ACC 304 Extraordinary Success |snaptutorial.com

1. ACC 304 Final Exam Part 1 (3 Sets)For more classes visit www.snaptutorial.com This Tutorial contains 3 Set of Finals ACC 304 Final Exam Part 1 (3 Sets) 1 1) Swing High Inc. offers its 100 employees to participate in an employee share-purchase plan. Under the terms of plan, employees are entitled to purchase 10 shares at 10% discount. The par values of shares were $10. Overall, 60 employees accepted the offer and each employee purchased six shares. The market price on purchase date was $100. What is the compensation expense recorded by Swing High Inc.?

2. The interest rate written in the terms of the bond indenture is known as the 3) Which of the following methods of amortization is normally used for intangible assets? 4) If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will 5) The distribution of stock rights to existing common stockholders will increase paid-in capital at the 6) Treasury shares are shares 7) Which of the following is a contract-related intangible assets? 8) Which of the following taxes does not represent a common employee payroll deduction? 9) On January 1, 2014, Ellison Co. issued eight-year bonds with a face value of $4,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: Present value of 1 for 8 periods at 6% .627 Present value of 1 for 8 periods at 8% .540 Present value of 1 for 16 periods at 3% .623 Present value of 1 for 16 periods at 4% .534 Present value of annuity for 8 periods at 6% 6.210 Present value of annuity for 8 periods at 8% 5.747

3. Present value of annuity for 16 periods at 3% 12.561 Present value of annuity for 16 periods at 4% 11.652 The present value of the interest is 10) Which of the following would be considered research and development costs? 11) On January 1, 2015, Evans Company granted Tim Telfer, an employee, an option to buy 3,000 shares of Evans Co. stock for $25 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $22,500. Telfer exercised his option on September 1, 2015, and sold his 1,000 shares on December 1, 2015. Quoted market prices of Evans Co. stock during 2015 were January 1 $25 per share September 1 $30 per share December 1 $34 per share The service period is for three years beginning January 1, 2015. As a result of the option granted to Telfer, using the fair value method, Evans should recognize compensation expense for 2015 on its books in the amount of 12) Presented below is information related to Hale Corporation: Common Stock, $1 par $4,500,000 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

4. 13) On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of $4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. Bond interest expense reported on the December 31, 2014 income statement of Macklin Corporation would be 14) Gannon Company acquired 10,000 shares of its own common stock at $20 per share on February 5, 2014, and sold 5,000 of these shares at $27 per share on August 9, 2015. The fair value of Gannon's common stock was $24 per share at December 31, 2014, and $25 per share at December 31, 2015. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2015 to record the sale of 5,000 shares? 15) When computing diluted earnings per share, convertible bonds are 16) Jeff Corporation purchased a limited-life intangible asset for $225,000 on May 1, 2013. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2015? 17) A corporation called an outstanding bond obligation four years before maturity. At that time there was an unamortized discount of $750,000. To extinguish this debt, the company had to pay a call premium of $250,000. Ignoring income tax considerations, how should these amounts be treated for accounting purposes? 18) Slack Inc. borrowed $320,000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31?

5. 19) Venible newspapers sold 6,000 of annual subscriptions at $125 each on June 1. How much unearned revenue will exist as of December 31? 20) Hanson Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 5% convertible bonds outstanding during 2015. The preferred stock is convertible into 40,000 shares of common stock. During 2015, Hanson paid dividends of $.60 per share on the common stock and $2 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2015 was $400,000 and the income tax rate was 30%. Basic earnings per share for 2015 is (rounded to the nearest penny) 21) Sealy Corporation had the following information in its financial statements for the years ended 2014 and 2015: Cash dividends for the year 2015 $5,000 Net income for the year ended 2015 87,000 Market price of stock, 12/31/14 10 Market price of stock, 12/31/15 12 Common stockholders' equity, 12/31/14 1,000,000 Common stockholders' equity, 12/31/15 1,200,000 Outstanding shares, 12/31/15 100,000 Preferred dividends for the year ended 2015 10,000 What is the payout ratio for Sealy Corporation for the year ended 2015? 22) Jenks Corporation acquired Linebrink Products on January 1, 2015 for $8,000,000, and recorded goodwill of $1,500,000 as a result of that purchase. At December 31, 2015, Linebrink Products had a fair value of $6,800,000. The net identifiable assets of the Linebrink (excluding

6. goodwill) had a fair value of $5,800,000 at that time. What amount of loss on impairment of goodwill should Jenks record in 2015? 23) On December 31, 2014, the stockholders' equity section of Arndt, Inc., was as follows: Common stock, par value $10; authorized 30,000 shares; issued and outstanding 9,000 shares $90,000 Additional paid-in capital 116,000 Retained earnings 184,000 Total stockholders' equity $390,000 On March 31, 2015, Arndt declared a 10% stock dividend, and accordingly 900 additional shares were issued, when the fair value of the stock was $18 per share. For the three months ended March 31, 2015, Arndt sustained a net loss of $32,000. The balance of Arndt’s retained earnings as of March 31, 2015, should be 24) On September 1, 2014, Halley Co. issued a note payable to Fidelity Bank in the amount of $1,800,000, bearing interest at 10%, and payable in three equal annual principal payments of $600,000. On this date, the bank's prime rate was 11%. The first payment for interest and principal was made on September 1, 2015. At December 31, 2015, Halley should record accrued interest payable of ACC 304 Final Exam Part 1 (3 Sets) 2 1) We have also attached download of Chapter 12, 13, 14, 15, 16 (download it from my account section) Please use those as well for your finals and please either use the question number or some data from question to search as they usually change the company keeping the data same

