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ACC 577 Final Exam Guide

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ACC 577 Final Exam Study Question 1 At the time Company P acquired controlling interest of Company S the following accounts and balances existed on the books of the two companies: Which one of the following amounts should be eliminated in preparing a consolidated balance sheet immediately following the business combination? Question 2 In which one of the following cases will a non-cash asset transferred as consideration in a business combination be measured at carrying value, not at fair value? Question 3 On January 1, 200x Ritt Corp. purchased 80% of Shaw Corp.'s $10 par common stock for $975,000. On this date, the carrying


amount of Shaw's net assets was $1,000,000. The fair values of Shaw's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net) which were $100,000 in excess of the carrying amount. On that date, the fair value of the 20% non controlling interest in Shaw was appropriately determined to be $200,000. For the year ended December 31, 200x, Shaw had net income of $190,000 and paid cash dividends totaling $125,000. In the January 1, 200x consolidated balance sheet, goodwill should be reported at Question 4 On December 31, 1988, Saxe Corporation was merged into Poe Corporation. In the business combination, Poe issued 200,000 shares of its $10 par common stock, with a market price of $18 a share, for all of Saxe's common stock. The stockholders' equity section of each company's balance sheet immediately before the combination was: Assume that the merger is accounted for using the acquisition method of accounting. December 31, 1988 additional paid-in capital should be reported at Question 5 Scroll, Inc., a wholly owned subsidiary of Pirn, Inc., began operations on January 1, 2005. The following information is from the condensed 2005 income statements of Pirn and Scroll: Additional information: Sales by Pirn to Scroll are made on the same terms as those made to third parties. Equipment purchased by Scroll from Pirn


for $36,000 on January 1, 2005, is depreciated using the straight-line method over four years. In Pirn's December 31, 2005, consolidating worksheet, how much intercompany profit should be eliminated from Scroll's inventory? Question 6 The preparation of consolidated statements likely will require the following information about the subsidiary's assets and liabilities at the date of acquisition: Question 7 Which one of the following levels of voting ownership is normally assumed to convey significant influence over an investee? Question 8 In recording its acquisition of Lambda, Inc., Omega, Inc. properly recognized a contingent consideration liability of $28,000 associated with a possible payment based on a target amount of post-combination cash flow from operations. Shortly after the combination, but during the measurement period, the national economy experienced a significant downturn which made it unlikely that the target amount would be reached. As a consequence, at the end of Omega's fiscal period, the liability was properly revalued to a fair value of $9,000. Which one of the following is the amount of gain or loss that will be


recognized in income as a result of the reevaluation of the contingent liability? Question 9 Beni Corp. purchased 100% of Carr Corp.'s outstanding capital stock for $430,000 cash. Immediately before the purchase, the balance sheets of both corporations reported the following: On the date of purchase, the fair value of Carr's assets was $50,000 more than the aggregate carrying amounts. In the consolidated balance sheet prepared immediately after the purchase, the consolidated stockholders' equity should amount to: Question 10 Which one of the following methods, if any, may a parent use on its books to carry an investment in a subsidiary that it will consolidate? Question 11 Parco owns 100% of its subsidiary, Subco, which it acquired at book value. It carries its investment in Subco on its books using the equity method of accounting. At the beginning of its 2009 fiscal year, the investment in Subco account was $552,000. During 2009 Subco reported the following: In preparing its 2009 fiscal year consolidated statements, which one of the following is the total amount of equity revenue that Parco will have to reverse for 2009 as a result of it ownership of Subco? Question 12


Which of the following kinds of transactions should be eliminated in the consolidating process? Question 13 Which of the following statements concerning the primary beneficiary of a variable-interest entity is/are correct? I. The primary beneficiary has the ability to direct the most significant economic activities of the variable-interest entity. II. Only one entity can be the primary beneficiary of a variable-interest entity. III. The investor that has the greatest equity ownership in a variable-interest entity will be the primary beneficiary of the entity. Question 14 Sun Co. is a wholly owned subsidiary of Star Co. Both companies have separate general ledgers, and prepare separate financial statements. Sun requires stand-alone financial statements. Which of the following statements is correct? Question 15 P Co. purchased term bonds at a premium on the open market. These bonds represented 20 percent of the outstanding class of bonds issued at a discount by S Co., P's wholly owned subsidiary. P intends to hold the bonds until maturity. In a consolidated balance sheet, the difference between the bond carrying amounts in the two companies would be Question 16


In which of the following circumstances of a business combination, if any, could the recognition of a gain occur at the time of the combination? Question 17 Aceco has significant investments in three separate entities. These investments are: Which of Aceco's investments would be consolidated with Aceco in its consolidated financial statements? Question 18 Consolidated financial statements are based on the concept that: Question 19 On January 1, 2005, Poe Corp. sold a machine for $900,000 to Saxe Corp., its wholly-owned subsidiary. Poe paid $1,100,000 for this machine, which had accumulated depreciation of $250,000. Poe estimated a $100,000 salvage value and depreciated the machine on the straight-line method over 20 years, a policy which Saxe continued. In Poe's December 31, 2005, consolidated balance sheet, this machine should be included in cost and accumulated depreciation as Question 20 In which one of the following cases is Company A most likely to be the acquirer of Company B in a business combination? Question 1


Hedges of foreign currency risks can be the hedge of: Question 2 On its December 31, 2004 balance sheet, Nilo Corp reported bonds payable of $8,000,000 and related unamortized bond issue costs of $430,000. The bonds had been issued at par. On January 2, 2005, Nilo retired $4,000,000 of the outstanding bonds at par plus a call premium of $100,000. What amount should Nilo report in its 2005 income statement as loss on extinguishment of debt? Question 3 Servco, a loan servicing agency, paid $60,000 to acquire a threeyear right to service $1,000,000 of Banco's loans. Servco will be entitled to a servicing fee of 1% of the interest and fees collected during the three-year period. Servco expects its servicing fees to be: Which one of the following is the amount of gross profit after amortization of the servicing asset that Servco expects to earn over the three-year life of the service contract? Question 4 Specific disclosures in financial statements are required when an entity engages in: Question 5


Which one of the following sets best describes the meaning of the terms "underlying" and "notional amount" as applied to derivative instruments? Question 6 Which of the following must the transferor of a financial asset disclose? I. Assets pledged as collateral, either in the balance sheet or notes. II. Detailed information about financial assets that have been securitized and sold. Question 7 Servco, a loan servicing agency, paid $60,000 to acquire a threeyear right to service $1,000,000 of Banco's loans. Servco will be entitled to a servicing fee of 1% of the interest and fees collected during the three-year period. Servco expects its servicing fees to be: Which one of the following is the amount of the $60,000 acquisition fee that Servco should amortize during year 1? Question 8 Which of the following, if any, can be the risk being hedged in a foreign currency hedge? Question 9 A derivative financial instrument is best described as: Question 10 Which of the following conditions must be met for derecognition of a transferred financial asset to occur under


IFRS? I. The financial asset has been transferred outside the consolidated group of the transferor. II. The transferor has transferred substantially all of the risks and rewards of ownership of the financial asset. III. The contractual rights to the financial assets cash flows cannot be retained by the transferor, but must be transferred to the transferee. Question 11 Where in its financial statements should a company disclose information about its concentration of credit risks? Question 12 Which of the following kinds of risk must be disclosed for most financial instruments? Question 13 Bigco, Inc. transferred long-term receivables with a carrying value of $500,000 to Banco for $425,000 cash. Banco will collect interest on the receivables during the life of the receivables, but Bigco is obligated to repurchase the receivables prior to their maturity. What amount of receivables has Bigco surrendered control of for accounting purposes? Question 14 Which one of the following is not associated with accounting for a transfer of a financial asset treated as a sale by the transferor? Question 15


For accounting purposes, which one of the following is not a characteristic associated with the transfer of financial assets? Question 16 A change in the fair value of a derivative qualified as a cash flow hedge is determined to be either effective in offsetting a change in the hedged item or ineffective in offsetting such a change. How should the effective and ineffective portions of the change in value of a derivative which qualifies as a cash flow hedge be reported in financial statements? Question 17 A financial asset is transferred with one component of the asset appropriately treated as sold and another component appropriately treated as retained. How will the amount to be written off as sold be determined? Question 18 On September 1, 2005, Hall Corp. redeemed $500,000 of its 12%, 15-year bonds. Related unamortized bond premium and issue costs at that date were $8,000 and $10,000, respectively. What amount should Hall use to determine gain or loss on redemption? Question 19


For accounting purposes, which one of the following circumstances would not be considered the transfer of a financial asset? Question 20 Gains and Losses from changes in the fair value of a derivative designated and qualified as a fair value hedge should be: Question 1 A U.S. entity is concerned that changing exchange rates will result in a loss on a foreign currency to be received in the future. To hedge the risk of possible loss, the entity should acquire a forward contract to Question 2 During 2005 both Raim Co. and Cane Co. suffered losses due to the flooding of the Mississippi River. Raim is located two miles from the river and sustains flood losses every two to three years. Cane, which has been located fifty miles from the river for the past twenty years, has never before had flood losses. How should the flood losses be reported in each company's 2005 income statement? Question 3 On September 1, 2008, Bain Corp. received an order for equipment from a foreign customer for 300,000 local currency units (LCU) when the U.S. dollar equivalent was $96,000. Bain


shipped the equipment on October 15, 2008, and billed the customer for 300,000 LCU when the U.S. dollar equivalent was $100,000. Bain received the customer's remittance in full on November 16, 2008, and sold the 300,000 LCU for $105,000. In its income statement for the year ended December 31, 2008, Bain should report a foreign exchange gain of: Question 4 The following information is relevant to the computation of Chan Co.'s earnings per share to be disclosed on Chan's income statement for the year ending December 31: Chan has no preferred stock outstanding, and no other convertible securities. What amount should be used as the numerator in the fraction used to compute Chan's diluted earnings per share assuming that the bonds are dilutive securities? Question 5 Fay Corp. had a realized foreign exchange loss of $15,000 for the year ended December 31, 2005 and must also determine whether the following items will require year-end adjustment: Fay had an $8,000 loss resulting from the translation of the accounts of its wholly owned foreign subsidiary for the year ended December 31, 2005. Fay had an account payable to an unrelated foreign supplier payable in the supplier's local currency. The U.S. dollar equivalent of the payable was $64,000 on the October 31, 2005 invoice date, and it was $60,000 on December 31, 2005. The invoice is payable on January 30, 2006.


