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ACC 423 Final Exam Guide (New 2019, With EXCEL FILE)

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This Tutorial contains Excel File which can be used for any change in values Week 5 Final Exam CPA Question 01 CPA Question 02 CPA Question 05 Question 29 Brief Exercise 15-4 Exercise 15-1 CPA Question 04 CPA Question 06 Brief Exercise 16-2

Brief Exercise 16-7 Brief Exercise 17-1 Brief Exercise 17-9 Brief Exercise 17-13 Exercise 17-3 Exercise 17-10 Question 8 Brief Exercise 19-3 Brief Exercise 19-12 Exercise 19-2 CPA Question 08 CPA Question 02 Brief Exercise 20-8 Exercise 20-1 Exercise 20-5 Exercise 20-12 CPA Question 03 Exercise 22-19

CPA Question 01

On September 1, 2017, Hyde Corp., a newly formed company, had the following stock issued and outstanding: • Common stock, no par, $1 stated value, 5,000 shares originally issued at $15 per share. • Preferred stock, $10 par value, 1,500 shares originally issued for $25 per share.

Hyde's September 1, 2017 statement of stockholders' equity should report Common Preferred Additional Paidstock stock in capital

CPA Question 02 Beck Corp. issued 200,000 shares of common stock when it began operations in year 1 and issued an additional 100,000 shares in year 2.

Beck also issued preferred stock convertible to 100,000 shares of common stock. In year 3, Beck purchased 75,000 shares of its common stock and held it in Treasury. At December 31, year 3, how many shares of Beck's common stock were outstanding?

CPA Question 05 Jones Co. had 50,000 shares of $5 par value common stock outstanding at January 1. On August 1, Jones declared a 5% stock dividend followed by a two-for-one stock split on September 1. What amount should Jones report as common shares outstanding at December 31?

Question 29

Grouper Corp. had $100,000 of 7%, $20 par value preferred stock and 12,000 shares of $25 par value common stock outstanding throughout 2017.

Assuming that total dividends declared in 2017 were $64,000, and that the preferred stock is not cumulative but is fully participating, common stockholders should receive 2017 dividends of what amount?

Assuming that total dividends declared in 2017 were $64,000, and that the preferred stock is fully participating and cumulative with preferred dividends in arrears for 2016, preferred stockholders should receive 2017 dividends totaling what amount?

Assuming that total dividends declared in 2017 were $30,000, that the preferred stock is cumulative, nonparticipating, and was issued on January 1, 2016, and that $5,000 of preferred dividends were declared and paid in 2016, the common stockholders should receive 2017 dividends totaling what amount?

Brief Exercise 15-4 Kingbird Corporation issued 384 shares of $10 par value common stock and 144 shares of $50 par value preferred stock for a lump sum of $19,872. The common stock has a market price of $20 per share, and the preferred stock has a market price of $100 per share.

Prepare the journal entry to record the issuance.

Exercise 15-1 During its first year of operations, Metlock Corporation had the following transactions pertaining to its common stock.

Jan. Issued 80,500 shares for cash at $6 per share.

10 Issued 5,000 shares to attorneys in payment of a bill for Mar. $37,700 for services rendered in helping the company to 1 incorporate.

July Issued 33,300 shares for cash at $8 per share.

1

Sept.

Issued 62,100 shares for cash at $10 per share.

1 Prepare the journal entries for these transactions, assuming that the common stock has a par value of $5 per share.

Prepare the journal entries for these transactions, assuming that the (b) common stock is no-par with a stated value of $2 per share. (a)

CPA Question 04 A restricted stock award was granted at the beginning of 2015 calling for 3,000 shares of stock to be awarded to executives at the beginning of 2019. The fair value of one option was $20 at grant date. During 2017, 100 shares were forfeited because an executive left the firm.

What amount of compensation expense is recognized for 2017?