7. 2) Convertible bonds 3) Litke Corporation issued at a premium of $5,000 a $100,000 bond issue convertible into 2,000 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $2,000, the market value of the bonds is $110,000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds? 4) Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2014. No common stock was issued during 2015. On January 1, 2015, Didde issued 200,000 shares of nonconvertible preferred stock. During 2015, Didde declared and paid $75,000 cash dividends on the common stock and $60,000 on the preferred stock. Net income for the year ended December 31, 2015 was $465,000. What should be Didde's 2015 earnings per common share? 5) Weiser Corp. on January 1, 2012, granted stock options for 40,000 shares of its $10 par value common stock to its key employees. The market price of the common stock on that date was $23 per share and the option price was $20. The Black-Scholes option pricing model determines total compensation expense to be $420,000. The options are exercisable beginning January 1, 2015, provided those key employees are still in Weiser’s employ at the time the options are exercised. The options expire on January 1, 2016. On January 1, 2015, when the market price of the stock was $29 per share, all 40,000 options were exercised. The amount of compensation expense Weiser should record for 2015 under the fair value method is 6) Carr Corporation retires its $300,000 face value bonds at 105 on January 1, following the payment of interest. The carrying value of the

8. bonds at the redemption date is $311,235. The entry to record the redemption will include a 7) On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of $4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straightline basis. The entry to record the issuance of the bonds would include a credit of 8) Farmer Company issues $25,000,000 of 10-year, 9% bonds on March 1, 2014 at 97 plus accrued interest. The bonds are dated January 1, 2014, and pay interest on June 30 and December 31. What is the total cash received on the issue date? 9) On its December 31, 2014 balance sheet, Emig Corp. reported bonds payable of $3,000,000 and related unamortized bond issue costs of $160,000. The bonds had been issued at par. On January 2, 2015, Emig retired $1,500,000 of the outstanding bonds at par plus a call premium of $35,000. What amount should Emig report in its 2015 income statement as loss on extinguishment of debt (ignore taxes)? 10) Feller Company issues $15,000,000 of 10-year, 9% bonds on March 1, 2014 at 97 plus accrued interest. The bonds are dated January 1, 2014, and pay interest on June 30 and December 31. What is the total cash received on the issue date? 11) Where is debt callable by the creditor reported on the debtor's financial statements?

9. 12) Sawyer Company self-insures its property for fire and storm damage. If the company were to obtain insurance on the property, it would cost them $1,500,000 per year. The company estimates that on average it will incur losses of $1,200,000 per year. During 2014, $525,000 worth of losses were sustained. How much total expense and/or loss should be recognized by Sawyer Company for 2014? 13) A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should 14) On September 1, Horton purchased $13,300 of inventory items on credit with the terms 1/15, net 30, FOB destination. Freight charges were $280. Payment for the purchase was made on September 18. Assuming Horton uses the perpetual inventory system and the net method of accounting for purchase discounts, what amount is recorded as inventory from this purchase? 15) What is a discount as it relates to zero-interest-bearing notes payable? 16) Which of the following legal fees should be capitalized? 17) Which of the following costs of goodwill should be amortized over their estimated useful lives? 18) MaBelle Corporation incurred the following costs in 2015: Acquisition of R&D equipment with a useful life of 4 years in R&D projects $800,000 Start-up costs incurred when opening a new plant 140,000 Advertising expense to introduce a new product 700,000 Engineering costs incurred to advance a product to full production stage 500,000 What amount should MaBelle record as research & development expense in 2015?

10. 19) Jenks Corporation acquired Linebrink Products on January 1, 2015 for $8,000,000, and recorded goodwill of $1,500,000 as a result of that purchase. At December 31, 2015, Linebrink Products had a fair value of $6,800,000. The net identifiable assets of the Linebrink (excluding goodwill) had a fair value of $5,800,000 at that time. What amount of loss on impairment of goodwill should Jenks record in 2015? 20) The general ledger of Vance Corporation as of December 31, 2015, includes the following accounts: Copyrights $30,000 Deposits with advertising agency (will be used to promote goodwill) 27,000 Discount on bonds payable 70,000 Excess of cost over fair value of identifiable net assets of Acquired subsidiary 480,000 Trademarks 90,000 In the preparation of Vance's balance sheet as of December 31, 2015, what should be reported as total intangible assets? 21) Sealy Corporation had the following information in its financial statements for the years ended 2014 and 2015: Cash dividends for the year 2015 $5,000 Net income for the year ended 2015 87,000 Market price of stock, 12/31/14 10 Market price of stock, 12/31/15 12 Common stockholders' equity, 12/31/14 1,000,000 Common stockholders' equity, 12/31/15 1,200,000 Outstanding shares, 12/31/15 100,000 Preferred dividends for the year ended 2015 10,000 What is the rate of return on common stock equity for Sealy Corporation for the year ended 2015? 22) An entry is not made on the

