 Final Exam (Questions & Answers)

ACCT 557 Week 8 Final Exam (Questions & Answers)


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These are the automatically computed results of your exam. Date Taken: 6/26/2016 Grades for essay questions, and Time Spent: 4 h , 00 secs comments from your instructor, are Points Received: 162 / 290 (55.9%) in the "Details" section below. Question Type: # Of Questions: # Correct: Multiple Choice 10 6 Essay 6 N/A

Grade Details - All Questions Question 1: (TCO A) Amazon Building, Inc. won a bid for a new warehouse building contract. Below is information from the project accountant. Total Construction Fixed Price $10,000,000 Construction Start Date June 13, 2012 Construction Complete Date December 16, 2013 As of Dec. 31… 2012 2013 Actual cost incurred $4,500,000 $2,360,000 Estimated remaining costs $2,250,000 $- Billed to customer $6,000,000 $4,000,000 Received from customer $5,000,000 $3,500,000 Assuming Amazon Building, Inc. uses the completed contract method, what amount of gross profit would be recognized in 2013? Question 2: (TCO B) At the beginning of 2012, Annie, Inc. has a deferred tax asset of $7,500 and deferred tax liability of $10,500. In 2012, pretax financial income was $826,000 and the tax rate was 35%. Pretax income included: Interest income from municipal bonds $15,000 Accrued warranty costs, estimated to be used in 2013 $74,000 Prepaid rent expense, will be used in 2013 $31,000 Installment sales revenue, to be collected in 2013 $56,000 Operating loss carryforward $71,000 What is taxable income for 2012? Question 3: (TCO C) Presented below is pension information related to Amazing Goods, Inc. for the year 2013. Service cost $105,000 Interest on projected benefit obligation $65,000 Interest on vested benefits $14,000 Amortization of prior service cost due to increase in benefits $17,000 Expected return on plan assets $23,000 The amount of pension expense to be reported for 2013 is Question 4: (TCO C) Apple Dumpling Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2013. Service cost $320,000 Contributions to the plan $285,000 Actual return on plan assets $215,000 Projected benefit obligation (beginning of year) $3,100,000 Fair value of plan assets (beginning of year) $3,600,000 The expected return on plan assets and the settlement rate were both 9%. The amount of pension expense reported for 2013 is