CPA Question 06 A company had the following outstanding shares as of January 1, year 2: Preferred stock, 10,000 $60 par, 4%, shares cumulative Common stock, 50,000 $3 par shares On April 1, year 2, the company sold 8,000 shares of previously unissued common stock. No dividends were in arrears on January 1, year 2, and no dividends were declared or paid during year 2. Net income for year 2 totaled $236,000. What amount is basic earnings per share for the year ended December 31, year 2?

Brief Exercise 16-2 Oriole Corporation has outstanding 2,100 $1,000 bonds, each convertible into 60 shares of $10 par value common stock. The bonds are converted on December 31, 2017, when the unamortized discount is $26,200 and the market price of the stock is $21 per share.

Record the conversion using the book value approach.

Brief Exercise 16-7 On January 1, 2017, Larkspur Corporation granted 2,000 shares of restricted $5 par value common stock to executives. The market price (fair value) of the stock is $66 per share on the date of grant. The period of benefit is 2 years.

Prepare Larkspur’s journal entries for January 1, 2017, and December 31, 2017 and 2018.

Brief Exercise 17-1 Teal Company purchased, on January 1, 2017, as a held-to-maturity investment, $81,000 of the 8%, 5-year bonds of Chester Corporation for $74,859, which provides an 10% return.

Prepare Teal’s journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization. Assume effective-interest amortization is used.

BE 17-3 Brief Exercise 17-9 The following information relates to Culver Co. for the year ended December 31, 2017: net income 1,321 million; unrealized holding loss of $11.7 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $56.3 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income.

Determine (a) other comprehensive income for 2017, (b) comprehensive

income for 2017, and (c) accumulated other comprehensive income at December 31, 2017

Exercise 17-3 On January 1, 2017, Carla Company purchased 8% bonds having a maturity value of $360,000, for $390,329.57. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year.

Carla Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the heldto-maturity category.

Question 8 Skysong financial income for Lake Inc. is $290,000, and its taxable income is $100,000 for 2018. Its only temporary difference at the end of the period relates to a $100,000 difference due to excess depreciation for tax purposes. If the tax rate is 39% for all periods, compute the amount of income tax expense to report in 2018. No deferred income taxes existed at the beginning of the year.

Brief Exercise 19-3

Marigold Corporation began operations in 2017 and reported pretax financial income of $206,000 for the year. Marigold’s tax depreciation exceeded its book depreciation by $33,000. Marigold’s tax rate for 2017 and years thereafter is 30%. Assume this is the only difference between Marigold’s pretax financial income and taxable income.

Prepare the journal entry to record the income tax expense, deferred income taxes, and income taxes payable Brief Exercise 19-12

Blossom Corporation had the following tax information.

Taxable Tax Year Taxes Paid Income Rate 2015 $306,000

34% $104,040

2016

324,000 29%

93,960

2017

393,000 29%

113,970

In 2018, Blossom suffered a net operating loss of $488,000, which it elected to carry back. The 2018 enacted tax rate is 28%.

Prepare Blossom’s entry to record the effect of the loss carryback.

Exercise 19-2 The following information is available for Pronghorn Corporation for 2016 (its first year of operations).

Excess of tax depreciation over book depreciation, $40,800. This 1. $40,800 difference will reverse equally over the years 2017–2020.

Deferral, for book purposes, of $21,400 of rent received in advance.

2.

The rent will be recognized in 2017.

3. Pretax financial income, $319,400.

4. Tax rate for all years, 30%.

CPA Question 08 Brass Co. reported income before income tax expense of $60,000 for 2017. Brass had no permanent or temporary timing differences for tax purposes. Brass has an effective tax rate of 30% and a $40,000 net operating loss carry-forward from 2016. What is the maximum income tax benefit that Brass can realize from the loss carry-forward for 2017?

Brief Exercise 20-8

Windsor Corporation has the following balances at December 31, 2017.

Projected benefit $2,705,000 obligation Plan assets at 2,099,000 fair value Accumulated 995,000 OCI (PSC) What is the amount for pension liability that should be reported on Windsor's balance sheet at December 31, 2017?