11. 23) The issuer of a 5% common stock dividend to common stockholders should transfer from retained earnings to paid-in capital an amount equal to the 24) Layne Corporation had the following information in its financial statements for the years ended 2014 and 2015: Cash dividends for the year 2015 $10,000 Net income for the year ended 2015 83,000 Market price of stock, 12/31/14 10 Market price of stock, 12/31/15 12 Common stockholders' equity, 12/31/14 1,600,000 Common stockholders' equity, 12/31/15 1,980,000 Outstanding shares, 12/31/15 180,000 Preferred dividends for the year ended 2015 15,000 What is the book value per share for Layne Corporation for the year ended 2015? 25) The pre-emptive right of a common stockholder is the right to ACC 304 Final Exam Part 1 (3 Sets) 1) Swing High Inc. offers its 100 employees to participate in an employee share-purchase plan. Under the terms of plan, employees are entitled to purchase 10 shares at 10% discount. The par values of shares were $10. Overall, 60 employees accepted the offer and each employee purchased six shares. The market price on purchase date was $100. 2) Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2014. No common stock was issued during

12. 2015. On January 1, 2015, Didde issued 200,000 shares of nonconvertible preferred stock. During 2015, Didde declared and paid $75,000 cash dividends on the common stock and $60,000 on the preferred stock. Net income for the year ended December 31, 2015 was $465,000. What should be Didde's 2015 earnings per common share? 3) When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be 4) On July 1, 2014, an interest payment date, $90,000 of Parks Co. bonds were converted into 1,800 shares of Parks Co. common stock each having a par value of $45 and a market value of $54. There is $3,600 unamortized discount on the bonds. Using the book value method, Parks would record 5) Convertible bonds 6) Paige Co. took advantage of market conditions to refund debt. This was the fourth refunding operation carried out by Paige within the last three years. The excess of the carrying amount of the old debt over the amount paid to extinguish it should be reported as a 7) Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to 8) When a business enterprise enters into what is referred to as off-balance-sheet financing, the company 9) When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be 10) On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of $4,000,000 at 104. Interest is paid on October 1 and

13. April 1, with any premiums or discounts amortized on a straight-line basis. 11) Which of the following taxes does not represent a common employee payroll deduction? 12) Which of the following is an example of a contingent liability? 13) Sawyer Company self-insures its property for fire and storm damage. If the company were to obtain insurance on the property, it would cost them $1,500,000 per year. The company estimates that on average it will incur losses of $1,200,000 per year. During 2014, $525,000 worth of losses were sustained. How much total expense and/or loss should be recognized by Sawyer Company for 2014? 14) Greeson Corp. signed a three-month, zero-interest-bearing note on November 1, 2014 for the purchase of $250,000 of inventory. The face value of the note was $253,900. Greeson used a "Discount on Note Payable" account to initially record the note. Assuming that the discount will be amortized equally over the 3-month period and that there was no adjusting entry made for November, the adjusting entry made at December 31, 2012 will include a

14. 17) One factor that is not considered in determining the useful life of an intangible asset is 18) In 2015, Edwards Corporation incurred research and development costs as follows: Materials and equipment $110,000 Personnel 130,000 Indirect costs 150,000 $390,000 These costs relate to a product that will be marketed in 2016. It is estimated that these costs will be recouped by December 31, 2018. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2015? 19) The carrying value of an intangible is 20) Under current accounting practice, intangible assets are classified as 21) The statement of changes in equity has columns for each of the following except: 22) The pre-emptive right of a common stockholder is the right to 23) Total stockholders' equity represents 24) The issuer of a 5% common stock dividend to common stockholders should transfer from retained earnings to paid-in capital an amount equal to the 25) Which of the following features of preferred stock makes it more like a debt than an equity instrument?

15. ACC 304 Final Exam Part 2 (2 Sets)For more classes visit www.snaptutorial.com ACC 304 Final Exam Part 2 (2 Sets) 1 1) On January 1, 2015, Piper Co. issued ten-year bonds with a face value of $3,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are: Present value of 1 for 10 periods at 10% .386 Present value of 1 for 10 periods at 12% .322 Present value of 1 for 20 periods at 5% .377 Present value of 1 for 20 periods at 6% .312 Present value of annuity for 10 periods at 10% 6.145 Present value of annuity for 10 periods at 12% 5.650 Present value of annuity for 20 periods at 5% 12.462 Present value of annuity for 20 periods at 6% 11.470 2) Without prejudice to your solution in part (a), assume that the issue price was $2,652,000. Prepare the amortization table for 2015, assuming that amortization is recorded on interest payment dates using the effective-interest method. 3) The following information pertains to Parsons Co.: Preferred stock, cumulative: Par value per share $100

16. Compute (assume no changes in balances during the past year): (Round per share and ratios to 2 decimal places, e.g. $15.75 or 15.75%.) (a) Total amount of stockholders' equity in the balance sheet $ 4) Sisco Co. purchased a patent from Thornton Co. for $620,000 on July 1, 2012. Expenditures of $119,000 for successful litigation in defense of the patent were paid on July 1, 2015. Sisco estimates that the useful life of the patent will be 20 years from the date of acquisition.

