# Strayer University ACC 304 Week 5 Midterm Part 1 (Set 3) New Work

Strayer University ACC 304 Week 5 Midterm Part 1 (Set 3) New Work

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ACC 304 Week 5 Midterm Part 1 (Set 3)

1) Tongas Company applies revaluation accounting to plant assets with a carrying value of \$1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of \$1,500,000.

The journal entry to adjust the plant assets to fair value and record revaluation surplus in year one will include a

2) Tongas Company applies revaluation accounting to plant assets with a carrying value of \$1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of \$1,500,000.

The journal entry to adjust the plant assets to fair value and record revaluation surplus in year one will include a

3) A major objective of MACRS for tax depreciation is to

4)  Sifton Company reported the following data:

2014   2015

Sales    \$3,000,000 \$3,900,000

Net Income 300,000 400,000

Assets at year end 1,800,000 2,500,000

Liabilities at year end 1,100,000 1,500,000

What is Sifton’s asset turnover for 2015?

5) Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?

6) Slotkin Products purchased a machine for \$39,000 on July 1, 2014. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is \$3,000. Depreciation for 2014 is

7) Tongas Company applies revaluation accounting to plant assets with a carrying value of \$1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of \$1,500,000.

The financial statements for year one will include the following information

8) Tongas Company applies revaluation accounting to plant assets with a carrying value of \$1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of \$1,500,000.

9) Which of the following is not an acceptable approach in applying the lower-of-cost-or-market method to inventory?

10) The following data concerning the retail inventory method are taken from the financial records of Welch Company.

Cost   Retail

Beginning inventory   \$ 147,000   \$ 210,000

Purchases   672,000   960,000

Freight-in   18,000   —

Net markups   —   60,000

Net markdowns   —   42,000

Sales   —   1,008,000

If the foregoing figures are verified and a count of the ending inventory reveals that merchandise actually on hand amounts to \$108,000 at retail, the business has

11) Muckenthaler Company sells product 2005WSC for \$40 per unit. The cost of one unit of 2005WSC is \$36, and the replacement cost is \$35. The estimated cost to dispose of a unit is \$8, and the normal profit is 40%. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?

12) Muckenthaler Company sells product 2005WSC for \$40 per unit. The cost of one unit of 2005WSC is \$36, and the replacement cost is \$35. The estimated cost to dispose of a unit is \$8, and the normal profit is 40%. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?

13) Barker Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were \$531,200 (\$653,800), purchases during the current year at cost (retail) were \$2,137,200 (\$2,772,200), freight-in on these purchases totaled \$127,800, sales during the current year totaled \$2,704,000, and net markups (markdowns) were \$4,000 (\$192,600). What is the ending inventory value at cost?

14) Barker Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were \$531,200 (\$653,800), purchases during the current year at cost (retail) were \$2,137,200 (\$2,772,200), freight-in on these purchases totaled \$127,800, sales during the current year totaled \$2,704,000, and net markups (markdowns) were \$4,000 (\$192,600). What is the ending inventory value at cost?

15) Under the lower-of-cost-or-market method, the replacement cost of an inventory item would be used as the designated market value

16) Under the lower-of-cost-or-market method, the replacement cost of an inventory item would be used as the designated market value

17) During 2014, Larue Co., a manufacturer of chocolate candies, contracted to purchase 200,000 pounds of cocoa beans at \$4.00 per pound, delivery to be made in the spring of 2015. Because a record harvest is predicted for 2015, the price per pound for cocoa beans had fallen to \$3.30 by December 31, 2014.

Of the following journal entries, the one which would properly reflect in 2014 the            effect of the commitment of Larue Co. to purchase the 200,000 pounds of cocoa is

18) During 2014, Larue Co., a manufacturer of chocolate candies, contracted to purchase 200,000 pounds of cocoa beans at \$4.00 per pound, delivery to be made in the spring of 2015. Because a record harvest is predicted for 2015, the price per pound for cocoa beans had fallen to \$3.30 by December 31, 2014.

19) Which method of inventory pricing best approximates specific identification of the actual flow of costs and units in most manufacturing situations?

20) Checkers uses the periodic inventory system. For the current month, the beginning inventory consisted of 4,800 units that cost \$12 each. During the month, the company made two purchases: 2,000 units at \$13 each and 8,000 units at \$13.50 each. Checkers also sold 8,600 units during the month. Using the FIFO method, what is the ending inventory?

21) Groh Co. recorded the following data pertaining to raw material X during January 2014:

Units

Date       Received   Cost   Issued   On Hand

1/1/14   Inventory       \$6.00       3,200

1/11/14   Issue             1,600   1,600

1/22/14   Purchase   4,000   \$7.05       5,600

The moving-average unit cost of X inventory at January 31, 2014 is

22) Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2013. Its inventory at that date was \$550,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows:

Date   Inventory at

Current Prices   Current

Price Index

December 31, 2014   \$642,000     107

December 31, 2015     725,000     125

December 31, 2016     812,500     130

What is the cost of the ending inventory at December 31, 2014 under dollar-value LIFO?

23) Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2013. Its inventory at that date was \$550,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows:

Date   Inventory at

Current Prices   Current

Price Index

December 31, 2014   \$642,000     107

December 31, 2015     725,000     125

December 31, 2016     812,500     130

What is the cost of the ending inventory at December 31, 2014 under dollar-value LIFO?

24)Goods in transit which are shipped f.o.b. destination should be

24) Milford Company had 400 units of “Tank” in its inventory at a cost of \$6 each. It purchased 600 more units of “Tank” at a cost of \$9 each. Milford then sold 700 units at a selling price of \$15 each. The LIFO liquidation overstated normal gross profit by

26) Milford Company had 400 units of “Tank” in its inventory at a cost of \$6 each. It purchased 600 more units of “Tank” at a cost of \$9 each. Milford then sold 700 units at a selling price of \$15 each. The LIFO liquidation overstated normal gross profit by

27)Huff Co. exchanged nonmonetary assets with Sayler Co. No cash was exchanged and the exchange had no commercial substance. The carrying amount of the asset surrendered by Huff exceeded both the fair value of the asset received and Sayler’s carrying amount of that asset. Huff should recognize the difference between the carrying amount of the asset it surrendered and

28) A machine cost \$600,000, has annual depreciation of \$100,000, and has accumulated depreciation of \$450,000 on December 31, 2014. On April 1, 2015, when the machine has a fair value of \$137,500, it is exchanged for a machine with a fair value of \$675,000 and the proper amount of cash is paid. The exchange had commercial substance.

The gain to be recorded on the exchange is

29) Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by Glen Inc. has a book value of \$36,000 and a fair value of \$45,000. The asset given up by Armstrong Co. has a book value of \$60,000 and a fair value of \$57,000. Boot of \$12,000 is received by Armstrong Co.

What amount should Glen Inc. record for the asset received?

30) Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by Glen Inc. has a book value of \$36,000 and a fair value of \$45,000. The asset given up by Armstrong Co. has a book value of \$60,000 and a fair value of \$57,000. Boot of \$12,000 is received by Armstrong Co.

What amount should Glen Inc. record for the asset received?

31) Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were \$4,800,000 on March 1, \$3,960,000 on June 1, and \$6,000,000 on December 31. Arlington Company borrowed \$2,400,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, \$4,800,000 note payable and an 11%, 4-year, \$9,000,000 note payable.

What is the weighted-average interest rate used for interest capitalization purposes?

32) Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were \$4,800,000 on March 1, \$3,960,000 on June 1, and \$6,000,000 on December 31. Arlington Company borrowed \$2,400,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, \$4,800,000 note payable and an 11%, 4-year, \$9,000,000 note payable.

What is the weighted-average interest rate used for interest capitalization purposes?

33) Assets that qualify for interest cost capitalization include

34) Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were \$4,800,000 on March 1, \$3,960,000 on June 1, and \$6,000,000 on December 31. Arlington Company borrowed \$2,400,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, \$4,800,000 note payable and an 11%, 4-year, \$9,000,000 note payable.

What are the weighted-average accumulated expenditures?

35) Which of the following is a capital expenditure?

# Strayer University ACC 304 Final Exam Part 1 (3 Sets) New Work

Strayer University ACC 304 Final Exam Part 1 (3 Sets) New Work

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This Tutorial contains 3 Set of Finals

ACC 304 Final Exam Part 1 (3 Sets) 1

1) Swing High Inc. offers its 100 employees to participate in an employee share-purchase plan. Under the terms of plan, employees are entitled to purchase 10 shares at 10% discount. The par values of shares were \$10. Overall, 60 employees accepted the offer and each employee purchased six shares. The market price on purchase date was \$100.

What is the compensation expense recorded by Swing High Inc.?

2) The interest rate written in the terms of the bond indenture is known as the

3) Which of the following methods of amortization is normally used for intangible assets?

4) If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will

5) The distribution of stock rights to existing common stockholders will increase paid-in capital at the

6) Treasury shares are shares

7) Which of the following is a contract-related intangible assets?

8) Which of the following taxes does not represent a common employee payroll deduction?

9) On January 1, 2014, Ellison Co. issued eight-year bonds with a face value of \$4,000,000 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:

Present value of 1 for 8 periods at 6%          .627

Present value of 1 for 8 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 8 periods at 6%            6.210

Present value of annuity for 8 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 present value of the interest is

10) Which of the following would be considered research and development costs?

