ACC/305 ACC305 ACC 305 WEEK 11 FINAL EXAM PART 1

ACC 305 WEEK 11 FINAL EXAM PART 1

Final Exam Part I 

Multiple Choice Question 74

Haystack, Inc. manufactures machinery used in the mining industry. On January 2, 2015 it leased equipment with a cost of $320,000 to Silver Point Co. The 5-year lease calls for a 10% down payment and equal annual payments at the end of each year. The equipment has an expected useful life of 5 years. If the selling price of the equipment is $520,000, and the rate implicit in the lease is 8%, what are the equal annual payments?

$117,214

 

$108,530

 

$121,315

 

$130,237

 

Multiple Choice Question 28

The methods of accounting for a lease by the lessee are

operating and leveraged lease methods.

 

operating, sales, and capital lease methods.

 

none of these answers are correct.

 

operating and capital lease methods.

 

Multiple Choice Question 27

The amount to be recorded as the cost of an asset under capital lease is equal to the

present value of the minimum lease payments or the fair value of the asset, whichever is lower.

 

present value of the minimum lease payments plus the present value of any unguaranteed residual value.

 

carrying value of the asset on the lessor's books.

 

present value of the minimum lease payments.

 

Multiple Choice Question 37

Which of the following would not be included in the Lease Receivable account?

All would be included

 

Unguaranteed residual value

 

Guaranteed residual value

 

A bargain purchase option

 

Multiple Choice Question 23

Which of the following best describes current practice in accounting for leases?

All leases are capitalized.

 

Leases are not capitalized.

 

Leases similar to installment purchases are capitalized.

 

All long-term leases are capitalized.

 

Multiple Choice Question 37

An example of a correction of an error in previously issued financial statements is a change

in the service life of plant assets, based on changes in the economic environment.

 

from the FIFO method of inventory valuation to the LIFO method.

 

in the tax assessment related to a prior period.

 

from the cash basis of accounting to the accrual basis of accounting.

 

IFRS Multiple Choice Question 08

Detailed guidance regarding the accounting and reporting for the indirect effects of changes in accounting principle is available under

IFRS only.

 

both U.S. GAAP and IFRS.

 

U.S. GAAP only.

 

neither U.S. GAAP nor IFRS.

 

Multiple Choice Question 32

When a company decides to switch from the double-declining balance method to the straight-line method, this change should be handled as a

change in accounting estimate.

 

prior period adjustment.

 

correction of an error.

 

change in accounting principle.

 

Multiple Choice Question 38

Counterbalancing errors do not include

errors that correct themselves in two years.

 

errors that correct themselves in three years.

 

an understatement of purchases.

 

an overstatement of unearned revenue.

 

IFRS Multiple Choice Question 06

Is the following exception applicable to IFRS or U.S. GAAP?
“If determining the effect of a change in accounting principle is considered impracticable, then a company should report the effect of the change in the period in which it believes it practicable to do so.”

IFRS

U.S. GAAP

 

Yes   No

 

Yes   Yes

 

No   Yes

 

No   No

 

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?

$120,000

 

$ 60,000

 

$ 75,000

 

$150,000

 

Multiple Choice Question 51

Lanier Company began operations on January 1, 2014, and uses the FIFO method in costing its raw material inventory. Management is contemplating a change to the LIFO method and is interested in determining what effect such a change will have on net income. Accordingly, the following information has been developed:

Final Inventory		2014		2015
FIFO		$ 320,000		$ 360,000
LIFO		240,000		300,000
Net Income (computed under the FIFO method)		500,000		650,000

Based upon the above information, a change to the LIFO method in 2015 would result in net income for 2015 of

$670,000.

 

$710,000.

 

$590,000.

 

$650,000.

 

Multiple Choice Question 35

In determining net cash flow from operating activities, a decrease in accounts payable during a period

requires an addition adjustment to net income under the indirect method.

 

means that income on an accrual basis is less than income on a cash basis.

 

requires a decrease adjustment to cost of goods sold under the direct method.