Question 5: (TCO D) Animal, Inc. leased equipment from Zoo Enterprises under a 5-year lease requiring equal annual payments of $63,000, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 5-year useful life and no salvage value. Animal, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Assuming that this lease is properly classified as a capital lease, what is the amount of interest expense recorded by Animal, Inc. in the first year of the asset’s life? PV Annuity Due PV Ordinary Annuity 8%, 5 periods 10%, 5 periods
Question 6: (TCO E) On December 31, 2013, Bob's Trucking, Inc. appropriately changed its inventory valuation method from weighted-average cost to FIFO method for financial statement and income tax purposes. The change will result in an $800,000 increase in the beginning inventory at January 1, 2013. Assume a 40% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is Question 7: (TCO E) Which of the following is not a change in accounting estimate? Question 8: (TCO F) Amazing Glory, Inc. recognized a net income of $55,000 including $8,000 in depreciation expense. Additional changes from the balance sheet are as follows. Accounts Receivable $1,200 decrease Prepaid Expenses $600 decrease Inventory $14,600 increase Accrued Liabilities $1,000 decrease Accounts Payable $2,100 increase Compute the net cash from operating activities based on the above information. Question 9: (TCO G) Which of the following events that occurred after the balance sheet date but before issuance of the financial statements would require adjustment of the accounts before issuance of the financial statements? Question 10: (TCO G) Adventure, Inc. is a company that operates in four different divisions. The following information relating to each segment is available for 2013. Sales revenue Operating profit (loss) Identifiable assets A $85,000 $31,000 $56,000 B $105,000 $(16,000) $82,000 C $250,000 $112,000 $640,000 D $20,000 $4,000 $35,000 Required: For which of the segments would information have to be disclosed in accordance with professional pronouncements? Question 11: (TCO A) Adam's Adorable Creations Company provided the following financial information for its installment sales for the current year. Financial Data: Installment sales for current year $2,400,000 Cost of goods sold on installment basis $1,800,000 Repossessed merchandise: Estimated value $56,000 Repossessed merchandise: Unpaid balances $90,000 Payments by customers $1,750,000 Required: (a) Prepare journal entries for the end of the year based on the information above. (b) Prepare the entry to record the gross profit realized in the current year. Question 12: (TCO B) The Accent Corporation shows the following information. On January 1, 2012, Accent purchased a donut machine for $700,000. (a) Pretax financial income is $2,300,000 in 2012 and $2,400,000 in 2013. (b) Taxable income is expected in future years with an expected tax rate of 35%. (c) The company recognized an extraordinary gain of $150,000 in 2013 (which is fully taxable). (d) Tax-exempt municipal bonds yielded interest of $150,000 in 2013. (e) Straight-line basis for 7 years for financial reporting (See Appendix 11A.) (f) Half-year convention basis depreciation for 4 years for tax purposes. Required: (a) Compute taxable income and income taxes payable for 2013. (b) Prepare the journal entries for income tax expense, income taxes payable, and deferred taxes for 2013. (c) Prepare the deferred income taxes presentation for December 31, 2013 balance sheet. Question 13: (TCO D) Absolute Leasing, Inc. agrees to lease equipment to Allen, Inc. on January 1, 2012. They agree on the following terms: (a) The normal selling price of the equipment is $600,000 and the cost of the asset to Absolute Leasing, Inc. was $475,000. (b) At the end of the lease, the equipment will revert to Absolute Leasing, Inc. and have an unguaranteed residual value of $60,000. Their implicit interest rate is 10%. (c) The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life). (d) Absolute Leasing, Inc. incurred costs of $10,000 in negotiating and closing the lease. There are no uncertainties regarding additional costs yet to be incurred and the collectability of the lease payments is reasonably predictable. (e) The lease begins on January 1, 2012 and payments will be in equal annual installments. (f) Allen will pay all maintenance, insurance, and tax costs directly and annual payments of $65,000 on January 1 of each year. Required: (a) Determine what type of lease this would be for the lessee and calculate the initial obligation. (b) Prepare Allen, Inc.'s amortization schedule for the lease terms. (c) Prepare all the journal entries for Allen, Inc. for 2012. Assume a calendar year fiscal year. Question 14: (TCO F) Drexon Corp., which follows U.S. GAAP, uses the direct method to report its cash flows. The CFO is assessing the impact on cash flows of 12 events during the fiscal year. Specify which category each event falls under (under the direct method) and note whether it increases cash, decreases cash, or has no impact on cash: # Event 1 Accounts payable decreases from $400,000 to $385,000. 2 An interest payment of $85,000 is made on a new debt issuance. 3 Capital expenditures of $35,000 are made for equipment used in day to day operations. 4 Dividends of $6,500 are received from a stock classified as available for sale. 5 A gain of $8,200 is booked on the sale of an asset. 6 Depreciation and amortization expense totaling $50,000 is booked. 7 Drexon purchases a trading security which it classifies as non¬current. 8 Accrued liabilities increase from $245,000 to $250,000. 9 40,000 new shares of stock are issued near the close of the fiscal year. 10 Drexon purchases 60% of a subsidiary company. 11 Accounts receivable decreases from $620,000 to $610,000. 12 Dividends of $12,000 are paid on Drexon company stock. Question 15: (TCO G) Selected financial ratios. The following information pertains to Allbright, Inc. Cash $53,000 Accounts receivable $186,000 Inventory $82,000 Plant assets (net) $320,000 Total assets $641,000 Accounts payable $85,000 Accrued taxes and expenses payable $12,000 Long-term debt $268,000 Common stock ($10 par) $120,000 Paid-in capital in excess of par $6,000 Retained earnings $150,000 Total equities $641,000 Net sales (all on credit) $980,000 Cost of goods sold $760,000 General & Admin Expenses $160,000 Net income $60,000 Required Compute the following: (It is not necessary to use averages for any balance sheet figures involved.) (a) Current ratio (b) Inventory turnover (c) Receivables turnover (d) Book value per share (e) Earnings per share (f) Debt to total assets (g) Profit margin on sales (h) Return on common stock equity Question 16: (TCO E) Please describe the requirements for a change in accounting principle and at least four reasons why companies might implement a change in accounting principle...

ACCT 557
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ACCT 557 Week 8 Final Exam (Questions & Answers)

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Excerpt from file: Grading Summary These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. Date Taken: Time Spent: Points Received: Question Type: Multiple Choice Essay 6/26/2016 4 h , 00 secs 162 / 290 (55.9%) # Of

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