In Fay's 2005 consolidated income statement, what amount should be included as foreign exchange loss? Question 6 Gains from remeasuring a foreign subsidiary's financial statements from the local currency, which is not the functional currency, into the parent company's currency should be reported as a(an) Question 7 The following information pertains to Flint Co.'s sale of 10,000 foreign currency units under a forward contract dated November 1, 2004, for delivery on January 31, 2005: Flint entered into the forward contract in order to speculate in the foreign currency. In Flint's income statement for the year ended December 31, 2004, what amount of loss should be reported from this forward contract? Question 8 In 2003, a personal injury lawsuit was brought against Halsey Co. Based on counsel's estimate, Halsey reported a $50,000 liability in its December 31, 2003, balance sheet. In November 2004, Halsey received a favorable judgment, requiring the plaintiff to reimburse Halsey for expenses of $30,000. The plaintiff has appealed the decision, and Halsey's counsel is unable to predict the outcome of the appeal. In its December 31,


2004, balance sheet, Halsey should report what amounts of asset and liability related to these legal actions? Question 9 Which of the following is not a contingent liability under international accounting standards? Question 10 Based on preliminary discussions with a foreign customer, Alcoco, a U.S. entity, budgeted a significant sale to the foreign entity denominated in its foreign currency expected in June 2009. To hedge the risk of an adverse exchange rate change on the dollar value of the expected sale, on January 2, 2009, Alcoco entered into a forward exchange contract to sell an amount of the foreign currency equal to the expected sale. On March 31, 2009, the value of the expected sale amount in dollars had decreased by $3,800. The fair value of the forward contract at that date had increased by $4,000. Which one of the following is the amount that should be recognized in other comprehensive income for the forward contract only (the hedging instrument) in Alcoco's quarterly financial statements as of March 31? Question 11 Ute Co. had the following capital structure during 2004 and 2005: Preferred stock is not considered a common stock equivalent. Ute reported net income of $500,000 for the year ended December 31, 2005. Ute paid no preferred dividends


during 2004 and paid $16,000 in preferred dividends during 2005. In its December 31, 2005, income statement, what amount should Ute report as earnings per share? Question 12 A manufacturer of household appliances may incur a loss due to the discovery of a defect in one of its products. The occurrence of the loss is reasonably possible and the resulting costs can be reasonably estimated. This possible loss should be Question 13 A hedge to offset the risk of loss on a recognized asset or liability is which of the following types of hedge? Question 14 Envoy Co. manufactures and sells household products. Envoy experienced losses associated with its small appliance group. Operations and cash flows for this group can be clearly distinguished from the rest of Envoy's operations. Envoy plans to sell the small appliance group with its operations. What is the earliest point at which Envoy should report the small appliance group as a discontinued operation? Question 15 An extraordinary gain should be reported as a direct increase to which of the following? Question 16


Poe Co. had 300,000 shares of common stock issued and outstanding at December 31, 2004. No common stock was issued during 2005.On January 1, 2005, Poe issued 200,000 shares of nonconvertible preferred stock. During 2005, Poe 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, 2005 was $330,000. What should be Poe's 2005 earnings per common share? Question 17 On December 1, 2005, Clay Co. declared and issued a 6% stock dividend on its 100,000 shares of outstanding common stock. There was no other common stock activity during 2005. What number of shares should Clay use in determining earnings per share for 2005? Question 18 Wyatt Co. has a probable loss that can only be reasonably estimated within a range of outcomes. No single amount within the range is a better estimate than any other amount. The loss accrual should be Question 19 On September 1, 2005, Cano & Co., a U.S. corporation, sold merchandise to a foreign firm for 250,000 francs. Terms of the sale require payment in francs on February 1, 2006. On September 1, 2005, the spot exchange rate was $.20 per franc.


At December 31, 2005, Cano's year end, the spot rate was $.19, but the rate increased to $.22 by February 1, 2006, when payment was received. How much should Cano report as a foreign exchange gain or loss in its 2006 income statement? Question 20 During 2005, Rex Co. introduced a new product carrying a twoyear warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2005 and 2006 are as follows: At December 31, 2006, Rex should report an estimated warranty liability of Question 1 Which of the following should be disclosed for each reportable operating segment of an enterprise? Question 2 Advertising costs may be accrued or deferred to provide an appropriate expense in each period for Question 3 Ace Co. settled litigation on February 1, 2005 for an event that occurred during 2004. An estimated liability was determined as of December 31, 2004. This estimate was significantly less than the final settlement. The transaction is considered to be material.


The financial statements for year-end 2004 have not been issued. How should the settlement be reported in Ace's year-end 2004 financial statements? Question 4 When should a lessor recognize in income a nonrefundable lease bonus paid by a lessee on signing an operating lease? Question 5 In a sale-leaseback transaction, a gain resulting from the sale should be deferred at the time of the sale-leaseback and subsequently amortized when I. The seller-lessee has transferred substantially all the risks of ownership. II. The seller-lessee retains the right to substantially all of the remaining use of the property. Question 6 The following information pertains to a sale and leaseback of equipment by Mega Co. on December 31, 2005: What amount of deferred gain on the sale should Mega report at December 31, 2005? Question 7 On August 1, 2005, Metro, Inc. leased a luxury apartment unit to Klum. The parties signed a 1-year lease beginning September 1, 2005 for a $1,000 monthly rent payable on the first day of the month. At the August 1 signing date, Metro collected $540 as a


nonrefundable fee for allowing Klum to sign a 1-year lease (the normal lease term is three years) and $1,000 rent for September. Klum has made timely payments each month, but prepaid January's rent on December 20. In Metro's 2005 income statement, rent revenue should be reported as Question 8 On January 1 of the current year, Tell Co. leased equipment from Swill Co. under a nine-year sales-type lease. The equipment had a cost of $400,000 and an estimated useful life of 15 years. Semiannual lease payments of $44,000 are due every January 1 and July 1. The present value of lease payments at 12% was $505,000, which equals the sales price of the equipment. Using the straight-line method, what amount should Tell recognize as depreciation expense on the equipment in the current year? Question 9 A twenty-year property lease, classified as an operating lease, provides for a 10% increase in annual payments every five years. In the sixth year compared to the fifth year, the lease will cause the following expenses to increase Question 10 Gei Co. determined that, due to obsolescence, equipment with an original cost of $900,000 and accumulated depreciation at January 1, 2004 of $420,000 had suffered permanent


impairment, and as a result should have a carrying value of only $300,000 as of the beginning of the year. In addition, the remaining useful life of the equipment was reduced from 8 years to 3. In its December 31, 2004 balance sheet, what amount should Gei report as accumulated depreciation? Question 11 Dahl Co. traded a delivery van and $5,000 cash for a newer van owned by West Corp. Assume there is no commercial substance to the exchange. The following information relates to the values of the vans on the exchange date: Dahl's income tax rate is 30%. What amounts should Dahl report as gain on exchange of the vans? Question 12 On July 1, 2004, Balt Co. exchanged a truck for 25 shares of Ace Corp.'s common stock. Assume commercial substance.On that date, the truck's carrying amount was $2,500, and its fair value was $3,000. Also, the book value of Ace's stock was $60 per share. On December 31, 2004, Ace had 250 shares of common stock outstanding and its book value per share was $50. What amount should Balt report in its December 31, 2004, balance sheet as investment in Ace? Question 13 On December 31, 2004, a building owned by Carr, Inc. was destroyed by fire. Carr paid $12,000 for removal and cleanup


costs. The building had a book value of $250,000 and a fair value of $280,000 on December 31, 2004. What amount should Carr use to determine the gain or loss on this involuntary conversion? Question 14 On July 1, 2005, Glen Corp. leased a new machine from Ryan Corp. The lease contains the following information: No bargain purchase option is provided, and the machine reverts to Ryan when the lease expires. What amount should Glen record as a capitalized leased asset at inception of the lease? Question 15 Scott Co. exchanged nonmonetary assets with Dale Co. No cash was exchanged. There is commercial substance to the exchange. The carrying amount of the asset surrendered by Scott exceeded both the fair value of the asset received and Dale's carrying amount of that asset. Scott should recognize the difference between the carrying amount of the asset it surrendered and Question 16 Lease A does not contain a purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases?


