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ACC 305 Final Exam Part I

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ACC 305 Final Exam Part I

Multiple Choice Question 78

Alt Corporation enters into an agreement with Yates Rentals Co. on January 1, 2015 for the purpose of leasing a machine to be used in its manufacturing operations. The following data pertain to the agreement:

Multiple Choice Question 71

Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $172,076, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pisa, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Pisa, Inc. uses the straight-line method to depreciate similar assets. What is the amount of depreciation expense recorded by Pisa, Inc. in the first year of the asset’s life?

Multiple Choice Question 100

Lease A does not contain a bargain 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?

Multiple Choice Question 64

On December 31, 2015, Kuhn Corporation leased a plane from Bell Company for an eight-year period expiring December 30, 2022. Equal annual payments of $300,000 are due on December 31 of each year, beginning with December 31, 2015. The lease is properly classified as a capital lease on Kuhn’s books. The present value at December 31, 2015 of the eight lease payments over the lease term discounted at 10% is $1,760,528. Assuming the first payment is made on time, the amount that should be reported by Kuhn Corporation as the lease liability on its December 31, 2015 balance sheet is

Multiple Choice Question 39

In order to properly record a direct-financing lease, the lessor needs to know how to calculate the lease receivable. The lease receivable in a direct-financing lease is best defined as

Multiple Choice Question 22

Which of the following is an advantage of captive leasing companies over the other players in the leasing market?

Multiple Choice Question 69

On December 31, 2015, Grantham, Inc. appropriately changed its inventory valuation method to FIFO cost from weighted-average cost for financial statement and income tax purposes. The change will result in a $2,500,000 increase in the beginning inventory at January 1, 2015. Assume a 30% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is

IFRS Multiple Choice Question 09

Ben, Inc. follows IFRS for its external financial reporting. Ben, Inc. owns 25% of the outstanding stock of Black, Inc. and accordingly uses the equity method to account for its investment. Which of the following is true regarding Ben, Inc.'s policies related to Black, Inc.?

Multiple Choice Question 46

During 2015, a construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years appear below:

 

 

Completed-Contract

 

Percentage-of-Completion

2013

 

 

$  475,000

 

 

 

$  900,000

 

2014

 

 

625,000

 

 

 

950,000

 

2015

 

 

700,000

 

 

 

1,050,000

 

 

 

 

$1,800,000

 

 

 

$2,900,000

 


Assuming an income tax rate of 40% for all years, the affect of this accounting change on prior periods should be reported by a credit of

Multiple Choice Question 49

On December 31, 2015 Dean Company changed its method of accounting for inventory from weighted average cost method to the FIFO method. This change caused the 2015 beginning inventory to increase by $840,000. The cumulative effect of this accounting change to be reported for the year ended 12/31/15, assuming a 40% tax rate, is

Multiple Choice Question 24

Which of the following is accounted for as a change in accounting principle?

Multiple Choice Question 53

Swift Company purchased a machine on January 1, 2012, for $600,000. At the date of acquisition, the machine had an estimated useful life of six years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2015, Swift determined, as a result of additional information, that the machine had an estimated useful life of eight years from the date of acquisition with no salvage. An accounting change was made in 2015 to reflect this additional information.

Assume that the direct effects of this change are limited to the effect on depreciation and the related tax provision, and that the income tax rate was 30% in 2012, 2013, 2014, and 2015. What should be reported in Swift's income statement for the year ended December 31, 2015, as the cumulative effect on prior years of changing the estimated useful life of the machine?

Multiple Choice Question 54

Swift Company purchased a machine on January 1, 2012, for $600,000. At the date of acquisition, the machine had an estimated useful life of six years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2015, Swift determined, as a result of additional information, that the machine had an estimated useful life of eight years from the date of acquisition with no salvage. An accounting change was made in 2015 to reflect this additional information.

What is the amount of depreciation expense on this machine that should be charged in Swift's income statement for the year ended December 31, 2015?

Multiple Choice Question 108

Jamison Corp.'s balance sheet accounts as of December 31, 2015 and 2014 and information relating to 2015 activities are presented below.

 

       December 31,        

 

    2015   

    2014   

Assets

 

 

Cash

$   440,000

$   200,000

Short-term investments

     600,000

Accounts receivable (net)

1,020,000

1,020,000

Inventory

1,380,000

1,200,000

Long-term investments

  400,000

  600,000

Plant assets

3,400,000

2,000,000

Accumulated depreciation

   (900,000)

  (900,000)

Patent

    180,000

  200,000

      Total assets

$6,520,000

$4,320,000 

Liabilities and Stockholders' Equity

 

 

Accounts payable and accrued liabilities

$1,660,000

$1,440,000

Notes payable (nontrade)

     580,000

Common stock, $10 par

1,600,000

1,400,000

Additional paid-in capital

    800,000

   500,000

Retained earnings

  1,880,000 

    980,000 

      Total liabilities and stockholders' equity

$6,520,000 

$4,320,000


Information relating to 2015 activities:

• Net income for 2015 was $1,300,000.
• Cash dividends of $400,000 were declared and paid in 2015.
• Equipment costing $1,000,000 and having a carrying amount of $320,000 was sold in 2015 for $360,000.
• A long-term investment was sold in 2015 for $320,000. There were no other transactions affecting long-term investments in 2015.
• 20,000 shares of common stock were issued in 2015 for $25 a share.
• Short-term investments consist of treasury bills maturing on 6/30/16.

Net cash provided by Jamison’s 2015 financing activities was

Multiple Choice Question 48

In reporting extraordinary transactions on a statement of cash flows (indirect method), the

Multiple Choice Question 62

Equipment that cost $525,000 and had a book value of $234,000 was sold for $270,000. Data from the comparative balance sheets are:

Multiple Choice Question 22

The primary purpose of the statement of cash flows is to provide information

Multiple Choice Question 76

In preparing Titan Inc.’s statement of cash flows for the year ended December 31, 2015, the following amounts were available:

Collect note receivable

$410,000

Issue bonds payable

426,000

Purchase treasury stock

200,000


What amount should be reported on Titan, Inc’s statement of cash flows for financing activities?

Multiple Choice Question 26

A company borrows $10,000 and signs a 90-day nontrade note payable. In preparing a statement of cash flows (indirect method), this event would be reflected as a(n)

Multiple Choice Question 57

In January 2015, Post, Inc. estimated that its year-end bonus to executives would be $840,000 for 2015. The actual amount paid for the year-end bonus for 2014 was $770,000. The estimate for 2015 is subject to year-end adjustment. What amount, if any, of expense should be reflected in Post's quarterly income statement for the three months ended March 31, 2015?

Multiple Choice Question 74

Farr, Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. Farr should report segment financial information for each division meeting which of the following criteria?

Multiple Choice Question 38

In considering interim financial reporting, how does the profession conclude that such reporting should be viewed?

Multiple Choice Question 35

In presenting segment information, which of the following items must be reconciled to the entity's consolidated financial statements?

IFRS Multiple Choice Question 15

High-quality standards in an international environment include which of the following?

Multiple Choice Question 26

If a business entity entered into certain related party transactions, it would be required to disclose all of the following information except the

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