11) On January 1, 2015, Evans Company granted Tim Telfer, an employee, an option to buy 3,000 shares of Evans Co. stock for \$25 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be \$22,500. Telfer exercised his option on September 1, 2015, and sold his 1,000 shares on December 1, 2015. Quoted market prices of Evans Co. stock during 2015 were

January 1 \$25 per share

September 1 \$30 per share

December 1 \$34 per share

The service period is for three years beginning January 1, 2015. As a result of the option granted to Telfer, using the fair value method, Evans should recognize compensation expense for 2015 on its books in the amount of

12) Presented below is information related to Hale Corporation:

Common Stock, \$1 par \$4,500,000

Paid-in Capital in Excess of Par―Common Stock 550,000

Preferred 8 1/2% Stock, \$50 par 2,000,000

Paid-in Capital in Excess of Par―Preferred Stock 400,000

Retained Earnings 1,500,000

Treasury Common Stock (at cost) 150,000

The total paid-in capital (cash collected) related to the common stock is

13) On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of \$4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis.

Bond interest expense reported on the December 31, 2014 income statement of Macklin Corporation would be

14) Gannon Company acquired 10,000 shares of its own common stock at \$20 per share on February 5, 2014, and sold 5,000 of these shares at \$27 per share on August 9, 2015. The fair value of Gannon’s common stock was \$24 per share at December 31, 2014, and \$25 per share at December 31, 2015. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2015 to record the sale of 5,000 shares?

15) When computing diluted earnings per share, convertible bonds are

16) Jeff Corporation purchased a limited-life intangible asset for \$225,000 on May 1, 2013. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2015?

17) A corporation called an outstanding bond obligation four years before maturity. At that time there was an unamortized discount of \$750,000. To extinguish this debt, the company had to pay a call premium of \$250,000. Ignoring income tax considerations, how should these amounts be treated for accounting purposes?

18) Slack Inc. borrowed \$320,000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31?

19) Venible newspapers sold 6,000 of annual subscriptions at \$125 each on June 1. How much unearned revenue will exist as of December 31?

20) Hanson Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and \$1,000,000 of 5% convertible bonds outstanding during 2015. The preferred stock is convertible into 40,000 shares of common stock. During 2015, Hanson paid dividends of \$.60 per share on the common stock and \$2 per share on the preferred stock. Each \$1,000 bond is convertible into 45 shares of common stock. The net income for 2015 was \$400,000 and the income tax rate was 30%.

Basic earnings per share for 2015 is (rounded to the nearest penny)

21) Sealy Corporation had the following information in its financial statements for the years ended 2014 and 2015:

Cash dividends for the year 2015 \$5,000

Net income for the year ended 2015 87,000

Market price of stock, 12/31/14 10

Market price of stock, 12/31/15 12

Common stockholders’ equity, 12/31/14 1,000,000

Common stockholders’ equity, 12/31/15 1,200,000

Outstanding shares, 12/31/15 100,000

Preferred dividends for the year ended 2015 10,000

What is the payout ratio for Sealy Corporation for the year ended 2015?

22) Jenks Corporation acquired Linebrink Products on January 1, 2015 for \$8,000,000, and recorded goodwill of \$1,500,000 as a result of that purchase. At December 31, 2015, Linebrink Products had a fair value of \$6,800,000. The net identifiable assets of the Linebrink (excluding goodwill) had a fair value of \$5,800,000 at that time. What amount of loss on impairment of goodwill should Jenks record in 2015?

23) On December 31, 2014, the stockholders’ equity section of Arndt, Inc., was as follows:

Common stock, par value \$10; authorized 30,000 shares;

issued and outstanding 9,000 shares \$90,000

Retained earnings 184,000

Total stockholders’ equity \$390,000

On March 31, 2015, Arndt declared a 10% stock dividend, and accordingly 900 additional shares were issued, when the fair value of the stock was \$18 per share. For the three months ended March 31, 2015, Arndt sustained a net loss of \$32,000. The balance of Arndt’s retained earnings as of March 31, 2015, should be

24) On September 1, 2014, Halley Co. issued a note payable to Fidelity Bank in the amount of \$1,800,000, bearing interest at 10%, and payable in three equal annual principal payments of \$600,000. On this date, the bank’s prime rate was 11%. The first payment for interest and principal was made on September 1, 2015. At December 31, 2015, Halley should record accrued interest payable of

ACC 304 Final Exam Part 1 (3 Sets) 2

Please use those as well for your finals and please either use the question number or some data from question to search as they usually change the company keeping the data same

2) Convertible bonds

3) Litke Corporation issued at a premium of \$5,000 a \$100,000 bond issue convertible into 2,000 shares of common stock (par value \$20). At the time of the conversion, the unamortized premium is \$2,000, the market value of the bonds is \$110,000, and the stock is quoted on the market at \$60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds?

4) Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2014. No common stock was issued during 2015. On January 1, 2015, Didde issued 200,000 shares of nonconvertible preferred stock. During 2015, Didde 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, 2015 was \$465,000. What should be Didde’s 2015 earnings per common share?

5) Weiser Corp. on January 1, 2012, granted stock options for 40,000 shares of its \$10 par value common stock to its key employees. The market price of the common stock on that date was \$23 per share and the option price was \$20. The Black-Scholes option pricing model determines total compensation expense to be \$420,000. The options are exercisable beginning January 1, 2015, provided those key employees are still in Weiser’s employ at the time the options are exercised. The options expire on January 1, 2016.

On January 1, 2015, when the market price of the stock was \$29 per share, all 40,000 options were exercised. The amount of compensation expense Weiser should record for 2015 under the fair value method is

6) Carr Corporation retires its \$300,000 face value bonds at 105 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is \$311,235. The entry to record the redemption will include a

7) On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of \$4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis.

The entry to record the issuance of the bonds would include a credit of

8) Farmer Company issues \$25,000,000 of 10-year, 9% bonds on March 1, 2014 at 97 plus accrued interest. The bonds are dated January 1, 2014, and pay interest on June 30 and December 31. What is the total cash received on the issue date?

9) On its December 31, 2014 balance sheet, Emig Corp. reported bonds payable of \$3,000,000 and related unamortized bond issue costs of \$160,000. The bonds had been issued at par. On January 2, 2015, Emig retired \$1,500,000 of the outstanding bonds at par plus a call premium of \$35,000. What amount should Emig report in its 2015 income statement as loss on extinguishment of debt (ignore taxes)?

10) Feller Company issues \$15,000,000 of 10-year, 9% bonds on March 1, 2014 at 97 plus accrued interest. The bonds are dated January 1, 2014, and pay interest on June 30 and December 31. What is the total cash received on the issue date?

11) Where is debt callable by the creditor reported on the debtor’s financial statements?

12) Sawyer Company self-insures its property for fire and storm damage. If the company were to obtain insurance on the property, it would cost them \$1,500,000 per year. The company estimates that on average it will incur losses of \$1,200,000 per year. During 2014, \$525,000 worth of losses were sustained. How much total expense and/or loss should be recognized by Sawyer Company for 2014?

13) A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should

14) On September 1, Horton purchased \$13,300 of inventory items on credit with the terms 1/15, net 30, FOB destination. Freight charges were \$280. Payment for the purchase was made on September 18. Assuming Horton uses the perpetual inventory system and the net method of accounting for purchase discounts, what amount is recorded as inventory from this purchase?

15) What is a discount as it relates to zero-interest-bearing notes payable?

16) Which of the following legal fees should be capitalized?

17) Which of the following costs of goodwill should be amortized over their estimated useful lives?

18) MaBelle Corporation incurred the following costs in 2015:

Acquisition of R&D equipment with a useful life of 4 years in R&D projects \$800,000

Start-up costs incurred when opening a new plant 140,000

Advertising expense to introduce a new product 700,000

Engineering costs incurred to advance a product to full production stage 500,000

What amount should MaBelle record as research & development expense in 2015?

19) Jenks Corporation acquired Linebrink Products on January 1, 2015 for \$8,000,000, and recorded goodwill of \$1,500,000 as a result of that purchase. At December 31, 2015, Linebrink Products had a fair value of \$6,800,000. The net identifiable assets of the Linebrink (excluding goodwill) had a fair value of \$5,800,000 at that time. What amount of loss on impairment of goodwill should Jenks record in 2015?\

20) The general ledger of Vance Corporation as of December 31, 2015, includes the following accounts:

Deposits with advertising agency (will be used to promote goodwill) 27,000

Discount on bonds payable 70,000

Excess of cost over fair value of identifiable net assets of Acquired subsidiary 480,000

In the preparation of Vance’s balance sheet as of December 31, 2015, what should be reported as total intangible assets?

21) Sealy Corporation had the following information in its financial statements for the years ended 2014 and 2015:

Cash dividends for the year 2015 \$5,000

Net income for the year ended 2015 87,000

Market price of stock, 12/31/14 10

Market price of stock, 12/31/15 12

Common stockholders’ equity, 12/31/14 1,000,000

Common stockholders’ equity, 12/31/15 1,200,000

Outstanding shares, 12/31/15 100,000

Preferred dividends for the year ended 2015 10,000

What is the rate of return on common stock equity for Sealy Corporation for the year ended 2015?

22) An entry is not made on the

23) The issuer of a 5% common stock dividend to common stockholders should transfer from retained earnings to paid-in capital an amount equal to the

24) Layne Corporation had the following information in its financial statements for the years ended 2014 and 2015:

Cash dividends for the year 2015 \$10,000

Net income for the year ended 2015 83,000

Market price of stock, 12/31/14 10

Market price of stock, 12/31/15 12

Common stockholders’ equity, 12/31/14 1,600,000

Common stockholders’ equity, 12/31/15 1,980,000

Outstanding shares, 12/31/15 180,000

Preferred dividends for the year ended 2015 15,000

What is the book value per share for Layne Corporation for the year ended 2015?