Question 17 On December 31, 2005, Bit Co. had capitalized costs for a new computer software product with an economic life of five years. Sales for 2006 were 30 percent of expected total sales of the software. At December 31, 2006, the software had a net realizable value equal to 90 percent of the capitalized cost. What percentage of the original capitalized cost should be reported as the net amount on Bit's December 31, 2006 balance sheet? Question 18 On January 1, 2001, Babson, Inc. leased two automobiles for executive use. The lease requires Babson to make five annual payments of $13,000 beginning January 1, 2001. At the end of the lease term, December 31, 2005, Babson guarantees the residual value of the automobiles will total $10,000. The lease qualifies as a capital lease. The interest rate implicit in the lease is 9%. Present value factors for the 9% rate implicit in the lease are as follows: Babson's recorded capital lease liability immediately after the first required payment should be Question 19 YIV Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. YIV should report segment financial information for each division meeting which of the following criteria? Question 20


Brill Co. made the following expenditures during 2004: What amount of these expenditures should Brill report in its 2004 income statement as research and development expenses? Question 1 Which of the following is a required financial statement for an investment trust fund? Question 2 Taxes collected and held by Franklin County for a separate school district would be accounted for in which fund? Question 3 During the past fiscal year, Arnett County recorded the following transactions: Receipt of $36,000 of intergovernmental revenues which must be used to provide medical assistance to victims of natural disasters. Investment earnings of $5,000 from an endowment established by the local Lions Club to subsidize summer camp for the Boy Scouts with demonstrated financial need. $3,000,000 in proceeds from revenue bonds. How much money from these transactions should Arnett record in Special Revenue funds? Question 4 What is the basic criterion used to determine the reporting entity for a governmental unit? Question 5


State University received two contributions during the year that must be used to provide scholarships. Contribution A for $10,000 was collected during the year, and $8,000 was spent on scholarships. Contribution B is a pledge for $30,000 to be received next fiscal year. What amount of contribution revenue should the university report in its statement of activities? Question 6 On January 2, City of Walton issued $500,000, 10-year, 7% general obligation bonds. Interest is payable annually, beginning January 2 of the following year.What amount of bond interest is Walton required to report in the statement of revenue, expenditures, and changes in fund balance of its governmental funds at the close of this fiscal year, September 30? Question 7 Hospital, Inc., a not-for-profit organization with no governmental affiliation, reported the following in its accounts for the current year ended December 31: What amount would the hospital report as net patient service revenue in its statement of operations for the current year ended December 31? Question 8 The encumbrance account of a governmental unit is debited when Question 9


The following revenues were among those reported by Ariba Township in 2005: What amount of the foregoing revenues should be accounted for in Ariba's governmental-type funds? Question 10 Todd City formally integrates budgetary accounts into its general fund. Todd uses an internal service fund to account for the operations of its data processing center, which provides services to Todd's other governmental units. During the year ended December 31, 2005, Todd received a state grant to buy a bus, and an additional grant for bus operation in 2005. In 2005, only 90% of the capital grant was used for the bus purchase, but 100% of the operating grant was disbursed. Todd has incurred the following long-term obligations: General obligation bonds issued for the water and sewer fund which will service the debt. Revenue bonds to be repaid from admission fees collected from users of the municipal recreation center. These bonds are expected to be paid from enterprise funds, and secured by Todd's full faith, credit, and taxing power as further assurance that the obligations will be paid. Todd's 2005 expenditures from the general fund include payments for structural alterations to a firehouse and furniture for the mayor's office. In Todd's general fund balance sheet presentation at December 31, 2005, which of the following expenditures should be classified as fixed assets? Question 11


On March 2, 2004, Finch City issued 10-year general obligation bonds at face amount, with interest payable March 1 and September 1. The proceeds were to be used to finance the construction of a civic center over the period April 1, 2004, to March 31, 2005.During the fiscal year ended June 30, 2004, no resources had been provided to the debt service fund for the payment of principal and interest. On June 30, 2004, Finch's debt service fund should include interest payable on the general obligation bonds for Question 12 A company used the percentage-of-completion method of accounting for a four-year construction contract. Which of the following items would be used to calculate the income recognized in the second year? Question 13 During 2004, Mitchell Corp. started a construction job with a total contract price of $600,000. The job was completed on December 15, 2005. Additional data are as follows: Under the completed contract method, what amount should Mitchell recognize as gross profit for 2005? Question 14 Which of the following would be reported as program revenues on a local government's government-wide statement of activities?


Question 15 Alinas County manages an endowment of $500,000, the earnings from which are required to be used to maintain the walking trails in the county parks. During the year, the endowment received $20,000 in investment earnings, $3,000 of which was related to earnings from the previous year which were not received 80 days after the fiscal year end. At the end of the year, the market value of the endowment was $510,000. In its fund-based financial statements, how much should the County recognize in conjunction with this endowment? Question 16 A state or local government should not have multiple funds in which of the following fund categories? Question 17 The governmental fund measurement focus is on the determination of Question 18 A not-for-profit voluntary health and welfare organization received a $500,000 permanent endowment. The donor stipulated that the income must be used for a mental health program. The endowment fund reported $60,000 net decrease in market value and $30,000 investment income.The organization spent $45,000 on the mental health program during the year.


What amount of change in temporarily restricted net assets should the organization report? Question 19 A not-for-profit voluntary health and welfare organization received a $500,000 permanent endowment. The donor stipulated that the income must be used for a mental health program. The endowment fund reported $60,000 net decrease in market value and $30,000 investment income. The organization spent $45,000 on the mental health program during the year. What amount of change in temporarily restricted net assets should the organization report? Question 20 Lema Fund, a voluntary welfare organization funded by contributions from the general public, received unrestricted pledges of $200,000 during 2005. It was estimated that 10% of these pledges would be uncollectible. By the end of 2005, $130,000 of the pledges had been collected. It was expected that $50,000 more would be collected in 2006 and that the balance of $20,000 would be written off as uncollectible. What amount should Lema include under public support in 2005 for net contributions? to consolidated financial statements, intercompany transactions, combined financial statements, financial instruments, derivatives, hedging and contingencies, and commitments.


Analyze the financial principles and concepts related to earnings per share, disclosures and reporting, and foreign currency transactions. Use technology and information resources to research issues in financial accounting and reporting. Write clearly and concisely about financial accounting and reporting using proper writing mechanics. ===============================================

ACC 577 Week 1 Quiz (100 % Correct Answers)

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Question 1 The fair value hierarchy provided by GAAP in FASB 157 is comprised of three (3) levels. Which of these levels is/are based, either directly or indirectly, on observable data?


Question 2 Giaconda, Inc. acquires an asset for which it will measure the fair value by discounting future cash flows of the asset. Which of the following terms best describes this fair value measurement approach? Question 3 On July 1, 2003, Roxy Co. obtained fire insurance for a threeyear period at an annual premium of $72,000 payable on July 1 of each year. The first premium payment was made July 1, 2003. On October 1, 2003, Roxy paid $24,000 for real estate taxes to cover the period ending September 30, 2004. This prepayment was made to obtain a discount. In its December 31, 2003, Balance Sheet, Roxy should report prepaid expenses of: Question 4 The effect of a transaction that is infrequent in occurrence but not unusual in nature should be presented separately as a component of income from continuing operations when the transaction results in a Question 5 Which of the following is a generally accepted accounting principle that illustrates the practice of conservatism during a particular reporting period? Question 6


According to the FASB conceptual framework, which of the following statements conforms to the realization concept? Question 7 In a statement of cash flows, which of the following would increase reported cash flows from operating activities using the direct method? (Ignore income tax considerations.) Question 8 White Co. wants to convert its 2001 financial statements from the accrual basis of accounting to the cash basis. Both supplies inventory and office salaries payable increased between January 1, 2001, and December 31, 2001.To obtain 2001 cash basis net income, how should these increases be added to or deducted from accrual basis net income? Question 9 A company is an accelerated filer that is required to file Form 10-K with the United States Securities and Exchange Commission (SEC). What is the maximum number of days after the company's fiscal year end that the company has to file Form 10-K with the SEC? Question 10 During the current year, Ace Co. amortized a bond discount. Ace prepares its statement of cash flows using the indirect


method. In which section of the statement should Ace report the amortization of the bond discount? Question 11 Which of the following statements is correct regarding reporting comprehensive income? Question 12 Which of the following is correct concerning financial statement disclosure of accounting policies? Question 13 According to the FASB conceptual framework, which of the following situations violates the concept of reliability? Question 14 Which of the following describes how comprehensive income should be reported? Question 15 Which of the following cash flows per share should be reported in a statement of cash flows? Question 16 Compared to the accrual basis of accounting, the cash basis of accounting understates income by the net decrease during the accounting period of