17. Prepare a computation of the carrying value of the patent at December 31, 2015. 5) On August 31, Latty Co. partially refunded $401,000 of its outstanding 10% note payable made one year ago to Dugan State Bank by paying $401,000 plus $40,100 interest, having obtained the $441,100 by using $126,240 cash and signing a new one-year $346,000 note discounted at 9% by the bank. 6) Make the entry to record the partial refunding. Assume Latty Co. makes reversing entries when appropriate. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) 6) 7) Prepare the adjusting entry at December 31, assuming straight-line amortization of the discount. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) ACC 304 Final Exam Part 2 (2 Sets) 1) The following information pertains to Parsons Co. Preferred stock, cumulative:

18. Additional paid-in capital $480,000 Unappropriated retained earnings (after closing) $250,000 Retained earnings appropriated for contingencies $280,000 Common treasury stock: Number of shares 9,000 Total cost $240,000 Net income $610,000 Compute (assume no changes in balances during the past year): (Round per share and ratios to 2 decimal places, e.g. $15.75 or 15.75%.) (a) Total amount of stockholders' equity in the balance sheet $ 2) On January 1, 2015, Piper Co. issued ten-year bonds with a face value of $3,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are: Present value of 1 for 10 periods at 10% .386 Present value of 1 for 10 periods at 12% .322 Present value of 1 for 20 periods at 5% .377 Present value of 1 for 20 periods at 6% .312 Present value of annuity for 10 periods at 10% 6.145 Present value of annuity for 10 periods at 12% 5.650 Present value of annuity for 20 periods at 5% 12.462 Present value of annuity for 20 periods at 6% 11.470

19. 3) Calculate the issue price of the bonds. Issue price of bond 4) Without prejudice to your solution in part (a), assume that the issue price was $2,652,000. Prepare the amortization table for 2015, assuming that amortization is recorded on interest payment dates using the effective-interest method. 5) Sisco Co. purchased a patent from Thornton Co. for $620,000 on July 1, 2012. Expenditures of $119,000 for successful litigation in defense of the patent were paid on July 1, 2015. Sisco estimates that the useful life of the patent will be 20 years from the date of acquisition. Prepare a computation of the carrying value of the patent at December 31, 2015. 6) On August 31, Latty Co. partially refunded $443,000 of its outstanding 10% note payable made one year ago to Dugan State Bank by paying $443,000 plus $44,300 interest, having obtained the $487,300 by using $134,220 cash and signing a new one-year $388,000 note discounted at 9% by the bank. 7) Make the entry to record the partial refunding. Assume Latty Co. makes reversing entries when appropriate. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) 8) Prepare the adjusting entry at December 31, assuming straight-line amortization of the discount. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit ACC 304 Week 1 Chapter 8 Homework

20. For more classes visit www.snaptutorial.com ACC 304 Week 1 Chapter 8 Homework 1) Matlock Company uses a perpetual inventory system. Its beginning inventory consists 50 units that cost $34 each. During June , (1) the company purchased units at $34 each, (2) returned 6 units for credit ,and (3) sold 125 unit at $50 each. Journalize the June transactions. 2) Amsterdam Company uses a periodic inventory system. For April, When the company sold 600 units, The following information is available. calculate weighted average cost per unit. 3) Arna, Inc. uses the dollar value LIFO method of computing its inventory. Data for the past 3 year follow. Compute the value of the 2014 and 2015 inventories using the dollar-value LIFE method. 4) Craig Company asks you to review its December 31, 2014, inventory values and prepare the necessary adjustments to the book. The following information is given to u. determine the proper inventory balance for Craig Company at December 31, 2014. 5) Prepare any correcting entries to adjust inventory to its proper amount at December 31, 2014. Assume the books have not been closed. 6) The net income per books of Linda Patrick Company was determined without knowledge of the errors indicated below. Prepare work sheet to show the adjusted net income figure for each of the 6 years after taking into account the inventory errors. 7) Presented below the information related to Dino Radja Company. Compute the ending inventory for Dino Radja Company for 2011 throw 2016 using the Dollar value LIFO method. 8) Under IFRS, an entity should initially recognize inventory when

21. 9) With respect to accounting of inventories, which of the following is a difference that exists for IFRS, as opposed to U.S GAAP? 10) Some of the transactions of Torres Company during August are listed below. Torres uses the periodic inventory method. 11) Assuming that purchases are recorded at gross amounts and that discounts are to be recorded when taken: prepare general journal entries to record the transactions 12) Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses: prepare general journal entries to record the transactions 13) Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses: prepare the adjusting entry necessary on August 31 if financial statements are to be prepared at that time. 14) Under IFRS, which of the following would be included in the cost of inventories? 15) Under IFRS, inventories are classified as 16) Which of the following best describes the IFRS requirement for applying the same cost formula to all inventories? ACC 304 Week 2 Chapter 8 Quiz (All Possible Questions) For more classes visit www.snaptutorial.com ACC 304 Week 2 Quiz - Strayer NEW

22. CHAPTER 8 VALUATION OF INVENTORIES:A COST-BASIS APPROACH IFRS questions are available at the end of this chapter. TRUE FALSE—Conceptual 1. A manufacturing concern would report the cost of units only partially processed as inventory in the balance sheet. 2. Both merchandising and manufacturing companies normally have multiple inventory accounts. 3. When using a perpetual inventory system, freight charges on goods purchased are debited to Freight-In. 4. If a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier delivers the goods to the common carrier. 5. If ending inventory is understated, then net income is understated. 6. If both purchases and ending inventory are overstated by the same amount, net income is not affected. 7. Freight charges on goods purchased are considered a period cost and therefore are not part of the cost of the inventory.