25) The pre-emptive right of a common stockholder is the right to

ACC 304 Final Exam Part 1 (3 Sets)

1) Swing High Inc. offers its 100 employees to participate in an employee share-purchase plan. Under the terms of plan, employees are entitled to purchase 10 shares at 10% discount. The par values of shares were \$10. Overall, 60 employees accepted the offer and each employee purchased six shares. The market price on purchase date was \$100.

2)   Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2014. No common stock was issued during 2015. On January 1, 2015, Didde issued 200,000 shares of nonconvertible preferred stock. During 2015, Didde 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, 2015 was \$465,000. What should be Didde’s 2015 earnings per common share?

3) When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be

4) On July 1, 2014, an interest payment date, \$90,000 of Parks Co. bonds were converted into 1,800 shares of Parks Co. common stock each having a par value of \$45 and a market value of \$54. There is \$3,600 unamortized discount on the bonds. Using the book value method, Parks would record

5)  Convertible bonds

6) Paige Co. took advantage of market conditions to refund debt. This was the fourth refunding operation carried out by Paige within the last three years. The excess of the carrying amount of the old debt over the amount paid to extinguish it should be reported as a

7) Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to

8) When a business enterprise enters into what is referred to as off-balance-sheet financing, the company

9) When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be

10) On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of \$4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis.

11) Which of the following taxes does not represent a common employee payroll deduction?

12) Which of the following is an example of a contingent liability?

13) Sawyer Company self-insures its property for fire and storm damage. If the company were to obtain insurance on the property, it would cost them \$1,500,000 per year. The company estimates that on average it will incur losses of \$1,200,000 per year. During 2014, \$525,000 worth of losses were sustained. How much total expense and/or loss should be recognized by Sawyer Company for 2014?

14) Greeson Corp. signed a three-month, zero-interest-bearing note on November 1, 2014 for the purchase of \$250,000 of inventory. The face value of the note was \$253,900. Greeson used a “Discount on Note Payable” account to initially record the note. Assuming that the discount will be amortized equally over the 3-month period and that there was no adjusting entry made for November, the adjusting entry made at December 31, 2012 will include a

15) Presented below is information available for Marley Company.

Current Assets

Cash   \$ 4,000

Short-term investments     65,000

Accounts receivable     61,000

Inventories     110,000

Prepaid expenses     30,000

Total current assets   \$ 270,000

16) In accounting for internally generated intangible assets, U.S. GAAP requires that

17) One factor that is not considered in determining the useful life of an intangible asset is

18) In 2015, Edwards Corporation incurred research and development costs as follows:

Materials and equipment \$110,000

Personnel 130,000

Indirect costs 150,000

\$390,000

These costs relate to a product that will be marketed in 2016. It is estimated that these costs will be recouped by December 31, 2018. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2015?

19) The carrying value of an intangible is

20) Under current accounting practice, intangible assets are classified as

21) The statement of changes in equity has columns for each of the following except:

22) The pre-emptive right of a common stockholder is the right to

23) Total stockholders’ equity represents

24) The issuer of a 5% common stock dividend to common stockholders should transfer from retained earnings to paid-in capital an amount equal to the

25) Which of the following features of preferred stock makes it more like a debt than an equity instrument?

# Strayer University ACC 304 Week 6 Chapter 12 Homework New Work

Strayer University ACC 304 Week 6 Chapter 12 Homework New Work

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ACC 304 Week 6 Chapter 12 Homework

1) Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of \$400,000. The Johnson Division’s net assets, including the good well, have a carrying amount of \$800,000. The fair value of the division is estimated to be \$1,000,000.prepare Water’s journal entry to record impairment of the goodwill.

2) Treasure Land Corporation incurred the following costs in 2014. Prepare the necessary 2014 journal entry or entries for Treasure Land.

3) Sinise Industries acquired two copyrights during 2014. One copy right related to a text book that was developed internally at a cost of \$9,900. This textbook is estimated to have a useful life of 3 years from September 1, 2014, the date it was published. The second copy right (a history research textbook) was purchased from University press on December 1, 2014, for \$24,000. This textbook has an indefinite useful life. How should these two copyrights be reported on Sinise’s balance sheet as of December 31, 2014?

4) Alatorre purchased a patent from Vaina Co. for \$1,000,000 on January 1, 2012. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2022. During 2014, alatorre determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2014?

5) Alatorre bought a franchise from Alexandar Co. on January 1, 2013, for \$400,000. The carrying amount of the franchise on Alexandar’s books on January 1, 2013, was \$500,000. The franchise agreement had an estimated useful life of 30 years. Because Alatorre must enter a competitive bidding at the end of 2015, it is unlikely that franchise will be retained beyond 2022.what amount should be amortized for the year ended December 31, 2014?

6) On January 1, 2014, alatorre incurred organization costs of \$275,000. What amount of organization expense should be reported in 2014?

7) Alatorre purchased the license for distribution of a popular consumer product on January 1, 2014, for \$150,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, alatorre can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2014?

8) Tones Industries has the following patents on its December 31, 2013, balance sheet. The following events occurred during the year ended December 31, 2014. The proper discount rate to be used for these flow is 8%. ( assume that the cash flow occur at the end of the year.) Compute the total carrying amount of tones’ patents on its December 31, 2013, balance sheet.

9)  Compute the total carrying amount of tones’ patents on its December 31, 2014, balance sheet.

10) Presented below is information related to copyrights owned by Walter de la Mare Company at December 31, 2014. Assume that Walter de la Mare Company will continue to use this copyright in the future. As of December 31, 2014, the copyright is estimated to have a remaining useul life of 10 years.

11) Prepare the journal entry ( if any ) to record the impairment of the asset at December 31, 2014. The company does not use accumulated amortization accounts.

12) Prepare the journal entry to record amortization expense for 2015 related to the copyrights.

13) The fair value of the copyright at December 31, 2015, is \$3, 20,000. Prepare journal entry ( if any) necessary to record the increase in fair value.

14) During 2012, Robin Wright Tool Company purchased a building site for its proposed research and development laboratory at a cost of \$60,000. Construction of the building was started in 2012. The building was completed on December 31, 2013, at a cost of \$320,000 and was placed in service on January 2, 2014. The estimated useful life of the building for depreciation purposes was 20 years. The straight-line method of depreciation was to be employed, and there was no estimated residual value. Management estimates that about 50% of the projects of the research and development group will result in long-term benefits ( i.e., at least 10 years ) to the corporation. The remaining projects and the direct costs incurred in conjunction with the research and development activities for 2014 appears below. Upon recommendation of the research and development group, Robin Wright Tool Company acquired a patent for manufacturing rights at a cost of \$88,000. The patent was acquired on April 1, 2013, and has an economic life 10 years. If generally accepted accounting principles were followed, how would the item above relating to research and development activities be reported on the following financial statements?

15) All of the following are key similarities between GAAP and IFRS with respect to accounting for intangible assets except:

16) Research and development costs are:

17) Which of the following statements is correct?

18) A loss on impairment of an intangible asset under IFRS is the asset’s?

19) Recovery of impairment is recognized for all the following except:

# Strayer University ACC 304 Week 10 Chapter 16 Homework New Work

Strayer University ACC 304 Week 10 Chapter 16 Homework New Work

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ACC 304 Week 10 Chapter 16 Homework

1) Archer Inc. issued \$4,461,300 par value, 7% convertible bonds at 99 for cash. If the bonds had not included the conversion feature, they would have sold for 95.

Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

Account Titles and Explanation Debit Credit

2) On January 1, 2014, Barwood Corporation granted 5,360 options to executives. Each option entitles the holder to purchase one share of Barwood’s \$5 par value common stock at \$50 per share at any time during the next 5 years. The market price of the stock is \$73 per share on the date of grant. The fair value of the options at the grant date is \$150,800. The period of benefit is 2 years.

Prepare Barwood’s journal entries for January 1, 2014, and December 31, 2014 and 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

3) Tomba Corporation had 546,600 shares of common stock outstanding on January 1, 2014. On May 1, Tomba issued 51,000 shares.

4) For each of the unrelated transactions described below, present the entries required to record each transaction.

(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

5) Illiad Inc. has decided to raise additional capital by issuing \$176,300 face value of bonds with a coupon rate of 11%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each \$100 bond sold. The value of the bonds without the warrants is considered to be \$139,570, and the value of the warrants in the market is \$24,630. The bonds sold in the market at issuance for \$156,000.

(a) What entry should be made at the time of the issuance of the bonds and warrants? (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

Account Titles and Explanation Debit Credit

(b) Prepare the entry if the warrants were nondetachable. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

6) Tweedie Company issues 10,500 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2014. The stock has a fair value of \$525,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2018. The par value of the stock is \$10. At December 31, 2014, the fair value of the stock is \$481,300.

(a) Prepare the journal entries to record the restricted stock on January 1, 2014 (the date of grant), and December 31, 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

(b) On July 25, 2018, Tokar leaves the company. Prepare the journal entry to account for this forfeiture. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

7) On January 1, 2015, Wilke Corp. had 501,000 shares of common stock outstanding. During 2015, it had the following transactions that affected the Common Stock account.