Question 17 On July 1, 20x2, Dewey Co. signed a 20-year building lease that it reported as a capital lease. Dewey paid the monthly lease payments when due. How should Dewey report the effect of the lease payments in the financing activities section of its 20x2 statement of cash flows? Question 18 In a comparison of 2004 to 2003, Neir Co.'s inventory turnover ratio increased substantially although sales and inventory amounts were essentially unchanged. Which of the following statements explains the increased inventory turnover ratio? Question 19 Heath Co.'s current ratio is 4:1. Which of the following transactions would normally increase its current ratio? Question 20 Which of the following levels of the fair value hierarchy, if any, requires the most extensive disclosures about fair value measurements? ===============================================

ACC 577 Week 2 Quiz (100 % Correct Answers)

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Week 2 Quiz All Questions Details given below (Please Check)

Question 1 On December 30, 2004, Astor Corp. sold merchandise for $75,000 to Day Co. The terms of the sale were net 30, FOB shipping point. The merchandise was shipped on December 31, 2004, and arrived at Day on January 5, 2005. Due to a clerical error, the sale was not recorded until January 2005 and the merchandise, sold at a 25% markup, was included in Astor's inventory at December 31, 2004. As a result, Astor's cost of goods sold for the year ended December 31, 2004, was Question 2 Foster Co. adjusted its allowance for uncollectible accounts at year end. The general ledger balances for the accounts receivable and the related allowance account were $1,000,000 and $40,000, respectively. Foster uses the percentage-ofreceivables method to estimate its allowance for uncollectible accounts. Accounts receivable were estimated to be 5% uncollectible. What amount should Foster record as an


adjustment to its allowance for uncollectible accounts at year end? Question 3 Jones Wholesalers stocks a changing variety of products. Which inventory costing method will be most likely to give Jones the lowest ending inventory when its product lines are subject to specific price increases? Question 4 Fenn Stores, Inc. had sales of $1,000,000 during December 2004. Experience has shown that merchandise equaling 7% of sales will be returned within 30 days and an additional 3% will be returned within 90 days. Returned merchandise is readily resalable. In addition, merchandise equaling 15% of sales will be exchanged for merchandise of equal or greater value. What amount should Fenn report for net sales in its income statement for the month of December 2004? Question 5 During January 2004, Metro Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory: Under the LIFO method, what amount should Metro report as inventory at January 31, 2004? Question 6


Anders Co. uses the moving-average method to determine the cost of its inventory. During January 2005, Anders recorded the following information pertaining to its inventory: What amount of inventory should Anders report in its January 31, 2005, balance sheet? Question 7 When the double extension approach to the dollar-value LIFO inventory method is used, the inventory layer added in the current year is multiplied by an index number. Which of the following correctly states how components are used in the calculation of this index number? Question 8 Fireworks, Inc. had an explosion in its plant that destroyed most of its inventory. Its records show that beginning inventory was $40,000. Fireworks made purchases of $480,000 and sales of $620,000 during the year. Its normal gross profit percentage is 25%. It can sell some of its damaged inventory for $5,000. The insurance company will reimburse Fireworks for 70% of its loss. What amount should Fireworks report as loss from the explosion? Question 9 When the dollar-value LIFO (DV LIFO) retail method is used, what is the first step in the calculation? Question 10


Smith Co. has a checking account at Small Bank and an interestbearing savings account at Big Bank. On December 31, year 1, the bank reconciliations for Smith are as follows: What amount should be classified as cash on Smith's balance sheet at December 31, year 1? Question 11 At the end of the current year (calendar-fiscal year), a creditor firm's 6% note receivable balance is $10,000. Two years remain in the note term. Interest is due each December 31. The debtor's financial position has deteriorated causing the creditor to reevaluate the note. After careful consideration, the creditor believes that only 60% of the principal ($10,000) will be collected at the end of the term. The only interest expected to be received is 2% of the original principal for one year, also to be collected at the end of the term. At the end of the current year, what amount of expense or loss is recognized by the creditor for this loan impairment? The present value of $1 two years hence at 6% is .89, and at 2% is .961. Question 12 Hutch, Inc. uses the conventional retail inventory method to account for inventory. The following information relates to 2004 operations: What amount should be reported as cost of sales for 2004? Question 13


Trans Co. uses a periodic inventory system. The following are inventory transactions for the month of January: Trans uses the average pricing method to determine the value of its inventory. What amount should Trans report as cost of goods sold on its income statement for the month of January? Question 14 At December 31, 2004, Kale Co. had the following balances in the accounts it maintains at First State Bank: Kale classifies investments with original maturities of three months or less as cash equivalents. In its December 31, 2004 balance sheet, what amount should Kale report as cash and cash equivalents? Question 15 Gar Co. factored its receivables without recourse with Ross Bank. Gar received cash as a result of this transaction, which is best described as a Question 16 A material overstatement in ending inventory was discovered after the year-end financial statements of a company were issued to the public. What effect did this error have on the year-end financial statements? Question 17


The following costs pertain to Den Co.'s purchase of inventory: What amount should Den record as the cost of inventory as a result of this purchase? Question 18 Loft Co. reviewed its inventory values for proper pricing at year-end. The following summarizes two inventory items examined for the lower of cost or market: What amount should Loft include in inventory at year-end, if it uses the total of the inventory to apply the lower of cost or market? Question 19 On January 1, 2004, Card Corp. signed a three-year, noncancelable purchase contract, which allows Card to purchase up to 500,000 units of a computer part annually from Hart Supply Co. at $.10 per unit and guarantees a minimum annual purchase of 100,000 units. During 2004, the part unexpectedly became obsolete. Card had 250,000 units of this inventory at December 31, 2004 and believes these parts can be sold as scrap for $.02 per unit. What amount of probable loss from the purchase commitment should Card report in its 2004 income statement? Question 20 Mill Co.'s allowance for uncollectible accounts was $100,000 at the end of 2005 and $90,000 at the end of 2004. For the year ended December 31, 2005, Mill reported bad debt expense of


$16,000 in its income statement. What amount did Mill debit to the appropriate account in 2005 to write off actual bad debts? ===============================================

ACC 577 Week 3 Quiz (100 % Correct Answers)

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Question 1 During 2004, Yvo Corp. installed a production assembly line to manufacture furniture. In 2005, Yvo purchased a new machine and rearranged the assembly line to install this machine. The rearrangement did not increase the estimated useful life of the assembly line, but it did result in significantly more efficient production. The following expenditures were incurred in connection with this project: What amount of the above expenditures should be capitalized in 2005? Question 2


On January 2, 2005, Well Co. purchased 10% of Rea, Inc.'s outstanding common shares for $400,000. Well is the largest single shareholder in Rea, and Well's officers are a majority on Rea's board of directors. Rea reported net income of $500,000 for 2005, and paid dividends of $150,000. In its December 31, 2005, balance sheet, what amount should Well report as investment in Rea? Question 3 On December 31, 2004, Roth Co. issued a $10,000 face value note payable to Wake Co. in exchange for services rendered to Roth. The note, made at usual trade terms, is due in nine months and bears interest, payable at maturity, at the annual rate of 3%. The market interest rate is 8%. The compound interest factor of $1 due in nine months at 8% is .944. At what amount should the note payable be reported in Roth's December 31, 2004 balance sheet? Question 4 Rye Co. purchased a machine with a four-year estimated useful life and an estimated 10% salvage value for $80,000 on January 1, 2003. In its income statement, what would Rye report as the depreciation expense for 2005 using the double declining balance method? Question 5


Turtle Co. purchased equipment on January 2, 2002, for $50,000. The equipment had an estimated five-year service life. Turtle's policy for five-year assets is to use the 200% double declining depreciation method for the first two years of the asset's life, and then switch to the straight-line depreciation method. In its December 31, 2004 balance sheet, what amount should Turtle report as accumulated depreciation for equipment? Question 6 During 2005, Jase Co. incurred research and development costs of $136,000 in its laboratories relating to a patent that was granted on July 1, 2005. Costs of registering the patent equaled $34,000. The patent's legal life is 17 years, and its estimated economic life is 10 years. In its December 31, 2005, balance sheet, what amount should Jase report as patent, net of accumulated amortization? Question 7 Weir Co. uses straight-line depreciation for its property, plant, and equipment, which, stated at cost, consisted of the following: Weir's depreciation expense for 2005 and 2004 was $55,000 and $50,000, respectively. What amount was debited to accumulated depreciation during 2005 because of property, plant, and equipment retirements? Question 8