Exercise 20-1 The following information is available for the pension plan of Marigold Company for the year 2017.

Actual and expected $ 16,300 return on plan assets Benefits paid to 38,400 retirees Contributions 94,400 (funding) Interest/discount rate Prior service cost amortization Projected benefit obligation, January 1, 2017 Service cost

11% 8,800 510,000 63,300

Exercise 20-12 Shamrock Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2017.

January 1, 2017

December 31, 2017

Projected benefit $1,499,000 $1,527,000 obligation Market-related and fair value of 802,000 1,127,200 plan assets Accumulated benefit 1,622,000 1,742,500 obligation Accumulated OCI (G/L)— 0 (199,900) Net gain The service cost component of pension expense for employee services rendered in the current year amounted to $78,000 and the amortization of prior service cost was $120,500. The company’s actual funding (contributions) of the plan in 2017 amounted to $245,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,205,000 on January 1, 2017. Assume no benefits paid in 2017.

CPA Question 03 Your answer has been saved and sent for grading. See Gradebook for score details.

During 2017, Orca Corp. decided to change from the FIFO method of inventory valuation to the weighted-average method. Inventory balances under each method were as follows: FIFO Weighted-average January 1, 2017 $71,000

$77,000

December 31, 2017 $79,000

$83,000

Orca's income tax rate is 30%.

In its 2017 financial statements, what amount should Orca report as the cumulative effect of this accounting change?

Exercise 22-18 Pina Tool Company’s December 31 year-end financial statements contained the following errors.

December 31, 2017 December 31, 2018 Ending inventory

$10,500 understated $7,400 overstated

Depreciation expense $2,100 understated

—

An insurance premium of $70,200 was prepaid in 2017 covering the years 2017, 2018, and 2019. The entire amount was charged to expense in 2017. In addition, on December 31, 2018, fully depreciated machinery was sold for $13,500 cash, but the entry was not recorded until 2019.

There were no other errors during 2017 or 2018, and no corrections have been made for any of the errors. (Ignore income tax considerations.)

Exercise 22-19 A partial trial balance of Bramble Corporation is as follows on December 31, 2018.

Dr. Supplies

$2,600

Salaries and wages payable Interest Receivable

Cr.

$1,500 4,600

Prepaid Insurance Unearned Rent Interest Payable

86,200 0 14,100

Additional adjusting data: A physical count of supplies on hand on December 31, 2018, totaled 1. $1,100.

Through oversight, the Salaries and Wages Payable account was not 2. changed during 2018. Accrued salaries and wages on December 31, 2018, amounted to $4,700.

The Interest Receivable account was also left unchanged during 2018.

3. Accrued interest on investments amounts to $3,700 on December 31, 2018.

The unexpired portions of the insurance policies totaled $68,300 as of 4.

December 31, 2018. $26,500 was received on January 1, 2018, for the rent of a building 5. for both 2018 and 2019. The entire amount was credited to rent revenue.

Depreciation on equipment for the year was erroneously recorded as 6. $5,200 rather than the correct figure of $52,000.

A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,500 was not recorded. It was 7. decided that this oversight should be corrected by a prior period adjustment.

Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for Novak Company, which started operations on January 1, 2016.

The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2017. The FIFO income statement is computed in accordance with the requirements of GAAP. Novak’s profit-sharing agreement with its employees indicates

that the company will pay employees 10% of income before profitsharing. Income taxes are ignored.

Question 18 In January 2017, installation costs of $5,800 on new machinery were charged to Maintenance and Repairs Expense. Other costs of this machinery of $29,000 were correctly recorded and have been depreciated using the straight-line method with an estimated life of 10 years and no salvage value. At December 31, 2018, it is decided that the machinery has a remaining useful life of 20 years, starting with January 1, 2018. What entries should be made in 2018 to correctly record transactions related to machinery, assuming the machinery has no salvage value? The books have not been closed for 2018 and depreciation expense has not yet been recorded for 2018.