February 1 Issued 142,000 shares

March 1 Issued a 10% stock dividend

May 1 Acquired 115,000 shares of treasury stock

June 1 Issued a 3-for-1 stock split

October 1 Reissued 67,800 shares of treasury stock

a.)Determine the weighted-average number of shares outstanding as of December 31, 2015.

b.)Assume that Wilke Corp. earned net income of \$3,315,000 during 2015. In addition, it had 117,000 shares of 9%, \$102 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2015. Compute earnings per share for 2015, using the weighted-average number of shares determined in part (a

c.)Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2015. (Round answer to 2 decimal places, e.g. \$2.55.)

d.)Assume the same facts as in part (b), except that net income included an extraordinary gain of \$941,000 and a loss from discontinued operations of \$489,000. Both items are net of applicable income taxes. Compute earnings per share for 2015. (Round answer to 2 decimal places, e.g. \$2.55.)

8) Amy Dyken, controller at Fitzgerald Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Fitzgerald’s financial statements. Below is selected financial information for the fiscal year ended June 30, 2014.

9) Under IFRS, how are convertible debt recorded?

10) Under IFRS, what is recorded as compensation expense for all employee share-purchase plans?

11) Which of the following differs in GAAP and IFRS?

12) Florence Inc. issued 8,000, 5-year convertible bonds of \$2,000 each for \$4,000,000 at the beginning of 2012. The bonds have a stated rate of interest of 9% and interest is payable annually. Each bond can be convertible into 100 shares with a par value of \$10. The market rate of similar nonconvertible debt is 10%.

Determine the fair value of equity component using the “with-and-without” method.

13) Swing High Inc. offers its 100 employees to participate in an employee share-purchase plan. Under the terms of plan, employees are entitled to purchase 10 shares at 10% discount. The par values of shares were \$10. Overall, 60 employees accepted the offer and each employee purchased six shares. The market price on purchase date was \$100.

Swing High Inc. will credit Share Premium―Ordinary for:

# Strayer University ACC 304 Week 9 Chapter 13 and Chapter 14 Quiz (All Possible Questions) New Work

Strayer University ACC 304 Week 9 Chapter 13 and Chapter 14 Quiz (All Possible Questions) New Work

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ACC 304 Week 9 Quiz – Strayer New Work

Week 9 Quiz 5: Chapter 13, Quiz 6: Chapter 14

CURRENT LIABILITIES AND CONTINGENCIES

IFRS questions are available at the end of this chapter.

TRUE-FALSE—Conceptual

1.  A zero-interest-bearing note payable that is issued at a discount will not result in any interest expense being recognized.

2.  Dividends in arrears on cumulative preferred stock should be recorded as a current liability.

3.  Magazine subscriptions and airline ticket sales both result in unearned revenues.

4.  Discount on Notes Payable is a contra account to Notes Payable on the balance sheet.

5.  All long-term debt maturing within the next year must be classified as a current liability on the balance sheet.

6.  A short-term obligation can be excluded from current liabilities if the company intends to refinance it on a long-term basis.

7.  Many companies do not segregate the sales tax collected and the amount of the sale at the time of the sale.

8.  A company must accrue a liability for sick pay that accumulates but does not vest.

9.  Companies report the amount of social security taxes withheld from employees as well as the companies’ matching portion as current liabilities until they are remitted.

10.  Accumulated rights exist when an employer has an obligation to make payment to an employee even after terminating his employment.

11.  Companies should recognize the expense and related liability for compensated absences in the year earned by employees.

12.  Companies should accrue an estimated loss from a loss contingency if information available prior to the issuance of financial statements indicates that it is probable that a liability has been incurred.

13.  A company discloses gain contingencies in the notes only when a high probability exists for realizing them.

14.  The expected profit from a sales type warranty that covers several years should all be recognized in the period the warranty is sold.

15.  The fair value of an asset retirement obligation is recorded as both an increase to the related asset and a liability.

16.  The cause for litigation must have occurred on or before the date of the financial statements to report a liability in the financial statements.

17.  Under the expense warranty approach, companies charge warranty costs only to the period in which they comply with the warranty.

18.  Prepaid insurance should be included in the numerator when computing the acid-test (quick) ratio.

19. Paying a current liability with cash will always reduce the current ratio.

20.  Current liabilities are usually recorded and reported in financial statements at their full maturity value.

MULTIPLE CHOICE—Conceptual

21.     Liabilities are

a.   any accounts having credit balances after closing entries are made.

b.   deferred credits that are recognized and measured in conformity with generally accepted accounting principles.

c.   obligations to transfer ownership shares to other entities in the future.

d.   obligations arising from past transactions and payable in assets or services in the future.

22.     Which of the following is a current liability?

a.   A long-term debt maturing currently, which is to be paid with cash in a sinking fund

b.   A long-term debt maturing currently, which is to be retired with proceeds from a new debt issue

c.   A long-term debt maturing currently, which is to be converted into common stock

d.   None of these

23.     Which of the following is true about accounts payable?

1.   Accounts payable should not be reported at their present value.

2.   When accounts payable are recorded at the net amount, a Purchase Discounts account will be used.

3.   When accounts payable are recorded at the gross amount, a Purchase Discounts Lost account will be used.

a.   1

b.   2

c.   3

d.   Both 2 and 3 are true.

24.     Among the short-term obligations of Lance Company as of December 31, the balance sheet date, are notes payable totaling \$250,000 with the Madison National Bank.  These are 90-day notes, renewable for another 90-day period.  These notes should be classified on the balance sheet of Lance Company as

a.   current liabilities.

b.   deferred charges.

c.   long-term liabilities.

d.   intermediate debt.

25.     Which of the following is not true about the discount on short-term notes payable?

a.   The Discount on Notes Payable account has a debit balance.

b.   The Discount on Notes Payable account should be reported as an asset on the balance sheet.

c.   When there is a discount on a note payable, the effective interest rate is higher than the stated discount rate.

d.   All of these are true.

26.    Which of the following may be a current liability?

a.   Withheld Income Taxes

c.   Deferred Revenue

d.   All of these

27.     Which of the following items is a current liability?

a.   Bonds (for which there is an adequate sinking fund properly classified as a long-term investment) due in three months.

b.   Bonds due in three years.

c.   Bonds (for which there is an adequate appropriation of retained earnings) due in eleven months.

d.   Bonds to be refunded when due in eight months, there being no doubt about the marketability of the refunding issue.

28.     Which of the following should not be included in the current liabilities section of the balance sheet?

b.   Short-term zero-interest-bearing notes payable

c.   The discount on short-term notes payable

d.   All of these are included

29.     Which of the following is a current liability?

a.   Preferred dividends in arrears

b.   A dividend payable in the form of additional shares of stock

c.   A cash dividend payable to preferred stockholders

d.   All of these

30.     Stock dividends distributable should be classified on the

a.   income statement as an expense.

b.   balance sheet as an asset.

c.   balance sheet as a liability.

d.   balance sheet as an item of stockholders’ equity.

31.     Of the following items, the only one which should not be classified as a current liability is

a.   current maturities of long-term debt.

b.   sales taxes payable.

c.   short-term obligations expected to be refinanced.

d.   unearned revenues.

32.     An account which would be classified as a current liability is

a.   dividends payable in the company’s stock.

b.   accounts payable—debit balances.

c.   losses expected to be incurred within the next twelve months in excess of the company’s insurance coverage.

d.   none of these.

33.     Which of the following is a characteristic of a current liability but not a long-term liability?

a.   Unavoidable obligation.

b.   Present obligation that entails settlement by probable future transfer or use of cash, goods, or services.

c.   Liquidation is reasonably expected to require use of existing resources classified as current assets or create other current liabilities.

d.   Transaction or other event creating the liability has already occurred.

34.     Which of the following is not considered a part of the definition of a liability?

a.   Unavoidable obligation.

b.   Transaction or other event creating the liability has already occurred.

c.   Present obligation that entails settlement by probable future transfer or use of cash, goods, or services.

d.   Liquidation is reasonably expected to require use of existing resources classified as current assets or create other current liabilities.

35.     Why is the liability section of the balance sheet of primary importance to bankers?

a.   To evaluate the entity’s credit quality.

b.   To assist in understanding the entity’s liquidity.

c.   To better understand sources of repayment.

d.   To evaluate operating efficiency.

36.     What is the relationship between current liabilities and a company’s operating cycle?

a.   Liquidation of current liabilities is reasonably expected within the company’s operating cycle (or one year if less).

b.   Current liabilities are the result of operating transactions.

c.   Current liabilities can’t exceed the amount incurred in one operating cycle.

d.   There is no relationship between the two.

37.     What is the relationship between present value and the concept of a liability?

a.   Present values are used to measure certain liabilities.

b.   Present values are not used to measure liabilities.

c.   Present values are used to measure all liabilities.

d.   Present values are only used to measure long-term liabilities.

38.     What is a discount as it relates to zero-interest-bearing notes payable?

a.   The discount represents the lender’s costs to underwrite the note.

b.   The discount represents the credit quality of the borrower.

c.   The discount represents the cost of borrowing.

d.   The discount represents the allowance for uncollectible amounts.

39.     Where is debt callable by the creditor reported on the debtor’s financial statements?

a.   Long-term liability.

b.   Current liability if the creditor intends to call the debt within the year, otherwise a long-term liability.

c.   Current liability if it is probable that creditor will call the debt within the year, otherwise a long-term liability.

d.   Current liability.

40.     Which of the following is not a condition necessary to exclude a short-term obligation from current liabilities?

a.   Intend to refinance the obligation on a long-term basis.

b.   Obligation must be due with one year.

c.   Demonstrate the ability to complete the refinancing.

d.   Subsequently refinance the obligation on a long-term basis.