 

requires an increase adjustment to cost of goods sold under the direct method.

 

Multiple Choice Question 67

Financial statements for Kiner Company are given below:

Total assets on the balance sheet at December 31, 2015 are $4,432,000. Accumulated deprecia-tion on the equipment sold was $224,000.

Capital stock (plus any additional paid-in capital) at December 31, 2015 was

$2,480,000.

 

$1,040,000.

 

$1,600,000.

 

$1,840,000.

 

Multiple Choice Question 49

Which of the following is shown on a statement of cash flows?

None of these answers are correct.

 

A stock split.

 

An appropriation of retained earnings.

 

A stock dividend.

 

Multiple Choice Question 53

Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below.

The following additional data were provided:

	1.	Dividends for the year 2015 were $144,000.
	2.	During the year, equipment was sold for $180,000. This equipment cost $264,000 originally and had a book value of $216,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
	3.	All depreciation expense is in the selling expense category.

Questions relate to a statement of cash flows (direct method) for the year ended December 31, 2015, for Harlan Mining Company.

Under the direct method, the cash received from customers is

$6,330,000.

 

$6,408,000.

 

$6,300,000.

 

$6,192,000.

 

Multiple Choice Question 70

The following information was taken from the 2015 financial statements of Dunlop Corporation:

Bonds payable, January 1, 2015	$   600,000
Bonds payable, December 31, 2015	3,600,000

During 2015

• A $540,000 payment was made to retire bonds payable with a face amount of $600,000.
• Bonds payable with a face amount of $240,000 were issued in exchange for equipment.

In its statement of cash flows for the year ended December 31, 2015, what amount should Dunlop report as proceeds from issuance of bonds payable?

$3,840,000

 

$3,300,000

 

$3,000,000

 

$3,360,000

 

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.

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

$320,000.

 

$1,480,000.

 

$1,080,000.

 

$680,000.

 

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?

Segment profit or loss is 10% or more of consolidated profit or loss.

 

Segment profit or loss is 10% or more of combined profit or loss of all company segments.

 

Segment revenue is 10% or more of combined revenue of all the company segments.

 

Segment revenue is 10% or more of consolidated revenue.

 

Multiple Choice Question 78

Mayo Corp. has estimated that total depreciation expense for the year ending December 31, 2015 will amount to $450,000, and that 2015 year-end bonuses to employees will total $900,000. In Mayo's interim income statement for the six months ended June 30, 2015, what is the total amount of expense relating to these two items that should be reported?

$0.

 

$1,350,000.

 

$675,000.

 

$225,000.

 

Multiple Choice Question 33

All of the following information about each operating segment must be reported except

interest revenue.

 

depreciation and amortization expense.

 

unusual items.

 

cost of goods sold.

 

Multiple Choice Question 30

Revenue of a segment includes

sales to unaffiliated customers and other revenue and gains.

 

sales to unaffiliated customers and intersegment sales.

 

sales to unaffiliated customers and interest revenue.

 

only sales to unaffiliated customers.

 

Multiple Choice Question 47

A financial forecast per professional pronouncements presents to the best of the responsible party's knowledge and belief,

given one or more hypothetical assumptions, an entity's expected financial position, results of operations, and cash flows.

 

an assessment of the company's ability to be successful in the future under a number of different assumptions.

 

an entity's expected financial position, results of operations, and cash flows.

 

an assessment of the company's ability to be successful in the future.

 

Multiple Choice Question 37

Rondelli Manufacturing Company employs a standard cost system. A planned volume variance in the first quarter of 2015, which is expected to be absorbed by the end of the fiscal year, ordinarily should

be deferred at the end of the first quarter if it is unfavorable; favorable variances are to be recognized in the period incurred.

 

be deferred at the end of the first quarter if it is favorable; unfavorable variances are to be recognized in the period incurred.

 

be deferred at the end of the first quarter, regardless of whether it is favorable or unfavorable.

 

never be deferred beyond the quarter in which it occurs.