23. 8. Purchase Discounts Lost is a financial expense and is reported in the “other expenses and losses” section of the income statement. 9. The cost flow assumption adopted must be consistent with the physical movement of the goods. 10. In all cases when FIFO is used, the cost of goods sold would be the same whether a perpetual or periodic system is used. 11. The change in the LIFO Reserve from one period to the next is recorded as an adjustment to Cost of Goods Sold. 12. Many companies use LIFO for both tax and internal reporting purposes. 13. LIFO liquidation often distorts net income, but usually leads to substantial tax savings. 14. LIFO liquidations can occur frequently when using a specific-goods approach. 15. Dollar-value LIFO techniques help protect LIFO layers from erosion.

24. 16. The dollar-value LIFO method measures any increases and decreases in a pool in terms of total dollar value and physical quantity of the goods. 17. A disadvantage of LIFO is that it does not match more recent costs against current revenues as well as FIFO. 18. The LIFO conformity rule requires that if a company uses LIFO for tax purposes, it must also use LIFO for financial accounting purposes. 19. Use of LIFO provides a tax benefit in an industry where unit costs tend to decrease as production increases. 20. LIFO is inappropriate where unit costs tend to decrease as production increases. True False Answers—Conceptual MULTIPLE CHOICE—Conceptual 21. Which of the following inventories carried by a manufacturer is similar to the merchandise inventory of a retailer? a. Raw materials. b. Work-in-process. c. Finished goods.

25. d. Supplies. 22. Where should raw materials be classified on the balance sheet? a. Prepaid expenses. b. Inventory. c. Equipment. d. Not on the balance sheet. 23. Which of the following accounts is not reported in inventory? a. Raw materials. b. Equipment. c. Finished goods. d. Supplies. 24. Why are inventories included in the computation of net income? a. To determine cost of goods sold. b. To determine sales revenue. c. To determine merchandise returns. d. Inventories are not included in the computation of net income.

26. 25. Which of the following is a characteristic of a perpetual inventory system? a. Inventory purchases are debited to a Purchases account. b. Inventory records are not kept for every item. c. Cost of goods sold is recorded with each sale. d. Cost of goods sold is determined as the amount of purchases less the change in inventory. 26. How is a significant amount of consignment inventory reported in the balance sheet? a. The inventory is reported separately on the consignor's balance sheet. b. The inventory is combined with other inventory on the consignor's balance sheet. c. The inventory is reported separately on the consignee's balance sheet. d. The inventory is combined with other inventory on the consignee's balance sheet. 27. Where should goods in transit that were recently purchased f.o.b. destination be included on the balance sheet? a. Accounts payable. b. Inventory.

27. c. Equipment. d. Not on the balance sheet. 28. If a company uses the periodic inventory system, what is the impact on net income of including goods in transit f.o.b. shipping point in purchases, but not ending inventory? a. Overstate net income. b. Understate net income. c. No effect on net income. d. Not sufficient information to determine effect on net income. 29. If a company uses the periodic inventory system, what is the impact on the current ratio of including goods in transit f.o.b. shipping point in purchases, but not ending inventory? a. Overstate the current ratio. b. Understate the current ratio. c. No effect on the current ratio. d. Not sufficient information to determine effect on the current ratio. 30. What is consigned inventory? a. Goods that are shipped, but title transfers to the receiver.

28. b. Goods that are sold, but payment is not required until the goods are sold. c. Goods that are shipped, but title remains with the shipper. d. Goods that have been segregated for shipment to a customer. 31. When using a perpetual inventory system, a. no Purchases account is used. b. a Cost of Goods Sold account is used. c. two entries are required to record a sale. d. all of these. 32. Goods in transit which are shipped f.o.b. shipping point should be a. included in the inventory of the seller. b. included in the inventory of the buyer. c. included in the inventory of the shipping company. d. none of these. 33. Goods in transit which are shipped f.o.b. destination should be

29. a. included in the inventory of the seller. b. included in the inventory of the buyer. c. included in the inventory of the shipping company. d. none of these. 34. Which of the following items should be included in a company's inventory at the balance sheet date? a. Goods in transit which were purchased f.o.b. destination. b. Goods received from another company for sale on consignment. c. Goods sold to a customer which are being held for the customer to call for at his or her convenience. d. None of these. Use the following information for questions 35 and 36. During 2012 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2013. Nolan then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Carne. In 2013 when Carne repurchased the inventory, Nolan used the proceeds to repay its bank loan. 35. This transaction is known as a(n) a. consignment.