41.     Which of the following does not demonstrate evidence regarding the ability to consummate a refinancing of short-term debt?

a.   Management indicated that they are going to refinance the obligation.

b.   Actually refinance the obligation.

c.   Have capacity under existing financing agreements that can be used to refinance the obligation.

d.   Enter into a financing agreement that clearly permits the entity to refinance the obligation.

42.    A company has not declared a dividend on its cumulative preferred stock for the past three years. What is the required accounting treatment or disclosure in this situation?

a.   Record a liability for cumulative amount of preferred stock dividends not declared.

b.   Disclose the amount of the dividends in arrears.

c.   Record a liability for the current year’s dividends only.

d.   No disclosure or recognition is required.

43.     Which of the following situations may give rise to unearned revenue?

a.   Providing trade credit to customers.

b.   Selling inventory.

c.   Selling magazine subscriptions.

d.   Providing manufacturer warranties.

44.     Which of the following statements is correct?

a.   A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis.

b.   A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to consummate a refinancing.

c.   A company may exclude a short-term obligation from current liabilities if it is paid off after the balance sheet date and subsequently replaced by long-term debt before the balance sheet is issued.

d.   None of these.

45.     The ability to consummate the refinancing of a short-term obligation may be demon- strated by

a.   actually refinancing the obligation by issuing a long-term obligation after the date of the balance sheet but before it is issued.

b.   entering into a financing agreement that permits the enterprise to refinance the debt on a long-term basis.

c.   actually refinancing the obligation by issuing equity securities after the date of the balance sheet but before it is issued.

d.   all of these.

46.     Which of the following statements is false?

a.   A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis and demonstrates an ability to complete the refinancing.

b.   Cash dividends should be recorded as a liability when they are declared by the board of directors.

c.   Under the cash basis method, warranty costs are charged to expense as they are paid.

d.   FICA taxes withheld from employees’ payroll checks should never be recorded as a liability since the employer will eventually remit the amounts withheld to the appropriate taxing authority.

47.     Which of the following is not a correct statement about sales taxes?

a.   Sales taxes are an expense of the seller.

b.   Many companies record sales taxes in the sales account.

c.   If sales taxes are included in the sales account, the first step to find the amount of sales taxes is to divide sales by 1 plus the sales tax rate.

d.   All of these are true.

S48.     If a short-term obligation is excluded from current liabilities because of refinancing, the footnote to the financial statements describing this event should include all of the following information except

a.   a general description of the financing arrangement.

b.   the terms of the new obligation incurred or to be incurred.

c.   the terms of any equity security issued or to be issued.

d.   the number of financing institutions that refused to refinance the debt, if any.

S49     In accounting for compensated absences, the difference between vested rights and accumulated rights is

a.   vested rights are normally for a longer period of employment than are accumu­lated rights.

b.   vested rights are not contingent upon an employee’s future service.

c.   vested rights are a legal and binding obligation on the company, whereas accumulated rights expire at the end of the accounting period in which they arose.

d.   vested rights carry a stipulated dollar amount that is owed to the employee; accumulated rights do not represent monetary compensation.

P50.     An employee’s net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee’s

a.   portion of FICA taxes and unemployment taxes.

b.   and employer’s portion of FICA taxes, and unemployment taxes.

c.   portion of FICA taxes, unemployment taxes, and any voluntary deductions.

d.   portion of FICA taxes and any voluntary deductions.

51.     Which of these is not included in an employer’s payroll tax expense?

a.   F.I.C.A. (social security) taxes

b.   Federal unemployment taxes

c.   State unemployment taxes

d.   Federal income taxes

52.     Which of the following is a condition for accruing a liability for the cost of compensation for future absences?

a.   The obligation relates to the rights that vest or accumulate.

b.   Payment of the compensation is probable.

c.   The obligation is attributable to employee services already performed.

d.   All of these are conditions for the accrual.

53.     A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should

a.   be accrued during the period when the compensated time is expected to be used by employees.

b.   be accrued during the period following vesting.

c.   be accrued during the period when earned.

d.   not be accrued unless a written contractual obligation exists.

54.     The amount of the liability for compensated absences should be based on

1.   the current rates of pay in effect when employees earn the right to compensated absences.

2.   the future rates of pay expected to be paid when employees use compensated time.

3.   the present value of the amount expected to be paid in future periods.

a.   1.

b.   2.

c.   3.

d.   Either 1 or 2 is acceptable.

55.     What are compensated absences?

a.   Unpaid time off.

b.   A form of healthcare.

c.   Payroll deductions.

d.   Paid time off.

56.     Which gives rise to the requirement to accrue a liability for the cost of compensated absences?

a.   Payment is probable.

b.   Employee rights vest or accumulate.

c.   Amount can be reasonably estimated.

d.   All of the above.

57.     Under what conditions is an employer required to accrue a liability for sick pay?

a.   Sick pay benefits can be reasonably estimated.

b.   Sick pay benefits vest.

c.   Sick pay benefits equal 100% of the pay.

d.   Sick pay benefits accumulate.

58.     Which of the following taxes does not represent a common payroll deduction?

a.   Federal income taxes.

b.   FICA taxes.

c.   State unemployment taxes.

d.   State income taxes.

59.     What is a contingency?

a.   An existing situation where certainty exists as to a gain or loss that will be resolved when one or more future events occur or fail to occur.

b.   An existing situation where uncertainty exists as to possible loss that will be resolved when one or more future events occur.

c.   An existing situation where uncertainty exists as to possible gain or loss that will not be resolved in the foreseeable future.

d.   An existing situation where uncertainty exists as to possible gain or loss that will be resolved when one or more future events occur or fail to occur.

60.     When is a contingent liability recorded?

a.   When the amount can be reasonably estimated.

b.   When the future events are probable to occur and the amount can be reasonably estimated.

c.   When the future events are probable to occur.

d.   When the future events will possibly occur and the amount can be reasonably estimated.

# Strayer University ACC 304 Week 7 Chapter 12 Quiz (All Possible Questions) New Work

Strayer University ACC 304 Week 7 Chapter 12 Quiz (All Possible Questions) New Work

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ACC 304 Week 7 Quiz – Strayer New Work

Week 7 Quiz 4: Chapter 12

INTANGIBLE ASSETS

IFRS questions are available at the end of this chapter.

TRUE-FALSE—Conceptual

1.     Intangible assets derive their value from the right (claim) to receive cash in the future.

2.     Internally created intangibles are recorded at cost.

3.     Internally generated intangible assets are initially recorded at fair value.

4.     Amortization of limited-life intangible assets should not be impacted by expected residual values.

5.     Some intangible assets are not required to be amortized every year.

6.     Limited-life intangibles are amortized by systematic charges to expense over their useful life.

7.     The cost of acquiring a customer list from another company is recorded as an intangible asset.

8.     The cost of purchased patents should be amortized over the remaining legal life of the patent.

9.     If a new patent is acquired through modification of an existing patent, the remaining book value of the original patent may be amortized over the life of the new patent.

10.     In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible assets, with the remainder recorded as goodwill.

11.     Internally generated goodwill should not be capitalized in the accounts.

12.     Internally generated goodwill associated with a business may be recorded as an asset when a firm offer to purchase that business unit has been received.

13.     All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.

14.     If the fair value of an unlimited life intangible other than goodwill is less than its book value, an impairment loss must be recognized.

15.     If market value of an impaired asset recovers after an impairment has been recognized, the impairment may be reversed in a subsequent period.

16.     The same recoverability test that is used for impairments of property, plant, and equipment is used for impairments of indefinite-life intangibles.

17.     Periodic alterations to existing products are an example of research and development costs.

18.     Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.

19.     Research and development costs are recorded as an intangible asset if it is felt they will provide economic benefits in future years.

20.     Contra accounts must be reported for intangible assets in a manner similar to accumu-lated depreciation and property, plant, and equipment.

MULTIPLE CHOICE—Conceptual

21.     Which of the following does not describe intangible assets?

a.   They lack physical existence.

b.   They are financial instruments.

c.   They provide long-term benefits.

d.   They are classified as long-term assets.

22.     Which of the following characteristics do intangible assets possess?

a.   Physical existence.

b.   Claim to a specific amount of cash in the future.

c.   Long-lived.

d.   Held for resale.

23.     Which characteristic is not possessed by intangible assets?

a.   Physical existence.

b.   Short-lived.

c.   Result in future benefits.

d.   Expensed over current and/or future years.

24.     Costs incurred internally to create intangibles are

a.   capitalized.

b.   capitalized if they have an indefinite life.

c.   expensed as incurred.

d.   expensed only if they have a limited life.

25.     Which of the following costs incurred internally to create an intangible asset is generally expensed?

a.   Research and development costs.

b.   Filing costs.

c.   Legal costs.

d.   All of the above.

26.     Which of the following methods of amortization is normally used for intangible assets?

a.   Sum-of-the-years’-digits

b.   Straight-line

c.   Units of production

d.   Double-declining-balance

27.     The cost of an intangible asset includes all of the following except

a.   purchase price.

b.   legal fees.

c.   other incidental expenses.

d.   all of these are included.

28.     Factors considered in determining an intangible asset’s useful life include all of the following except

a.   the expected use of the asset.

b.   any legal or contractual provisions that may limit the useful life.

c.   any provisions for renewal or extension of the asset’s legal life.

d.   the amortization method used

29.     Under current accounting practice, intangible assets are classified as

a.   amortizable or unamortizable.

b.   limited-life or indefinite-life.

c.   specifically identifiable or goodwill-type.

d.   legally restricted or goodwill-type.

