Question Details

AC 551
MIDTERM
Question :
(TCO C) The cost of an intangible asset includes all of the following except
Question :
(TCO C) Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to 
Question :
(TCO C) Negative goodwill arises when the _____ of the net assets acquired is higher than the purchase price of the assets. 
Question :
(TCO C) ELO Corporation purchased a patent for $90,000 on September 1, 2008. It had a useful life of 10 years. On January 1, 2010, ELO spent $22,000 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2010? 

Question 5.	Question :	(TCO C) General Products Company bought Special Products Division in 2010 and appropriately recorded $500,000 of goodwill related to the purchase. On December 31, 2011, the fair value of Special Products Division is $4,000,000 and it is carried on General Products’ books for a total of $3,400,000, including the goodwill. An analysis of Special Products Division- assets indicates that goodwill of $400,000 exists on December 31, 2011. What goodwill impairment should be recognized by General Products in 2011? 

Question :
(TCO D) An employee's net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee's 
Question :
(TCO D) Which gives rise to the requirement to accrue a liability for the cost of compensated absences? 

Question 8.	Question :	(TCO D) Which of the following is not acceptable treatment for the presentation of current liabilities? 

Question :
(TCO D) Jenkins Corporation has $2,500,000 of short-term debt it expects to retire with proceeds from the sale of 75,000 shares of common stock. If the stock is sold for $20 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities?
Question :
(TCO D) Tender Foot, Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that it may lose the case. The attorneys estimated that there is a 40% chance of losing. Tender Foot- attorney estimated that if it loses, then the amount of any payment would be $500,000. What is the required journal entry as a result of this litigation?
Question :
(TCO D) Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity 10 years from date of issue. If the bonds were issued at a premium, this indicates that 
Question :
(TCO D) If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a 
Question :
(TCO D) On January 1, 2010, Ellison Co. issued 8-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are as follows: 


Present value of 1 for eight periods at 6%                      .627
Present value of 1 for eight periods at 8%                      .540
Present value of 1 for 16 periods at 3%                          .623
Present value of 1 for 16 periods at 4%                          .534
Present value of annuity for eight periods at 6%             6.210
Present value of annuity for eight periods at 8%             5.747
Present value of annuity for 16 periods at 3%                 12.561
Present value of annuity for 16 periods at 4%                 11.652

The issue price of the bonds is 
Question :
(TCO D) A company issues $5,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2010. Interest is paid on June 30 and December 31. The proceeds from the bonds are $4,901,036. Using effective-interest amortization, how much interest expense will be recognized in 2010? 
Question :
(TCO D) On January 1, Martinez Inc. issued $3,000,000, 11% bonds for $3,195,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report unamortized bond premium of 
Question :
(TCO C) Intangible assets may be internally generated or purchased from another party. In either case, the cost that should be included in the initial valuation of the asset is an issue.
 Instructions:
- Identify the typical costs included in the cash purchase of an intangible asset.
- Discuss how to determine the cost of an intangible asset acquired in a noncash transaction.
- Describe how to determine the cost of several intangible assets acquired in a basket purchase. Provide a numerical example involving intangibles being acquired for a total price of $120,000.
Question :
(TCO C) Under what circumstances is it appropriate to record goodwill in the accounts? How should goodwill, properly recorded on the books, be written off in accordance with generally accepted accounting principles?
Question :
(TCO D) Irving Music Shop gives its customers coupons redeemable for a poster plus a Dixie Chicks CD. One coupon is issued for each dollar of sales. On the surrender of 100 coupons and $5.00 cash, the poster and CD are given to the customer. It is estimated that 80% of the coupons will be presented for redemption. Sales for the first period were $700,000, and the coupons redeemed totaled 340,000. Sales for the second period were $840,000, and the coupons redeemed totaled 850,000. Irving Music Shop bought 20,000 posters at $2.00/poster and 20,000 CDs at $6.00/CD. 
Instructions: Prepare the following entries for the two periods, assuming all the coupons expected to be redeemed from the first period were redeemed by the end of the second period.
Entry
Period 1
Period 2
(a) To record coupons redeemed
 
 
(b) To record estimated liability
 
 

Question :
(TCO D) On January 1, 2011, Piper Co. issued 10-year bonds with a face value of $1,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:
            Present value of 1 for 10 periods at 10%                                                .386
            Present value of 1 for 10 periods at 12%                                                .322
            Present value of 1 for 20 periods at 5%                                      .377
            Present value of 1 for 20 periods at 6%                                      .312
            Present value of annuity for 10 periods at 10%                           6.145
            Present value of annuity for 10 periods at 12%                           5.650
            Present value of annuity for 20 periods at 5%                             12.462
            Present value of annuity for 20 periods at 6%                             11.470
 
Instructions:
- Calculate the issue price of the bonds.
- Without prejudice to your solution in Part (a), assume that the issue price was $884,000. Prepare the amortization table for 2011, assuming that amortization is recorded on interest payment dates.
Question :
(TCO D) Prepare journal entries to record the following retirement. (Show computations and round to the nearest dollar). The December 31, 2010 balance sheet of Wolfe Co. included the following items:
7.5% bonds payable due December 31, 2018     $1,200,000
            Unamortized discount on bonds payable            48,000
 
The bonds were issued on December 31, 2008 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization)
 
            On April 1, 2011, Wolfe retired $240,000 of these bonds at 101 plus accrued interest.