On January 2, 2004, Judd Co. bought a trademark from Krug Co. for $500,000. Judd retained an independent consultant, who estimated the trademark's remaining life to be unlimited because the trademark will be renewed indefinitely. Its unamortized cost on Krug's accounting records was $380,000. At the time of sale, Krug estimated the useful life of the trademark to be 50 years. In Judd's December 31, 2004 balance sheet, what amount should be reported as accumulated amortization? Question 9 Cart Co. purchased an office building and the land on which it is located for $750,000 cash and an existing $250,000 mortgage. For realty tax purposes, the property is assessed at $960,000, 60% of which is allocated to the building. At what amount should Cart record the building? Question 10 Up Company owns 60% of SideCo, and Down Company owns the other 40% of SideCo. Up Company and Down Company are competitors in the same market. Which one of the following sets reflects the most likely level of influence each company has over SideCo? Question 11 On July 1, 2005, Casa Development Co. purchased a tract of land for $1,200,000. Casa incurred additional costs of $300,000 during the remainder of 2005 in preparing the land for sale. The


tract was subdivided into residential lots as follows: Using the relative sales value method, what amount of costs should be allocated to the Class A lots? Question 12 On January 2 of the current year, Cruises, Inc. borrowed $3 million at a rate of 10% for three years and began construction of a cruise ship. The note states that annual payments of principal and interest in the amount of $1.3 million are due every December 31. Cruises used all proceeds as a down payment for construction of a new cruise ship that is to be delivered two years after the start of construction. What should Cruise report as interest expense related to the note in its income statement for the second year? Question 13 Puff Co. acquired 40% of Straw, Inc.'s voting common stock on January 2, 2005, for $400,000. The carrying amount of Straw's net assets at the purchase date totaled $900,000. Fair values equaled carrying amounts for all items except equipment, for which fair values exceeded carrying amounts by $100,000. The equipment has a five year life. Goodwill, if any, is expected to have a useful life of 10 years. During 2005, Straw reported net income of $150,000. What amount of income from this investment should Puff report in its 2005 income statement? Question 14


The discount resulting from the determination of a note payable's present value should be reported on the balance sheet as a(an) Question 15 Land was purchased to be used as the site for the construction of a plant. A building on the property was sold and removed by the buyer so that construction on the plant could begin. The proceeds from the sale of the building should be Question 16 Park Co. uses the equity method to account for its January 1, 2004, purchase of Tun Inc.'s common stock. On January 1, 2004, the fair values of Tun's FIFO inventory and land exceeded their carrying amounts. How do these excesses of fair values over carrying amounts affect Park's reported equity in Tun's 2004 earnings? Question 17 On July 1, 2005, Pell Co. purchased Green Corp. ten-year, 8% bonds with a face amount of $500,000 for $420,000. The bonds mature on June 30, 2013 and pay interest semi-annually on June 30 and December 31. Pell has the intent and ability to hold the bonds until maturity. Using the interest method, Pell recorded bond discount amortization of $1,800 for the six months ended December 31, 2005. For this held-to-maturity investment, Pell should report 2005 revenue of


Question 18 Jersey, Inc. is a retailer of home appliances and offers a service contract on each appliance sold. Jersey sells appliances on installment contracts, but all service contracts must be paid in full at the time of sale. Collections received for service contracts should be recorded as an increase in a Question 19 On January 1, 2005, Mega Corp. acquired 10% of the outstanding voting stock of Penny, Inc.On January 2, 2006, Mega gained the ability to exercise significant influence over financial and operating control of Penny by acquiring an additional 20% of Penny's outstanding stock. The two purchases were made at prices proportionate to the value assigned to Penny's net assets, which equaled their carrying amounts. For the years ended December 31, 2005 and 2006, Penny reported the following: In 2006, what amounts should Mega report as current year investment income and as an adjustment, before income taxes, to 2005 investment income? Question 20 In November and December 2005, Dorr Co., a newly organized magazine publisher, received $72,000 for 1,000 three-year subscriptions at $24 per year, starting with the January 2006 issue. Dorr elected to include the entire $72,000 in its 2005 income tax return. What amount should Dorr report in its 2005 income statement for subscriptions revenue?


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ACC 577 Week 4 Quiz (100 % Correct Answers)

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Week 4 Quiz All Questions Details given below (Please Check)

Question 1 Treasury stock was acquired for cash at a price in excess of its original issue price. The treasury stock was subsequently reissued for cash at a price in excess of its acquisition price. Assuming that the par value method of accounting for treasury stock transactions is used, what is the effect on total stockholders' equity of each of the following events? Question 2 Murphy Co. had 200,000 shares outstanding of $10 par common stock on March 30 of the current year. Murphy reacquired 30,000 of those shares at a cost of $15 per share and recorded


the transaction using the cost method on April 15. Murphy reissued the 30,000 shares at $20 per share and recognized a $50,000 gain on its income statement on May 20. Which of the following statements is correct? Question 3 On January 1, 2005, Celt Corp. issued 9% bonds in the face amount of $1,000,000, which mature on January 1, 2015. The bonds were issued for $939,000 to yield 10%, resulting in a bond discount of $61,000. Celt uses the effective interest method of amortizing bond discount. Interest is payable annually on December 31. At December 31, 2005, Celt's unamortized bond discount should be Question 4 In 2000, May Corp. acquired land by paying $75,000 down and signing a note with a maturity value of $1,000,000. On the note's due date, December 31, 2005, May owed $40,000 of accrued interest and $1,000,000 principal on the note. May was in financial difficulty and was unable to make any payments. May and the bank agreed to amend the note as follows: The $40,000 of interest due on December 31, 2005 was forgiven. The principal of the note was reduced from $1,000,000 to $950,000 and the maturity date extended 1 year to December 31, 2006. May would be required to make one interest payment totaling $30,000 on December 31, 2006. As a result of the troubled debt


restructuring, May should report a gain, before taxes, in its 2005 income statement of Question 5 Universe Co. issued 500,000 shares of common stock in the current year. Universe declared a 30% stock dividend. The market value was $50 per share, the par value was $10, and the average issue price was $30 per share. By what amount will Universe decrease stockholders' equity for the dividend? Question 6 On July 1, 2005, Day Co. received $103,288 for $100,000 face amount, 12% bonds, a price that yields 10%. Interest expense for the six months ended December 31, 2005 should be Question 7 On July 1, 2005, Vail Corp. issued rights to stockholders to subscribe to additional shares of its common stock. One right was issued for each share owned. A stockholder could purchase one additional share for 10 rights plus $15 cash. The rights expired on September 30, 2005. On July 1, 2005, the market price of a share with the right attached was $40, while the market price of one right alone was $2. Vail's stockholders' equity on June 30, 2005 comprised the following: By what amount should Vail's retained earnings decrease as a result of issuance of the stock rights on July 1, 2005? Question 8


On January 1, 2005, Wolf Corp. issued its 10% bonds in the face amount of $1,000,000, which mature on January 1, 2015.The bonds were issued for $1,135,000 to yield 8%, resulting in bond premium of $135,000. Wolf uses the effective interest method of amortizing bond premium. Interest is payable annually on December 31. At December 31, 2005, Wolf's adjusted unamortized bond premium should be Question 9 Earl was engaged by Farm Corp. to perform consulting services. Earl's compensation for these services consisted of 1,000 shares of Farm's $10 par value common stock, to be issued to Earl on completion of Earl's services. On the execution date of Earl's employment contract, Farm's stock had a market value of $40 per share. Six months later, when Earl's services were completed and the stock issued, the stock's market value was $50 per share. Farm's management estimated that Earl's services were worth $100,000 in cost savings to the company. As a result of this transaction, additional paid-in capital should increase by Question 10 During 2005, Eddy Corp. incurred the following costs in connection with the issuance of bonds: What amount should be recorded as a deferred charge to be amortized over the term of the bonds? Question 11


The primary purpose of a quasi-reorganization is to give a corporation the opportunity to Question 12 Clay Corp. had $600,000 of convertible 8% bonds outstanding at June 30, 2005. Each $1,000 bond was convertible into 10 shares of Clay's $50 par value common stock. On July 1, 2005, the interest was paid to bondholders and the bonds were converted into common stock, which had a fair market value of $75 per share. The unamortized premium on these bonds was $12,000 at the date of conversion. Under the book value method, this conversion increased the following elements of the stockholders' equity section by Question 13 On December 31, 2003, Moss Co. issued $1,000,000 of 11% bonds at 109. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitled the bondholder to purchase one share of $5 par common stock for $25. Immediately after issuance, the market value of each warrant was $4. On December 31, 2003, what amount should Moss record as discount or premium on issuance of bonds? Question 14 During 2005, Brad Co. issued 5,000 shares of $100 par convertible preferred stock for $110 per share. One share of preferred stock can be converted into three shares of Brad's $25


par common stock at the option of the preferred shareholder. On December 31, 2006, when the market value of the common stock was $40 per share, all of the preferred stock was converted. What amount should Brad credit to Common Stock and to Additional Paid-in Capital -- Common Stock as a result of the conversion? Question 15 A company declared a cash dividend on its common stock on December 15, 2003, payable on January 12, 2004. How would this dividend affect stockholders' equity on the following dates? Question 16 Beck Corp. issued 200,000 shares of common stock when it began operations in 2003 and issued an additional 100,000 shares in 2004. Beck also issued preferred stock convertible to 100,000 shares of common stock. In 2005, Beck purchased 75,000 shares of its common stock and held it in Treasury. At December 31, 2005, how many shares of Beck's common stock were outstanding? Question 17 On January 2, 2005, Nast Co. issued 8% bonds with a face amount of $1,000,000 that mature on January 2, 2011. The bonds were issued to yield 12%, resulting in a discount of $150,000. Nast incorrectly used the straight-line method instead


of the effective interest method to amortize the discount. How is the carrying amount of the bonds affected by the error? Question 18 Deb Co. records all sales using the installment method of accounting. Installment sales contracts call for 36 equal monthly cash payments. According to the FASB's conceptual framework, the amount of deferred gross profit relating to collections 12 months beyond the balance sheet date should be reported in the Question 19 Mirr, Inc. was incorporated on January 1, 2005, with proceeds from the issuance of $750,000 in stock and borrowed funds of $110,000. During the first year of operations, revenues from sales and consulting amounted to $82,000, and operating costs and expenses totaled $64,000. On December 15, Mirr declared a $3,000 cash dividend, payable to stockholders on January 15, 2006. No additional activities affected owners' equity in 2005. Mirr's liabilities increased to $120,000 by December 31, 2005. On Mirr's December 31, 2005 balance sheet, total assets should be reported at Question 20 The following information pertains to Meg Corp.: Dividends on its 1,000 shares of 6%, $10 par value cumulative preferred stock have not been declared or paid for 3 years. Treasury stock that


cost $15,000 was reissued for $8,000. What amount of retained earnings should be appropriated as a result of these items? RELATED TUTORIALS ===============================================

ACC 577 Week 5 Quiz (100 % Correct Answers)

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Question 1 Parker Co. amended its pension plan on January 2 of the current year. It also granted $600,000 of unrecognized prior service costs to its employees. The employees are all active and expect to provide 2,000 service years in the future, with 350 service years this year. What is Parker's unrecognized prior service cost amortization for the year?