30.     Companies should test indefinite life intangible assets at least annually for:

a.   recoverability.

b.   amortization.

c.   impairment.

d.   estimated useful life.

S31.     One factor that is not considered in determining the useful life of an intangible asset is

a. salvage value.

b. provisions for renewal or extension.

c. legal life.

d. expected actions of competitors.

32.       Which intangible assets are amortized?

Limited-Life                Indefinite-Life

a.               Yes                                Yes

b.               Yes                                 No

c.               No                                 Yes

d.               No                                  No

33.     The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser’s patented products should be

a.   charged off in the current period.

b.   amortized over the legal life of the purchased patent.

c.   added to factory overhead and allocated to production of the purchaser’s product.

d.   amortized over the remaining estimated life of the original patent covering the product whose market would have been impaired by competition from the newly patented product.

34.     Broadway Corporation was granted a patent on a product on January 1, 2001. To protect its patent, the corporation purchased on January 1, 2012 a patent on a competing product which was originally issued on January 10, 2008. Because of its unique plant, Broadway Corporation does not feel the competing patent can be used in producing a product. The cost of the competing patent should be

a.   amortized over a maximum period of 20 years.

b.   amortized over a maximum period of 16 years.

c.   amortized over a maximum period of 9 years.

d.   expensed in 2012.

35.     Wriglee, Inc. went to court this year and successfully defended its patent from infringe-ment by a competitor.  The cost of this defense should be charged to

a.   patents and amortized over the legal life of the patent.

b.   legal fees and amortized over 5 years or less.

c.   expenses of the period.

d.   patents and amortized over the remaining useful life of the patent.

36.     Which of the following is not an intangible asset?

b.   Research and development costs

c.   Franchise

37.     Which of the following intangible assets should not be amortized?

b.   Customer lists

c.   Perpetual franchises

d.   All of these intangible assets should be amortized.

38.     When a patent is amortized, the credit is usually made to

a.   the Patent account.

b.   an Accumulated Amortization account.

c.   a Deferred Credit account.

d.   an expense account.

39.     When a company develops a trademark the costs directly related to securing it should generally be capitalized. Which of the following costs associated with a trademark would not be allowed to be capitalized?

a.   Attorney fees.

b.   Consulting fees.

c.   Research and development fees.

d.   Design costs.

40.     In a business combination, companies record identifiable intangible assets that they can reliably measure. All other intangible assets, too difficult to identify or measure, are recorded as:

a.   other assets.

b.   indirect costs.

c.   goodwill.

d.   direct costs.

41.     Goodwill may be recorded when:

a.   it is identified within a company.

b.   one company acquires another in a business combination.

c.   the fair value of a company’s assets exceeds their cost.

d.   a company has exceptional customer relations.

42.     When a new company is acquired, which of these intangible assets, unrecorded on the acquired company’s books, might be recorded in addition to goodwill?

a.   A brand name.

b.   A patent.

c.   A customer list.

d.   All of the above

43.     Which of the following intangible assets could not be sold by a business to raise needed cash for a capital project?

a.   Patent.

c.   Goodwill.

d.   Brand Name.

44.     The reason goodwill is sometimes referred to as a master valuation account is because

a.   it represents the purchase price of a business that is about to be sold.

b.   it is the difference between the fair value of the net tangible and identifiable intangible assets as compared with the purchase price of the acquired business.

c.   the value of a business is computed without consideration of goodwill and then goodwill is added to arrive at a master valuation.

d.   it is the only account in the financial statements that is based on value, all other accounts are recorded at an amount other than their value.

45.     Easton Company and Lofton Company were combined in a purchase transaction. Easton was able to acquire Lofton at a bargain price. The sum of the fair values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Easton. Proper accounting treatment by Easton is to report the excess amount as

a.   a gain.

b.   part of current income in the year of combination.

c.   a deferred credit and amortize it.

d.   paid-in capital.

46.     Purchased goodwill should

a.   be written off as soon as possible against retained earnings.

b.   be written off as soon as possible as an extraordinary item.

c.   be written off by systematic charges as a regular operating expense over the period benefited.

d.   not be amortized.

47.     The intangible asset goodwill may be

a.   capitalized only when purchased.

b.   capitalized either when purchased or created internally.

c.   capitalized only when created internally.

d.   written off directly to retained earnings.

48.     A loss on impairment of an intangible asset is the difference between the asset’s

a.   carrying amount and the expected future net cash flows.

b.   carrying amount and its fair value.

c.   fair value and the expected future net cash flows.

d.   book value and its fair value.

49.     The recoverability test is used to determine any impairment loss on which of the following types of intangible assets?

a.   Indefinite life intangibles other than goodwill.

b.   Indefinite life intangibles.

c.   Goodwill.

d.   Limited life intangibles.

50.     Buerhle Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet. The impairment test(s) to be used is (are)

Recoverability Test      Fair Value Test

a.            Yes                                Yes

b.            Yes                                No

c              No                                Yes

d.             No                                 No

51.     The carrying amount of an intangible is

a.   the fair value of the asset at a balance sheet date.

b.   the asset’s acquisition cost less the total related amortization recorded to date.

c.   equal to the balance of the related accumulated amortization account.

d.   the assessed value of the asset for intangible tax purposes.

52.    Which of the following research and development related costs should be capitalized and depreciated over current and future periods?

a.   Research and development general laboratory building which can be put to alternative uses in the future

b.   Inventory used for a specific research project

c.   Administrative salaries allocated to research and development

d.   Research findings purchased from another company to aid a particular research project currently in process

53.     Which of the following principles best describes the current method of accounting for research and development costs?

a.   Associating cause and effect

b.   Systematic and rational allocation

c.   Income tax minimization

d.   Immediate recognition as an expense

54.     how should research and development costs be accounted for, according to a Financial Accounting Standards Board Statement?

a.   Must be capitalized when incurred and then amortized over their estimated useful lives.

b.   Must be expensed in the period incurred.

c.   May be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved.

d.   Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future uses or unless contractually reimbursable.

55.     Which of the following would be considered research and development?

a.   Routine efforts to refine an existing product.

b.   Periodic alterations to existing production lines.

c.   Marketing research to promote a new product.

d.   Construction of prototypes.

56.     Which of the following costs should be capitalized in the year incurred?

a.   Research and development costs.

b.   Costs to internally generate goodwill.

c.   Organizational costs.

d.   Costs to successfully defend a patent.

57.     Research and development costs

a.   are intangible assets.

b.   may result in the development of a patent.

c.   are easily identified with specific projects.

d.   all of the above.

58.     Which of the following is considered research and development costs?

a.   Planned search or critical investigation aimed at discovery of new knowledge.

b.   Translation of research findings or other knowledge into a plan or design for a new product or process.

c.   Translation of research findings or other knowledge into a significant improvement of an existing product.

d.   all of the above.

59.     Which of the following is considered research and development costs?

a.   Planned search or critical investigation aimed at discovery of new knowledge.

b.   Translation of research findings or other knowledge into a plan or design for a new product or process.

c.   Neither a nor b.

d.   Both a and b

60.     Which of the following costs should be excluded from research and development expense?

a.   Modification of the design of a product

b.   Acquisition of R & D equipment for use on a current project only

c.   Cost of marketing research for a new product

d.   Engineering activity required to advance the design of a product to the manufacturing stage

# Strayer University ACC 304 Week 7 Chapter 13 Homework New Work

Strayer University ACC 304 Week 7 Chapter 13 Homework New Work

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ACC 304 Week 7 Chapter 13 Homework

1) Takemoto Corporation borrowed \$64,850 on November 1, 2014, by signing a \$68,450, 3-month, zero-interest-bearing note. Prepare Takemoto’s November 1, 2014, entry; the December 31, 2014, annual adjusting entry; and the February 1, 2015, entry. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

2) Kasten Inc. provides paid vacations to its employees. At December 31, 2014, 36 employees have each earned 2 weeks of vacation time. The employees’ average salary is \$513 per week. Prepare Kasten’s December 31, 2014, adjusting entry. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

3) Buchanan Company recently was sued by a competitor for patent infringement. Attorneys have determined that it is probable that Buchanan will lose the case and that a reasonable estimate of damages to be paid by Buchanan is \$317,310. In light of this case, Buchanan is considering establishing a \$115,690 self-insurance allowance.

4) Buchanan should record a litigation accrual on the patent case, since the amount is both estimable and probable. This entry will reduce income by \$317,310 and Buchanan will report a litigation liability of \$317,310. The \$115,690 self-insurance allowance has no impact on income or liabilities.

5) Green Day Hardware Company’s payroll for November 2014 is summarized below.

Amount Subject to Payroll Taxes

Unemployment Tax

Payroll Wages Due Federal State

Factory \$212,000 \$43,000 \$43,000

Sales 36,400 5,300 5,300

Total \$289,600 \$48,300 \$48,300

At this point in the year, some employees have already received wages in excess of those to which payroll taxes apply. Assume that the state unemployment tax is 2.5%. The FICA rate is 7.65% on an employee’s wages to \$114,600 and 1.45% in excess of \$114,600. Of the \$289,600 wages subject to FICA tax, \$22,000 of the sales wages is in excess of \$114,600. Federal unemployment tax rate is 0.8% after credits. Income tax withheld amounts to \$16,570 for factory, \$6,110 for sales, and \$5,010 for administrative.