30. b. installment sale. c. assignment for the benefit of creditors. d. product financing arrangement. 36. On whose books should the cost of the inventory appear at the December 31, 2012 balance sheet date? a. Carne Corporation b. Nolan Corporation c. Norwalk Bank d. Nolan Corporation, with Carne making appropriate note disclosure of the transaction 37. Goods on consignment are a. included in the consignee's inventory. b. recorded in a Consignment Out account which is an inventory account. c. recorded in a Consignment In account which is an inventory account. d. all of these S38. Valuation of inventories requires the determination of all of the following except

31. a. the costs to be included in inventory. b. the physical goods to be included in inventory. c. the cost of goods held on consign-ment from other companies. d. the cost flow assumption to be adopted. P39. The accountant for the Pryor Sales Company is preparing the income statement for 2012 and the balance sheet at December 31, 2012. Pryor uses the periodic inventory system. The January 1, 2012 merchandise inventory balance will appear a. only as an asset on the balance sheet. b. only in the cost of goods sold section of the income statement. c. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet. d. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet. P40. If the beginning inventory for 2012 is overstated, the effects of this error on cost of goods sold for 2012, net income for 2012, and assets at December 31, 2013, respectively, are a. overstatement, understatement, overstatement. b. overstatement, understatement, no effect.

32. c. understatement, overstatement, overstatement. d. understatement, overstatement, no effect. S41. The failure to record a purchase of mer-chandise on account even though the goods are properly included in the physical inven-tory results in a. an overstatement of assets and net income. b. an understatement of assets and net income. c. an understatement of cost of goods sold and liabilities and an overstatement of assets. d. an understatement of liabilities and an overstatement of owners' equity. 42. Dolan Co. received merchandise on consignment. As of March 31, Dolan had recorded the transaction as a purchase and included the goods in inventory. The effect of this on its financial statements for March 31 would be a. no effect. b. net income was correct and current assets and current liabilities were overstated. c. net income, current assets, and current liabilities were overstated. d. net income and current liabilities were overstated.

33. 43. Green Co. received merchandise on consignment. As of January 31, Green included the goods in inventory, but did not record the transaction. The effect of this on its financial statements for January 31 would be a. net income, current assets, and retained earnings were overstated. b. net income was correct and current assets were understated. c. net income and current assets were overstated and current liabilities were understated. d. net income, current assets, and retained earnings were understated. 44. Feine Co. accepted delivery of merchandise which it purchased on account. As of December 31, Feine had recorded the transaction, but did not include the merchandise in its inventory. The effect of this on its financial statements for December 31 would be a. net income, current assets, and retained earnings were understated. b. net income was correct and current assets were understated. c. net income was understated and current liabilities were overstated. d. net income was overstated and current assets were understated. 45. On June 15, 2012, Wynne Corporation accepted delivery of merchandise which it pur-chased on account. As of June 30, Wynne had not recorded the transaction or included the merchandise in its inventory. The effect of this on its balance sheet for June 30, 2012 would be

34. a. assets and stockholders' equity were overstated but liabilities were not affected. b. stockholders' equity was the only item affected by the omission. c. assets, liabilities, and stockholders' equity were understated. d. none of these. 46. What is the effect of a $50,000 overstatement of last year's inventory on current years ending retained earning balance? a. Understated by $50,000. b. No effect. c. Overstated by $50,000. d. Need more information to determine. 47. Which of the following is a product cost as it relates to inventory? a. Selling costs. b. Interest costs. c. Raw materials. d. Abnormal spoilage. 48. Which of the following is a period cost?

35. a. Labor costs. b. Freight in. c. Production costs. d. Selling costs. 49. Which method may be used to record cash discounts a company receives for paying suppliers promptly? a. Net method. b. Gross method. c. Average method. d. a and b. 50. Which of the following is included in inventory costs? a. Product costs. b. Period costs. c. Product and period costs. d. Neither product or period costs. 51. Which of the following is correct?

36. a. Selling costs are product costs. b. Manufacturing overhead costs are product costs. c. Interest costs for routine inventories are product costs. d. All of these. 52. All of the following costs should be charged against revenue in the period in which costs are incurred except for a. manufacturing overhead costs for a product manufactured and sold in the same accounting period. b. costs which will not benefit any future period. c. costs from idle manufacturing capacity resulting from an unexpected plant shutdown. d. costs of normal shrinkage and scrap incurred for the manufacture of a product in ending inventory. 53. Which of the following types of interest cost incurred in connection with the purchase or manufacture of inventory should be capitalized as a product cost? a. Purchase discounts lost b. Interest incurred during the production of discrete projects such as ships or real estate projects c. Interest incurred on notes payable to vendors for routine purchases made on a repetitive basis

37. d. All of these should be capitalized. 54. The use of a Discounts Lost account implies that the recorded cost of a purchased inventory item is its a. invoice price. b. invoice price plus the purchase discount lost. c. invoice price less the purchase discount taken. d. invoice price less the purchase discount allowable whether taken or not. 55. The use of a Purchase Discounts account implies that the recorded cost of a purchased inventory item is its a. invoice price. b. invoice price plus any purchase discount lost. c. invoice price less the purchase discount taken. d. invoice price less the purchase discount allowable whether taken or not. Use the following information for questions 56 and 57. During 2012, which was the first year of operations, Oswald Company had merchandise purchases of $985,000 before cash discounts. All