Question 2 Note section disclosures in the financial statements for pensions do not require inclusion of which of the following? Question 3 For the year ended December 31, 2004, Grim Co.'s pretax financial statement income was $200,000 and its taxable income was $150,000. The difference is due to the following: Grim's enacted income tax rate is 30%. In its 2004 income statement, what amount should Grim report as current provision for income tax expense? Question 4 On December 31, 20x5, Rapp Co. changed inventory cost methods to LIFO from FIFO for financial statement and income tax purposes. Rapp is unable to determine the beginning 20x5 inventory under LIFO. Therefore, Question 5 Which of the following should be reported as a prior period adjustment? Question 6 At 1/1/x6, there is no net gain or loss for a defined benefit pension plan, and plan assets at market value are $45,000. At 12/31/x6 before any actuarial gain or loss is computed (but after pension expense has been recorded and funding has occurred),


the following data apply: PBO, $50,000Assets at market value, $40,000Expected rate of return on assets, 10% Actual return, $3,000A $2,000 actuarial gain is determined at 12/31/x6.By what amount is the Pension Gain/Loss-OCI account changed in 20x6? And what portion of that change is subject to amortization in 20x7? Question 7 Graf Corp.'s 2005 income statement showed pretax accounting income of $200,000. To compute the federal income tax liability, the following 2005 data are provided: If the alternate minimum tax provisions are ignored, what amount of current federal income tax liability should be included in Graf's December 31, 2005 balance sheet? Question 8 The following information relates to a postretirement benefit plan (in millions): APBO beginning, $300Plan assets beginning, $100Net postretirement benefit gain, beginning, $20Amortization of net gain or loss is based on SL method, 10 year average remaining service periodPrior service cost, initial amount, recognized four years ago, $50Amortization of prior service cost is based on SL method, 10 year average remaining service periodService cost, $40Discount rate, 5%Expected rate of return, 6%Actual return, $10Change in estimated life expectancy caused a gain of $16, year-endFunding contribution,


$20. What amount of net gain is subject to amortization next year? Question 9 Information about a postretirement benefit plan at the beginning of the current year is as follows (in millions). EPBO, $400Discount rate, 5%Average years of service rendered toward full eligibility, 12Average years of service required to reach full eligibility, 20Plan assets, $120Expected and actual return, 10%. Compute the reported postretirement benefit liability at yearend. Question 10 The balance in the capitalized natural resources deposit account immediately before beginning removal operations is $110,000. The date is January 1 of the current (first) year. The firm is then informed that to comply with environmental regulations, the site will require reclamation work in four years costing an estimated $30,000 at that time. 5% is the appropriate risk adjusted rate of return. One-fourth the total estimated resource in the site was removed in the first year and was sold for $70,000. Compute the increase in net income for the current year from operating the site. Ignore income taxes. The present value of $1 four years hence at 5% is .8227. Question 11


A stock option award was granted at the beginning of the current year (1/1/x4) to three managers. The total shares granted are 30,000 (10,000 each). The option price and market price of the $2 par common stock on the grant date was $6. The options vest Dec. 31, 20x7. Applying an option pricing model yielded a fair value of $1 per option. Assume all of the options were exercised when the stock price was $10. What amount of compensation expense in total is recognized over the service period and by what amount is the firm's net assets increased as a result of the option award. Question 12 Because management has been so successful, key executives were granted 1,000 stock appreciation rights at the beginning of 20x4 calling for the difference between the market price of the firm's stock at grant date and at exercise date to be paid in cash. The employees must work for 3 years after which the rights are exercisable. The market price at the beginning of 20x4 was $10, and on the exercise date (during 20x7) was $18. The fair values of one right, based on an option pricing model, are as follows: What amount of compensation expense is recognized for years 20x6 and 20x7? Question 13 Mobe Co. reported the following operating income (loss) for its first three years of operations: For each year, there were no deferred income taxes, and Mobe's effective income tax rate was


30%. In its 2004 income tax return, Mobe elected to carry back the maximum amount of loss possible. In its 2005 income statement, what amount should Mobe report as total income tax expense? Question 14 Interest cost included in the net pension cost recognized for a period by an employer sponsoring a defined benefit pension plan represents the Question 15 At the beginning of 20x4, XCOR Inc. granted executives a total of 2,000 options to purchase the firm's stock beginning in 20x7. The fair value of each option at grant date was $3. Initially, no forfeitures were anticipated. During 20x5 however, forfeitures are apparent. The firm estimates a 2% forfeiture rate each year during the service period. What amount of compensation expense is recognized for 20x5? Question 16 Choose the correct statement about restricted stock plans. Question 17 A stock option plan granted 2,000 options each with a fair value of $2.50 on January 1, 20x4. The option price was $20 per share and the stock price was $5 on the grant date. The options were exercisable beginning 20x7 and were exercised when the market


price of the $5 par stock was $50. The journal entry to record the issuance of stock to the option holders at date of exercise will include: Question 18 On August 31, 20x4, Harvey Co. decided to change from the FIFO periodic inventory system to the weighted average periodic inventory system. Harvey is on a calendar year basis. The cumulative effect of the change is determined Question 19 For its first year of operations, Cable Corp. recorded a $100,000 expense in its tax return that will not be recorded in its accounting records until next year. There were no other differences between its taxable and financial statement income. Cable's effective tax rate for the current year is 45%, but a 40% rate has already been passed into law for next year. In its yearend balance sheet, what amount should Cable report as a deferred tax asset(liability)? Question 20 Tack, Inc. reported retained earnings balance of $150,000 at December 31, 20x3.In June 20x4, Tack discovered that merchandise costing $40,000 had not been included in inventory in its 20x3 financial statements. Tack has a 30% tax rate. What amount should Tack report as adjusted beginning retained


earnings in its statement of retained earnings at December 31, 20x4? ===============================================

ACC 577 Week 6 Quiz (100 % Correct Answers)

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Week 6 Quiz Review: ACC 577 Question 1 At the time Company P acquired controlling interest of Company S the following accounts and balances existed on the books of the two companies: Which one of the following amounts should be eliminated in preparing a consolidated balance sheet immediately following the business combination? Question 2 In which one of the following cases will a non-cash asset transferred as consideration in a business combination be measured at carrying value, not at fair value?


Question 3 On January 1, 200x Ritt Corp. purchased 80% of Shaw Corp.'s $10 par common stock for $975,000. On this date, the carrying amount of Shaw's net assets was $1,000,000. The fair values of Shaw's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net) which were $100,000 in excess of the carrying amount. On that date, the fair value of the 20% noncontrolling interest in Shaw was appropriately determined to be $200,000. For the year ended December 31, 200x, Shaw had net income of $190,000 and paid cash dividends totaling $125,000. In the January 1, 200x consolidated balance sheet, goodwill should be reported at Question 4 On December 31, 1988, Saxe Corporation was merged into Poe Corporation. In the business combination, Poe issued 200,000 shares of its $10 par common stock, with a market price of $18 a share, for all of Saxe's common stock. The stockholders' equity section of each company's balance sheet immediately before the combination was: Assume that the merger is accounted for using the acquisition method of accounting. December 31, 1988 additional paid-in capital should be reported at Question 5 Scroll, Inc., a wholly owned subsidiary of Pirn, Inc., began operations on January 1, 2005. The following information is


from the condensed 2005 income statements of Pirn and Scroll: Additional information: Sales by Pirn to Scroll are made on the same terms as those made to third parties. Equipment purchased by Scroll from Pirn for $36,000 on January 1, 2005, is depreciated using the straight-line method over four years. In Pirn's December 31, 2005, consolidating worksheet, how much intercompany profit should be eliminated from Scroll's inventory? Question 6 The preparation of consolidated statements likely will require the following information about the subsidiary's assets and liabilities at the date of acquisition: Question 7 Which one of the following levels of voting ownership is normally assumed to convey significant influence over an investee? Question 8 In recording its acquisition of Lambda, Inc., Omega, Inc. properly recognized a contingent consideration liability of $28,000 associated with a possible payment based on a target amount of post-combination cash flow from operations. Shortly after the combination, but during the measurement period, the national economy experienced a significant downturn which made it unlikely that the target amount would be reached. As a