6) No Doubt Company includes 1 coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2014, No Doubt Company purchased 8,840 premiums at 70 cents each and sold 122,500 boxes of soap powder at \$3.40 per box; 50,000 coupons were presented for redemption in 2014. It is estimated that 60% of the coupons will eventually be presented for redemption.

Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2014. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation Debit Credit

Make all the journal entries necessary to record the transactions above using appropriate dates. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit

7) Edwardson Corporation’s year-end is December 31. Assuming that no adjusting entries relative to the transactions above have been recorded, prepare any adjusting journal entries concerning interest that are necessary to present fair financial statements at December 31. Assume straight-line amortization of discounts. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

8) The presentation of current and non-current liabilities in the statement of financial position (balance sheet):

9) In accounting for short-term debt expected to be refinanced to long-term debt:

10) Under IFRS, a provision is the same as:

11) A typical provision is:

12) In determining the amount of a provision, a company using IFRS should generally measure:

# Strayer University ACC 304 Week 8 Chapter 14 Homework New Work

Strayer University ACC 304 Week 8 Chapter 14 Homework New Work

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ACC 304 Week 8 Chapter 14 Homework

1)  Teton Corporation issued \$704,000 of 9% bonds on November 1, 2014, for \$745,018. The bonds were dated November 1, 2014, and mature in 8 years, with interest payable each May 1 and November 1. Teton uses the effective-interest method with an effective rate of 8%.

Prepare Teton’s December 31, 2014, adjusting entry. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

2)  On January 1, 2014, Henderson Corporation redeemed \$572,100 of bonds at 97. At the time of redemption, the unamortized premium was \$17,163 and unamortized bond issue costs were \$5,721.

Prepare the corporation’s journal entry to record the reacquisition of the bonds. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

3) Shlee Corporation issued a 5-year, \$70,300, zero-interest-bearing note to Garcia Company on January 1, 2014, and received cash of \$70,300. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 5-year period. The market rate of interest for similar notes is 12%.

Prepare Shlee Corporation’s January 1 journal entry. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

4) The following items are found in the financial statements.

Indicate how each of these items should be classified in the financial statements.

Classification

(a) Discount on bonds payable

(b) Interest expense (credit balance)

(c) Unamortized bond issue costs

(d) Gain on repurchase of debt

(e) Mortgage payable (payable in equal amounts over next 3 years)

(f) Debenture bonds payable (maturing in 5 years)

(g) Notes payable (due in 4 years)

(i) Bonds payable (due in 3 years)

5) On June 30, 2014, Mischa Auer Company issued \$4,166,000 face value of 13%, 20-year bonds at \$4,479,407, a yield of 12%. Auer uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

(a) Prepare the journal entries to record the following transactions. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(b) Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2015, balance sheet. (Round answers to 0 decimal places, e.g. 38,548.)

(c) Provide the answers to the following questions.

6) Fallen Company commonly issues long-term notes payable to its various lenders. Fallen has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual basis). Fallen has elected to use the fair value option for the long-term notes issued to Barclay’s Bank and has the following data related to the carrying and fair value for these notes.

Carrying Value Fair Value

December 31, 2014 \$56,930 \$56,930

December 31, 2015 46,660 45,060

December 31, 2016 38,850 40,980

(a) Prepare the journal entry at December 31 (Fallen’s year-end) for 2014, 2015, and 2016, to record the fair value option for these notes. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(b) At what amount will the note be reported on Fallen’s 2015 balance sheet?

Note to be reported on Fallen’s 2015 balance sheet \$

(c) What is the effect of recording the fair value option on these notes on Fallen’s 2016 income?

The effect of recording the fair value option would result in unrealized holding

7) Holiday Company issued its 7%, 25-year mortgage bonds in the principal amount of \$3,019,000 on January 2, 2000, at a discount of \$158,000, which it proceeded to amortize by charges to expense over the life of the issue on a straight-line basis. The indenture securing the issue provided that the bonds could be called for redemption in total but not in part at any time before maturity at 104% of the principal amount, but it did not provide for any sinking fund.

On December 18, 2014, the company issued its 11%, 20-year debenture bonds in the principal amount of \$4,277,000 at 101, and the proceeds were used to redeem the 7%, 25-year mortgage bonds on January 2, 2015. The indenture securing the new issue did not provide for any sinking fund or for redemption before maturity.

(a) Prepare journal entries to record the issuance of (1) the 11% bonds and (2) the redemption of the 7% bonds. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

8) Under IFRS, bond issuance costs, including the printing costs and legal fees associated with the issuance, should be:

expensed in the period when the debt is issued.

recorded as a reduction in the carrying value of bonds payable.

accumulated in a deferred charge account and amortized over the life of the bonds.

reported as an expense in the period the bonds mature or are retired.

9) Which of the following is stated correctly?

Current liabilities follow non-current liabilities on the statement of financial position under GAAP but non-current liabilities follow current liabilities under IFRS.

IFRS does not treat debt modifications as extinguishments of debt.

Under GAAP, bonds payable is recorded at the face amount and any premium or discount is recorded in a separate account. Under IFRS, bonds payable is recorded at the carrying value so no separate premium or discount accounts are used.

Bond issuance costs are recorded as a reduction of the carrying value of the debt under GAAP but are recorded as an asset and amortized to expense over the term of the debt under IFRS.

10) On January 1, Patterson Inc. issued \$5,000,000, 9% bonds for \$4,695,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Patterson uses the effectiveinterest method of amortizing bond discount. At the end of the first year, Patterson should report bonds payable of:

11) 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 effectiveinterest method of amortizing bond premium. At the end of the first year, Martinez should report bonds payable of:

# Strayer University ACC 304 Week 8 Assignment 1 Delta Airlines Property, Plant, And Equipment New Work

Strayer University ACC 304 Week 8 Assignment 1 Delta Airlines Property, Plant, And Equipment New Work

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ACC 304 WEEK 8 ASSIGNMENT 1 DELTA AIRLINES PROPERTY, PLANT, AND EQUIPMENT

Assignment 1: Delta Airlines Property, Plant, and Equipment
Due Week 8 and worth 200 points

According to the textbook, U.S. companies and foreign companies are affected by deprecation rules. When companies write off the cost of long-lived assets over a period of time, the term used is depreciation.

In order to complete this assignment, review Delta Airlines’ annual reports for the years 2012 and 2013, located athttp://ir.delta.com/stock-and-financial/sec-filings/.

Write a five to six (5-6) page paper in which you:
Briefly outline Delta Airlines company’s history, products, and services, and identify the costs reported in the balance sheet for property, plant, and equipment. Prepare a horizontal analysis of Delta’s property, plant, and equipment for 2012 and 2013. Next, calculate the asset turnover ratio, return on asset ratio, and the debt to total assets ratio. Based on your calculations, indicate the conclusions that you can draw, based on the changes in property, plant, and equipment.
Determine the method or methods of depreciation that Delta Airlines uses to depreciate its property, plant, and equipment. Suggest three (3) alternative methods that Delta Airlines could use in order to depreciate assets. Based on your suggestions, propose the method that Delta Airlines could use in order to improve the reporting of its property, plant and equipment. Provide a rationale for your response.
Analyze the information disclosed in Delta Airlines’ notes to their financial statements on property, plant, and equipment. Recommend additional data that Delta Airlines could include that would be useful to potential investors and creditors.
Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.

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, the student’s 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:
Demonstrate, analyze, and explain the proper accounting for acquisition and valuation of property, plant, and equipment; valuation; costs subsequent to acquisition; and disposition of plant assets.
Demonstrate, analyze, and explain the proper accounting for depreciation, impairments, and depletion.
Use technology and information resources to research issues in intermediate accounting.
Write clearly and concisely about intermediate accounting using proper writing mechanics.

# Strayer University ACC 304 Week 10 Chapter 15 Quiz (All Possible Questions) New Work

Strayer University ACC 304 Week 10 Chapter 15 Quiz (All Possible Questions) New Work

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ACC 304 Week 10 Quiz – Strayer New Work

Week 10 Quiz 7: Chapter 15

STOCKHOLDERS’ EQUITY

IFRS questions are available at the end of this chapter.

TRUE-FALSE—Conceptual

1.     A corporation is incorporated in only one state regardless of the number of states in which it operates.

2.     The preemptive right allows stockholders the right to vote for directors of the company.

3.     Common stock is the residual corporate interest that bears the ultimate risks of loss.

4.     Earned capital consists of additional paid-in capital and retained earnings.

5.     True no-par stock should be carried in the accounts at issue price without any additional paid-in capital reported.

6.     Companies allocate the proceeds received from a lump-sum sale of securities based on the securities’ par values.

7.     Companies should record stock issued for services or noncash property at either the fair value of the stock issued or the fair value of the consideration received.

8.     Treasury stock is a company’s own stock that has been reacquired and retired.

9.     The cost method records all transactions in treasury shares at their cost and reports the treasury stock as a deduction from capital stock.

10.     When a corporation sells treasury stock below its cost, it usually debits the difference between cost and selling price to Paid-in Capital from Treasury Stock.

11.     Participating preferred stock requires that if a company fails to pay a dividend in any year, it must make it up in a later year before paying any common dividends.

12.     Callable preferred stock permits the corporation at its option to redeem the outstanding preferred shares at stipulated prices.

13.     The laws of some states require that corporations restrict their legal capital from distribution to stockholders.