38. purchases were made on terms of 2/10, n/30. Three-fourths of the items purchased were paid for within 10 days of purchase. All of the goods available had been sold at year end. 56. Which of the following recording procedures would result in the highest cost of goods sold for 2012? 1. Recording purchases at gross amounts 2. Recording purchases at net amounts, with the amount of discounts not taken shown under "other expenses" in the income statement a. 1 b. 2 c. Either 1 or 2 will result in the same cost of goods sold. d. Cannot be determined from the information provided. 57. Which of the following recording procedures would result in the highest net income for 2012? 1. Recording purchases at gross amounts 2. Recording purchases at net amounts, with the amount of discounts not taken shown under "other expenses" in the income statement a. 1 b. 2 c. Either 1 or 2 will result in the same net income.

39. d. Cannot be determined from the information provided. 58. When using the periodic inventory system, which of the following generally would not be separately accounted for in the computation of cost of goods sold? a. Trade discounts applicable to purchases during the period b. Cash (purchase) discounts taken during the period c. Purchase returns and allowances of merchandise during the period d. Cost of transportation-in for merchandise purchased during the period S59. Costs which are inventoriable include all of the following except a. costs that are directly connected with the bringing of goods to the place of business of the buyer. b. costs that are directly connected with the converting of goods to a salable condition. c. buying costs of a purchasing department. d. selling costs of a sales department. P60. Which inventory costing method most closely approximates current cost for each of the following:

40. Ending Inventory Cost of Goods Sold a. FIFO FIFO b. FIFO LIFO c. LIFO FIFO d. LIFO LIFO for: ACC 304 Week 2 Chapter 9 HomeworkFor more classes visit www.snaptutorial.com ACC 304 Week 2 Chapter 9 Homework 1) Floyd Corporation has the following four items in its ending inventory. Determine the final lower-of-cost-or-market inventory value for each item. 2) Bell, Inc. buys 1,000 computer game CDs from a distributor who is disconnecting those games. The purchase price for the lot is $8,000.Bell will group the CDs into three price categories for resale, as indicated bellow. Determine the cost per CD for each group, using the relative sales value method. 3) Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 t retail. Net purchase were $12,000 at cost and $17,000 at retail. Net markups were $10,000; net markdowns were $7,000; and sales

41. revenue was $147,000.compute ending inventory at cost using the conventional retail method. 4) Marvin Gaye Company has been having difficulty obtaining key raw materials for its manufacturing process. The Company therefore signed a long-term non cancelable purchase commitment with its largest supplier of this raw material on November 30, 2014,at an agreed price of $400,0000. At December 31, 2014, the raw material had declined in price to $365,000. What entry would you make on December 31, 2014, to recognize these facts? 5) Tim Legler requires an estimate of the cost of goods loat by fire on March 9. Merchandise on hand on January 1 was $38,000. Purchases since January 1 were $72,000; freight-in $3,400; purchases returns and allowances, $2,400. Sales are made at 33 1/3% above cost and totaled $100,000 to March 9. Goods coasting $10,900 were left undamaged by the fire; remaining goods were destroyed. (a). compute the cost goods destroyed. (b). compute the cost goods destroyed, assuming that the gross profit 33 1/3% of sales. 6) Presented below is information related to Ricky Henderson Company. Compute the inventory by the conventional retail inventory method. 7) The inventory section of Maddox’s balance sheet as of November 30,2014, including required foot notes, is presented below are the inventory section supporting calculations. 8) All of the following are key similarities between GAAP and IFRS with respect to accounting for inventories except: 9) Starfish Company (a Company using Gap and LIFO inventory method) is considering changing to IFRS and the FIFO inventory method. How would a comparison of these methods affect Starfish’s financials? 10) Assume that Darcy industry had the following inventory values. 1. Inventory cost (on December 31,2014)$1,500 2. Inventory sales value (on December 31,2014)$1,350 3. Inventory net realizable value (on December 31,2014)$1,320 Under IFRS, what is the inventory carrying value on December 31, 2014 ?

42. 11) Under IFRS, agricultural activity results in which of the following types of assets? 1. Agricultural produce 2. Biological assets ACC 304 Week 3 Chapter 9 Quiz (All Possible Questions) For more classes visit www.snaptutorial.com

43. 1. A company should abandon the historical cost principle when the future utility of the inventory item falls below its original cost. 2. The lower-of-cost-or-market method is used for inventory despite being less conservative than valuing inventory at market value. 3. The purpose of the “floor” in lower-of-cost-or-market considerations is to avoid overstating inventory. 4. Application of the lower-of-cost-or-market rule results in inconsistency because a company may value inventory at cost in one year and at market in the next year. 5. GAAP requires reporting inventory at net realizable value, even if above cost, whenever there is a controlled market with a quoted price applicable to all quantities. 6. A reason for valuing inventory at net realizable value is that sometimes it is too difficult to obtain the cost figures. 7. In a basket purchase, the cost of the individual assets acquired is determined on the basis of their relative sales value. 8. A basket purchase occurs when a company agrees to buy inventory weeks or months in advance. 9. Most purchase commitments must be recorded as a liability. 10. If the contract price on a noncancelable purchase commitment exceeds the market price, the buyer should record any expected losses on the commitment in the period in which the market decline takes place.