consequence, at the end of Omega's fiscal period, the liability was properly revalued to a fair value of $9,000. Which one of the following is the amount of gain or loss that will be recognized in income as a result of the reevaluation of the contingent liability? Question 9 Beni Corp. purchased 100% of Carr Corp.'s outstanding capital stock for $430,000 cash. Immediately before the purchase, the balance sheets of both corporations reported the following: On the date of purchase, the fair value of Carr's assets was $50,000 more than the aggregate carrying amounts. In the consolidated balance sheet prepared immediately after the purchase, the consolidated stockholders' equity should amount to: Question 10 Which one of the following methods, if any, may a parent use on its books to carry an investment in a subsidiary that it will consolidate? Question 11 Parco owns 100% of its subsidiary, Subco, which it acquired at book value. It carries its investment in Subco on its books using the equity method of accounting. At the beginning of its 2009 fiscal year, the investment in Subco account was $552,000. During 2009 Subco reported the following: In preparing its 2009 fiscal year consolidated statements, which one of the following


is the total amount of equity revenue that Parco will have to reverse for 2009 as a result of it ownership of Subco? Question 12 Which of the following kinds of transactions should be eliminated in the consolidating process? Question 13 Which of the following statements concerning the primary beneficiary of a variable-interest entity is/are correct? I. The primary beneficiary has the ability to direct the most significant economic activities of the variable-interest entity. II. Only one entity can be the primary beneficiary of a variable-interest entity. III. The investor that has the greatest equity ownership in a variable-interest entity will be the primary beneficiary of the entity. Question 14 Sun Co. is a wholly owned subsidiary of Star Co. Both companies have separate general ledgers, and prepare separate financial statements. Sun requires stand-alone financial statements. Which of the following statements is correct? Question 15 P Co. purchased term bonds at a premium on the open market. These bonds represented 20 percent of the outstanding class of bonds issued at a discount by S Co., P's wholly owned


subsidiary. P intends to hold the bonds until maturity. In a consolidated balance sheet, the difference between the bond carrying amounts in the two companies would be ===============================================

ACC 577 Week 7 Quiz (100 % Correct Answers)

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ACC 577 Week 7 Quiz Question 1 Hedges of foreign currency risks can be the hedge of: Question 2 On its December 31, 2004 balance sheet, Nilo Corp reported bonds payable of $8,000,000 and related unamortized bond issue costs of $430,000. The bonds had been issued at par. On January 2, 2005, Nilo retired $4,000,000 of the outstanding bonds at par plus a call premium of $100,000. What amount should Nilo


report in its 2005 income statement as loss on extinguishment of debt? Question 3 Servco, a loan servicing agency, paid $60,000 to acquire a threeyear right to service $1,000,000 of Banco's loans. Servco will be entitled to a servicing fee of 1% of the interest and fees collected during the three-year period. Servco expects its servicing fees to be: Which one of the following is the amount of gross profit after amortization of the servicing asset that Servco expects to earn over the three-year life of the service contract? Question 4 Specific disclosures in financial statements are required when an entity engages in: Question 5 Which one of the following sets best describes the meaning of the terms "underlying" and "notional amount" as applied to derivative instruments? Question 6 Which of the following must the transferor of a financial asset disclose? I. Assets pledged as collateral, either in the balance sheet or notes. II. Detailed information about financial assets that have been securitized and sold. Question 7


Servco, a loan servicing agency, paid $60,000 to acquire a threeyear right to service $1,000,000 of Banco's loans. Servco will be entitled to a servicing fee of 1% of the interest and fees collected during the three-year period. Servco expects its servicing fees to be: Which one of the following is the amount of the $60,000 acquisition fee that Servco should amortize during year 1? Question 8 Which of the following, if any, can be the risk being hedged in a foreign currency hedge? Question 9 A derivative financial instrument is best described as: Question 10 Which of the following conditions must be met for derecognition of a transferred financial asset to occur under IFRS? I. The financial asset has been transferred outside the consolidated group of the transferor. II. The transferor has transferred substantially all of the risks and rewards of ownership of the financial asset. III. The contractual rights to the financial assets cash flows cannot be retained by the transferor, but must be transferred to the transferee. Question 11 Where in its financial statements should a company disclose information about its concentration of credit risks?


Question 12 Which of the following kinds of risk must be disclosed for most financial instruments? Question 13 Bigco, Inc. transferred long-term receivables with a carrying value of $500,000 to Banco for $425,000 cash. Banco will collect interest on the receivables during the life of the receivables, but Bigco is obligated to repurchase the receivables prior to their maturity. What amount of receivables has Bigco surrendered control of for accounting purposes? Question 14 Which one of the following is not associated with accounting for a transfer of a financial asset treated as a sale by the transferor? Question 15 For accounting purposes, which one of the following is not a characteristic associated with the transfer of financial assets? Question 16 A change in the fair value of a derivative qualified as a cash flow hedge is determined to be either effective in offsetting a change in the hedged item or ineffective in offsetting such a change. How should the effective and ineffective portions of the change in value of a derivative which qualifies as a cash flow hedge be reported in financial statements?


Question 17 A financial asset is transferred with one component of the asset appropriately treated as sold and another component appropriately treated as retained. How will the amount to be written off as sold be determined? Question 18 On September 1, 2005, Hall Corp. redeemed $500,000 of its 12%, 15-year bonds. Related unamortized bond premium and issue costs at that date were $8,000 and $10,000, respectively. What amount should Hall use to determine gain or loss on redemption? Question 19 For accounting purposes, which one of the following circumstances would not be considered the transfer of a financial asset? Question 20 Gains and Losses from changes in the fair value of a derivative designated and qualified as a fair value hedge should be: ===============================================

ACC 577 Week 8 Assignment 1 Emerging Issues Task Force

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ACC 577 Week 8 Assignment 1 Emerging Issues Task Force

Assignment 1: Emerging Issues Task Force

Review the Emerging Issues Task Force (EITF) on the FASB Website, located at http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1218220 137512. Next, review the Description and Status of Current Issues section, located at http://www.fasb.org/jsp/FASB/Page/SectionPage &cid=1218220137528, along with the Exposure Drafts and Public Comment Documents, located at http://www.fasb.org/cs/ContentServer?site=FASB&c=Page&pa gen ame=FASB%2FPage%2FSectionPage&cid=1176157086783.

Write a four to five (4-5) page paper in which you:


Analyze the primary way in which Emerging Issues Task Force (EITF) influences Generally Accepted Accounting Principles (GAAP). Based on your analysis, recommend one (1) improvement that the EITF could take in order to more effectively influence GAAP. From the Description and Status of Current Issues section of the FASB Website, choose one (1) of the current issues, and analyze the EITF’s conclusion(s). Based on your analysis, make at least two (2) recommendations that would enhance the EITF’s conclusion(s). Provide a rationale to support your recommendation. From the Exposure Drafts and Public Comment Documents section of the FASB Website, choose one (1) public comment on the most recent exposure draft issued by EITF. Analyze the chosen public comment, and give your opinion on whether or not you agree with the commenter. Support your position with at least two (2) examples. Imagine that your company has tasked you with proposing a new agenda item for the EITF to consider. Create a scenario for one (1) accounting issue that you would propose, and support that proposal with a brief statement of the issue(s). Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic resources.


Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions. Include a cover page containing the title of the assignment, your name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

Analyze the financial principles and concepts related to consolidated financial statements, intercompany transactions, combined financial statements, financial instruments, derivatives, hedging and contingencies, and commitments. Analyze the financial principles and concepts related to earnings per share, disclosures and reporting, and foreign currency transactions.