14.     The SEC requires companies to disclose their dividend policy in their annual report.

15.     All dividends, except for liquidating dividends, reduce the total stockholders’ equity of a corporation.

16.     Dividends payable in assets of the corporation other than cash are called property dividends or dividends in kind.

17.     When a stock dividend is less than 20-25 percent of the common stock outstanding, a company is required to transfer the fair value of the stock issued from retained earnings.

18.     Stock splits and large stock dividends have the same effect on a company’s retained earnings and total stockholders’ equity.

19.     The rate of return on common stock equity is computed by dividing net income by the average common stockholders’ equity.

20.     The payout ratio is determined by dividing cash dividends paid to common stockholders by net income available to common stockholders.

MULTIPLE CHOICE—Conceptual

21.     The residual interest in a corporation belongs to the

a.   management.

b.   creditors.

c.   common stockholders.

d.   preferred stockholder

22.     The pre-emptive right of a common stockholder is the right to

a.   share proportionately in corporate assets upon liquidation.

b.   share proportionately in any new issues of stock of the same class.

c.   receive cash dividends before they are distributed to preferred stockholders.

d.   exclude preferred stockholders from voting rights.

23.     The pre-emptive right enables a stockholder to

a.   share proportionately in any new issues of stock of the same class.

b.   receive cash dividends before other classes of stock without the pre-emptive right.

c.   sell capital stock back to the corporation at the option of the stockholder.

d.   receive the same amount of dividends on a percentage basis as the preferred stockholders.

S24.     In a corporate form of business organization, legal capital is best defined as

a.   the amount of capital the state of incorporation allows the company to accumulate over its existence.

b.   the par value of all capital stock issued.

c.   the amount of capital the federal government allows a corporation to generate.

d.   the total capital raised by a corporation within the limits set by the Securities and Exchange Commission.

S25.     Stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders

a.   are entitled to a dividend every year in which the business earns a profit.

b.   have the rights to specific assets of the business.

c.   bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.

d.   can negotiate individual contracts on behalf of the enterprise.

26.     Total stockholders’ equity represents

a.   a claim to specific assets contributed by the owners.

b.   the maximum amount that can be borrowed by the enterprise.

c.   a claim against a portion of the total assets of an enterprise.

d.   only the amount of earnings that have been retained in the business.

27.     A primary source of stockholders’ equity is

a.   income retained by the corporation.

b.   appropriated retained earnings.

c.   contributions by stockholders.

d.   both income retained by the corporation and contributions by stockholders.

28.     Stockholders’ equity is generally classified into two major categories:

a.   contributed capital and appropriated capital.

b.   appropriated capital and retained earnings.

c.   retained earnings and unappropriated capital.

d.   earned capital and contributed capital.

29.     The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the

a.   pro forma method.

b.   proportional method.

c.   incremental method.

d.   either the proportional method or the incremental method.

30.     When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the

a.   market value of the services received.

b.   par value of the shares issued.

c.   market value of the shares issued.

d.   Any of these provides an appropriate basis for recording the transaction.

31.     Direct costs incurred to sell stock such as underwriting costs should be accounted for as

1.   a reduction of additional paid-in capital.

2.   an expense of the period in which the stock is issued.

3.   an intangible asset.

a.   1

b.   2

c.   3

d.   1 or 3

32.     A “secret reserve” will be created if

a.   inadequate depreciation is charged to income.

b.   a capital expenditure is charged to expense.

c.   liabilities are understated.

d.   stockholders’ equity is overstated.

P33.     Which of the following represents the total number of shares that a corporation may issue under the terms of its charter?

a.   authorized shares

b.   issued shares

c.   unissued shares

d.   outstanding shares

S34.     Stock that has a fixed per-share amount printed on each stock certificate is called

a.   stated value stock.

b.   fixed value stock.

c.   uniform value stock.

d.   par value stock.

S35.     Which of the following is not a legal restriction related to profit distributions by a corporation?

a.   The amount distributed to owners must be in compliance with the state laws governing corporations.

b.   The amount distributed in any one year can never exceed the net income reported for that year

c.   Profit distributions must be formally approved by the board of directors.

d.   Dividends must be in full agreement with the capital stock contracts as to preferences and participation.

S36.     In January 2012, Finley Corporation, a newly formed company, issued 10,000 shares of its \$10 par common stock for \$15 per share. On July 1, 2012, Finley Corporation reacquired 1,000 shares of its outstanding stock for \$12 per share. The acquisition of these treasury shares

a.   decreased total stockholders’ equity.

b.   increased total stockholders’ equity.

c.   did not change total stockholders’ equity.

d.   decreased the number of issued shares.

P37.     Treasury shares are

a.   shares held as an investment by the treasurer of the corporation.

b.   shares held as an investment of the corporation.

c.   issued and outstanding shares.

d.   issued but not outstanding shares.

38.     When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?

a.   Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value.

b.   Paid-in capital in excess of par for the purchase price.

c.   Treasury stock for the purchase price.

d.   Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value.

39.     “Gains” on sales of treasury stock (using the cost method) should be credited to

a.   paid-in capital from treasury stock.

b.   capital stock.

c.   retained earnings.

d.   other income.

40.     Porter Corp. purchased its own par value stock on January 1, 2012 for \$20,000 and debited the treasury stock account for the purchase price. The stock was subsequently sold for \$12,000. The \$8,000 difference between the cost and sales price should be recorded as a deduction from

a.   additional paid-in capital to the extent that previous net “gains” from sales of the same class of stock are included therein; otherwise, from retained earnings.

b.   additional paid-in capital without regard as to whether or not there have been previous net “gains” from sales of the same class of stock included therein.

c.   retained earnings.

d.   net income.

41.     How should a “gain” from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?

a.   As ordinary earnings shown on the income statement.

b.   As paid-in capital from treasury stock transactions.

c.   As an increase in the amount shown for common stock.

d.   As an extraordinary item shown on the income statement.

42.     Which of the following best describes a possible result of treasury stock transactions by a corporation?

a.   May increase but not decrease retained earnings.

b.   May increase net income if the cost method is used.

c.   May decrease but not increase retained earnings.

d.   May decrease but not increase net income.

43.     Which of the following features of preferred stock makes the security more like debt than an equity instrument?

a.   Participating

b.   Voting

c.   Redeemable

d.   Noncumulative

44.     The cumulative feature of preferred stock

a.   limits the amount of cumulative dividends to the par value of the preferred stock.

b.   requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.

c.   means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock.

d.   enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends.

P45.     According to the FASB, redeemable preferred stock should be

a.   included with common stock.

b.   included as a liability.

c.   excluded from the stockholders’ equity heading.

d.   included as a contra item in stockholders’ equity.

S46.     Cumulative preferred dividends in arrears should be shown in a corporation’s balance sheet as

a.   an increase in current liabilities.

b.   an increase in stockholders’ equity.

c.   a footnote.

d.   an increase in current liabilities for the current portion and long-term liabilities for the long-term portion.

47.     At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the

a.   declaration of a stock split.

b.   declaration of a stock dividend.

c.   purchase of treasury stock.

d.   payment in full of subscribed stock.

48.     An entry is not made on the

a.   date of declaration.

b.   date of record.

c.   date of payment.

d.   An entry is made on all of these dates.

49.     Cash dividends are paid on the basis of the number of shares

a.   authorized.

b.   issued.

c.   outstanding.

d.   outstanding less the number of treasury shares.

50.     Which of the following statements about property dividends is not true?

a.   A property dividend is usually in the form of securities of other companies.

b.   A property dividend is also called a dividend in kind.

c.   The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.

d.   All of these statements are true

51.     Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2012, Houser distributed these shares of stock as a dividend to its stockholders. This is an example of a

a.   property dividend.

b.   stock dividend.

c.   liquidating dividend.

d.   cash dividend.

52.     A dividend which is a return to stockholders of a portion of their original investments is a

a.   liquidating dividend.

b.   property dividend.

c.   liability dividend.

d.   participating dividend.

53.     A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

a.   Retained Earnings.

b.   a paid-in capital account.

c.   Accumulated Depletion.

d.   Accumulated Depreciation.

54.     If management wishes to “capitalize” part of the earnings, it may issue a

a.   cash dividend.

b.   stock dividend.

c.   property dividend.

d.   liquidating dividend.

55.     Which dividends do not reduce stockholders’ equity?

a.   Cash dividends

b.   Stock dividends

c.   Property dividends

d.   Liquidating dividends

56.     The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding

a.   increases common stock outstanding and increases total stockholders’ equity.

b.   decreases retained earnings but does not change total stockholders’ equity.

c.   may increase or decrease paid-in capital in excess of par but does not change total stockholders’ equity.

d.   increases retained earnings and increases total stockholders’ equity.

57.     Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of \$10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?

a.   There should be no capitalization of retained earnings.

b.   Par value

c.   Fair value on the declaration date

d.   Fair value on the payment date

58.     The issuer of a 5% common stock dividend to common stockholders preferably should transfer from retained earnings to contributed capital an amount equal to the

a.   fair value of the shares issued.

b.   book value of the shares issued.

c.   minimum legal requirements.

d.   par or stated value of the shares issued.

59.     At the date of declaration of a small common stock dividend, the entry should not include

a.   a credit to Common Stock Dividend Payable.

b.   a credit to Paid-in Capital in Excess of Par.

c.   a debit to Retained Earnings.

d.   All of these are acceptable.

60.     The balance in Common Stock Dividend Distributable should be reported as a(n)

a.   deduction from common stock issued.