44. 11. When a buyer enters into a formal, noncancelable purchase contract, an asset and a liability are recorded at the inception of the contract. 12. The gross profit method can be used to approximate the dollar amount of inventory on hand. 13. In most situations, the gross profit percentage is stated as a percentage of cost. 14. A disadvantage of the gross profit method is that it uses past percentages in determining the markup. 15. When the conventional retail method includes both net markups and net markdowns in the cost-to-retail ratio, it approximates a lower-of-cost-or-market valuation. 16. In the retail inventory method, the term markup means a markup on the original cost of an inventory item. 17. In the retail inventory method, abnormal shortages are deducted from both the cost and retail amounts and reported as a loss. 18. The inventory turnover ratio is computed by dividing the cost of goods sold by the ending inventory on hand. 19. The average days to sell inventory represents the average number of days’ sales for which a company has inventory on hand. *20. The LIFO retail method assumes that markups and markdowns apply only to the goods purchased during the period. True False Answers—Conceptual

45. MULTIPLE CHOICE—Conceptual 21. Which of the following is true about lower-of-cost-or-market? a. It is inconsistent because losses are recognized but not gains. b. It usually understates assets. c. It can increase future income. d. All of these. 22. The primary basis of accounting for inventories is cost. A departure from the cost basis of pricing the inventory is required where there is evidence that when the goods are sold in the ordinary course of business their a. selling price will be less than their replacement cost. b. replacement cost will be more than their net realizable value. c. cost will be less than their replacement cost. d. future utility will be less than their cost. 23. When valuing raw materials inventory at lower-of-cost-or-market, what is the meaning of the term "market"? a. Net realizable value b. Net realizable value less a normal profit margin c. Current replacement cost

46. d. Discounted present value 24. In no case can "market" in the lower-of-cost-or-market rule be more than a. estimated selling price in the ordinary course of business. b. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal. c. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for an approximately normal profit margin. d. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate reserve for possible future losses. 25. Designated market value a. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin. b. should always be equal to net realizable value. c. may sometimes exceed net realizable value. d. should always be equal to net realizable value less a normal profit margin. 26. Lower-of-cost-or-market

47. a. is most conservative if applied to the total inventory. b. is most conservative if applied to major categories of inventory. c. is most conservative if applied to individual items of inventory. d. must be applied to major categories for taxes. 27. An item of inventory purchased this period for $15.00 has been incorrectly written down to its current replacement cost of $10.00. It sells during the following period for $30.00, its normal selling price, with disposal costs of $3.00 and normal profit of $12.00. Which of the following statements is not true? a. The cost of sales of the following year will be understated. b. The current year's income is understated. c. The closing inventory of the current year is understated. d. Income of the following year will be understated. S28. When the cost-of-goods-sold method is used to record inventory at market a. there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale. b. a loss is recorded directly in the inventory account by crediting inventory and debiting loss on inventory decline.

48. c. only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements. d. the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold. 29. Lower-of-cost-or-market as it applies to inventory is best described as the a. drop of future utility below its original cost. b. method of determining cost of goods sold. c. assumption to determine inventory flow. d. change in inventory value to market value. 30. The floor to be used in applying the lower-of-cost-or-market method to inventory is determined as the a. net realizable value. b. net realizable value less normal profit margin. c. replacement cost. d. selling price less costs of completion and disposal. 31. What is the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory? a. Prevents understatement of the inventory value.

49. b. Allows for a normal profit to be earned. c. Allows for items to be valued at replacement cost. d. Prevents overstatement of the value of obsolete or damaged inventories. 32. Why are inventories stated at lower-of-cost-or-market? a. To report a loss when there is a decrease in the future utility. b. To be conservative. c. To report a loss when there is a decrease in the future utility below the original cost. d. To permit future profits to be recognized. 33. Which of the following is not an acceptable approach in applying the lower-of-cost-or-market method to inventory? a. Inventory location. b. Categories of inventory items. c. Individual item. d. Total of the inventory. 34. Which method(s) may be used to record a loss due to a price decline in the value of inventory?

50. a. Cost-of-goods-sold. b. Sales method. c. Loss method d. Both a and c. 35. Why might inventory be reported at sales prices (net realizable value or market price) rather than cost? a. When there is a controlled market with a quoted price applicable to all quantities and when there are no significant costs of disposal. b. When there are no significant costs of disposal. c. When a non-cancellable contract exists to sell the inventory. d. When there is a controlled market with a quoted price applicable to all quantities. S36. Recording inventory at net realizable value is permitted, even if it is above cost, when there are no significant costs of disposal involved and a. the ending inventory is determined by a physical inventory count. b. a normal profit is not anticipated. c. there is a controlled market with a quoted price applicable to all quantities.