Use technology and information resources to research issues in financial accounting and reporting. Write clearly and concisely about financial accounting and reporting using proper writing mechanics. ===============================================

ACC 577 Week 9 Quiz (100 % Correct Answers)

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ACC 577 Week 9 Quiz Question 1 Which of the following should be disclosed for each reportable operating segment of an enterprise? Question 2 Advertising costs may be accrued or deferred to provide an appropriate expense in each period for Question 3


Ace Co. settled litigation on February 1, 2005 for an event that occurred during 2004. An estimated liability was determined as of December 31, 2004. This estimate was significantly less than the final settlement. The transaction is considered to be material. The financial statements for year-end 2004 have not been issued. How should the settlement be reported in Ace's year-end 2004 financial statements? Question 4 When should a lessor recognize in income a nonrefundable lease bonus paid by a lessee on signing an operating lease? Question 5 In a sale-leaseback transaction, a gain resulting from the sale should be deferred at the time of the sale-leaseback and subsequently amortized when . I. The seller-lessee has transferred substantially all the risks of ownership. II. The sellerlessee retains the right to substantially all of the remaining use of the property. Question 6 The following information pertains to a sale and leaseback of equipment by Mega Co. on December 31, 2005: What amount of deferred gain on the sale should Mega report at December 31, 2005? Question 7


On August 1, 2005, Metro, Inc. leased a luxury apartment unit to Klum. The parties signed a 1-year lease beginning September 1, 2005 for a $1,000 monthly rent payable on the first day of the month. At the August 1 signing date, Metro collected $540 as a nonrefundable fee for allowing Klum to sign a 1-year lease (the normal lease term is three years) and $1,000 rent for September. Klum has made timely payments each month, but prepaid January's rent on December 20. In Metro's 2005 income statement, rent revenue should be reported as Question 8 On January 1 of the current year, Tell Co. leased equipment from Swill Co. under a nine-year sales-type lease. The equipment had a cost of $400,000 and an estimated useful life of 15 years. Semiannual lease payments of $44,000 are due every January 1 and July 1. The present value of lease payments at 12% was $505,000, which equals the sales price of the equipment. Using the straight-line method, what amount should Tell recognize as depreciation expense on the equipment in the current year? Question 9 A twenty-year property lease, classified as an operating lease, provides for a 10% increase in annual payments every five years. In the sixth year compared to the fifth year, the lease will cause the following expenses to increase Question 10


Gei Co. determined that, due to obsolescence, equipment with an original cost of $900,000 and accumulated depreciation at January 1, 2004 of $420,000 had suffered permanent impairment, and as a result should have a carrying value of only $300,000 as of the beginning of the year. In addition, the remaining useful life of the equipment was reduced from 8 years to 3. In its December 31, 2004 balance sheet, what amount should Gei report as accumulated depreciation? Question 11 Dahl Co. traded a delivery van and $5,000 cash for a newer van owned by West Corp. Assume there is no commercial substance to the exchange. The following information relates to the values of the vans on the exchange date: Dahl's income tax rate is 30%. What amounts should Dahl report as gain on exchange of the vans? Question 12 On July 1, 2004, Balt Co. exchanged a truck for 25 shares of Ace Corp.'s common stock. Assume commercial substance.On that date, the truck's carrying amount was $2,500, and its fair value was $3,000. Also, the book value of Ace's stock was $60 per share. On December 31, 2004, Ace had 250 shares of common stock outstanding and its book value per share was $50. What amount should Balt report in its December 31, 2004, balance sheet as investment in Ace? Question 13


On December 31, 2004, a building owned by Carr, Inc. was destroyed by fire. Carr paid $12,000 for removal and cleanup costs. The building had a book value of $250,000 and a fair value of $280,000 on December 31, 2004. What amount should Carr use to determine the gain or loss on this involuntary conversion? Question 14 On July 1, 2005, Glen Corp. leased a new machine from Ryan Corp. The lease contains the following information: No bargain purchase option is provided, and the machine reverts to Ryan when the lease expires. What amount should Glen record as a capitalized leased asset at inception of the lease? Question 15 Scott Co. exchanged nonmonetary assets with Dale Co. No cash was exchanged. There is commercial substance to the exchange. The carrying amount of the asset surrendered by Scott exceeded both the fair value of the asset received and Dale's carrying amount of that asset. Scott should recognize the difference between the carrying amount of the asset it surrendered and Question 16 Lease A does not contain a purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is


equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases? Question 17 On December 31, 2005, Bit Co. had capitalized costs for a new computer software product with an economic life of five years. Sales for 2006 were 30 percent of expected total sales of the software. At December 31, 2006, the software had a net realizable value equal to 90 percent of the capitalized cost. What percentage of the original capitalized cost should be reported as the net amount on Bit's December 31, 2006 balance sheet? Question 18 On January 1, 2001, Babson, Inc. leased two automobiles for executive use. The lease requires Babson to make five annual payments of $13,000 beginning January 1, 2001. At the end of the lease term, December 31, 2005, Babson guarantees the residual value of the automobiles will total $10,000. The lease qualifies as a capital lease. The interest rate implicit in the lease is 9%. Present value factors for the 9% rate implicit in the lease are as follows: Babson's recorded capital lease liability immediately after the first required payment should be Question 19 YIV Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. YIV


should report segment financial information for each division meeting which of the following criteria? Question 20 Brill Co. made the following expenditures during 2004: What amount of these expenditures should Brill report in its 2004 income statement as research and development expenses? ===============================================

ACC 577 Week 10 Quiz (100 % Correct Answers)

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ACC 577 Week 10 Quiz Question 1 Which of the following is a required financial statement for an investment trust fund? Question 2


Taxes collected and held by Franklin County for a separate school district would be accounted for in which fund? Question 3 During the past fiscal year, Arnett County recorded the following transactions: Receipt of $36,000 of intergovernmental revenues which must be used to provide medical assistance to victims of natural disasters. Investment earnings of $5,000 from an endowment established by the local Lions Club to subsidize summer camp for the Boy Scouts with demonstrated financial need. $3,000,000 in proceeds from revenue bonds. How much money from these transactions should Arnett record in Special Revenue funds? Question 4 What is the basic criterion used to determine the reporting entity for a governmental unit? Question 5 State University received two contributions during the year that must be used to provide scholarships. Contribution A for $10,000 was collected during the year, and $8,000 was spent on scholarships. Contribution B is a pledge for $30,000 to be received next fiscal year. What amount of contribution revenue should the university report in its statement of activities? Question 6


On January 2, City of Walton issued $500,000, 10-year, 7% general obligation bonds. Interest is payable annually, beginning January 2 of the following year.What amount of bond interest is Walton required to report in the statement of revenue, expenditures, and changes in fund balance of its governmental funds at the close of this fiscal year, September 30? Question 7 Hospital, Inc., a not-for-profit organization with no governmental affiliation, reported the following in its accounts for the current year ended December 31: What amount would the hospital report as net patient service revenue in its statement of operations for the current year ended December 31? Question 8 The encumbrance account of a governmental unit is debited when Question 9 The following revenues were among those reported by Ariba Township in 2005: What amount of the foregoing revenues should be accounted for in Ariba's governmental-type funds? Question 10 Todd City formally integrates budgetary accounts into its general fund. Todd uses an internal service fund to account for the operations of its data processing center, which provides


services to Todd's other governmental units. During the year ended December 31, 2005, Todd received a state grant to buy a bus, and an additional grant for bus operation in 2005. In 2005, only 90% of the capital grant was used for the bus purchase, but 100% of the operating grant was disbursed. Todd has incurred the following long-term obligations: General obligation bonds issued for the water and sewer fund which will service the debt. Revenue bonds to be repaid from admission fees collected from users of the municipal recreation center. These bonds are expected to be paid from enterprise funds, and secured by Todd's full faith, credit, and taxing power as further assurance that the obligations will be paid. Todd's 2005 expenditures from the general fund include payments for structural alterations to a firehouse and furniture for the mayor's office. In Todd's general fund balance sheet presentation at December 31, 2005, which of the following expenditures should be classified as fixed assets? Question 11 On March 2, 2004, Finch City issued 10-year general obligation bonds at face amount, with interest payable March 1 and September 1. The proceeds were to be used to finance the construction of a civic center over the period April 1, 2004, to March 31, 2005.During the fiscal year ended June 30, 2004, no resources had been provided to the debt service fund for the payment of principal and interest. On June 30, 2004, Finch's debt service fund should include interest payable on the general obligation bonds for


Question 12 A company used the percentage-of-completion method of accounting for a four-year construction contract. Which of the following items would be used to calculate the income recognized in the second year? Question 13 During 2004, Mitchell Corp. started a construction job with a total contract price of $600,000. The job was completed on December 15, 2005. Additional data are as follows: Under the completed contract method, what amount should Mitchell recognize as gross profit for 2005? Question 14 Which of the following would be reported as program revenues on a local government's government-wide statement of activities? Question 15 Alinas County manages an endowment of $500,000, the earnings from which are required to be used to maintain the walking trails in the county parks. During the year, the endowment received $20,000 in investment earnings, $3,000 of which was related to earnings from the previous year which were not received 80 days after the fiscal year end. At the end of the year, the market value of the endowment was $510,000. In


its fund-based financial statements, how much should the County recognize in conjunction with this endowment? Question 16 A state or local government should not have multiple funds in which of the following fund categories? Question 17 The governmental fund measurement focus is on the determination of Question 18 A not-for-profit voluntary health and welfare organization received a $500,000 permanent endowment. The donor stipulated that the income must be used for a mental health program. The endowment fund reported $60,000 net decrease in market value and $30,000 investment income.The organization spent $45,000 on the mental health program during the year. What amount of change in temporarily restricted net assets should the organization report? Question 19 A not-for-profit voluntary health and welfare organization received a $500,000 permanent endowment. The donor stipulated that the income must be used for a mental health program. The endowment fund reported $60,000 net decrease in market value and $30,000 investment income. The organization


spent $45,000 on the mental health program during the year. What amount of change in temporarily restricted net assets should the organization report? Question 20 Lema Fund, a voluntary welfare organization funded by contributions from the general public, received unrestricted pledges of $200,000 during 2005. It was estimated that 10% of these pledges would be uncollectible. By the end of 2005, $130,000 of the pledges had been collected. It was expected that $50,000 more would be collected in 2006 and that the balance of $20,000 would be written off as uncollectible. What amount should Lema include under public support in 2005 for net contributions? ===============================================


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